The budget for the next fiscal year will see government spending to encourage the poor to buy local instead of the rich spending on importing, the finance minister announced in the National Assembly on Friday.
Miftah Ismail, the finance minister, presented the budget. He opened with an acid remark on the previous government. “The PTI ruined the economy, with a new person presenting the budget every year.”
“Due to the PTI government, Pakistan has the third-highest rate of inflation among major countries,” he said.
- 75 million people live below the poverty line
- 20 million were added in the last government’s tenure
- 6 million Pakistanis became unemployed
- Rs530 billion earmarked for pensions
Pakistan has been struggling to meet IMF conditions for a loan. The IMF bailout was supposed to end this year but had to be suspended in February because the reforms that were supposed to have been done in 2019 have yet to be rolled out, he said.
A draft of the budget speech received by Aaj News yielded this important piece of news: People earning less than Rs40,000 per month will be given Rs2,000 monthly from June. The government has taken this initiative to benefit 80 million people.
- 15% increase in salaries of government employees
- 10 million people will benefit from Benazir Income Support Programme: budget speech draft
- Government servants will get 40% less fuel allocation
According to Miftah Ismail, the PTI-led govt took loans of Rs20,000 billion during their tenure. “This is 80% of the total loans taken since the time of Liaquat Ali Khan.” This was because they spent more than they earned, he added.
- Bad news: Circular debt for electricity went up from Rs1,062 billion to Rs25,000 billion
- We expect a deficit of Rs5.1 trillion in the current fiscal year
- Inflation = 11.7% – highest in 10 years
Taxes In emerging markets, the tax-to-GDP ratio is 16% but in Pakistan, it is an abysmal 8.6%, which is very low.
The government wants to increase tax paying as part of GDP to 9.2% in the next financial year. “We left it at 11.1% when we left in 2017-18,” said Miftah Ismail.
Pakistan’s imports are $76 billion which has to come down to $70 billion.
Exports are expected to be $31.3 billion and has to go up to $35 billion.
Benazir Income Support Programme
More scholarships will be allocated under this programme, which will go up to Rs354 million.
- Rs12 billion for Utility Stores Corporation
- Rs5 billion additional Ramazan package
- 9 million households to benefit from BISP
Scholarships to be extended to include 10 million children and 10,000 more students to benefit from the Benazir Undergraduate Scholarship programme (Rs9 billion earmarked).
- Benazir Nash-o-Numa programme to be extended to all districts and Rs21.5 billion to be spent on it
The armed forces will get Rs1,523 billion and the civilian administration will get Rs550 billion.
In the next fiscal year, Rs570 billion has been earmarked to deal with load-shedding during the sweltering heat and given that tariffs have gone up.
The HEC budget will include money for 5,000 scholarships for Balochistan and the merged tribal districts.
2 million jobs for young people under the ’’Youth Employment Policy“
Interest free loans of up to Rs500,000 will be offered. And in another scheme loans of up to 25 million rupees on easy conditions would be provided. A quarter of these loans will be given to women.
- Advanced tax on vehicles over 1600 cc is proposed
- For vehicles with electric engine, a 2% tax will be levied
- Non-filers will pay 200% tax
- Government proposes increasing the tax on banking companies from 39% to 42%
- Payments made with credit, debit, prepaid cards to be taxed at 1% and the tax rate for non-filers will be 2%
- Proposal to give tax exemption for the import of solar panels
- Proposal to withdraw sales tax on tractors, agricultural implements, wheat and other crops
- Tax exemption cap increased from Rs600,000 to Rs1.2 million annual earning for salaried class
- Behbud Saving Certificates: Tax on profit from these certificates was capped at 10%. It will be reduced to 5%
- Direct taxes will increase. Non-productive assets will be taxed. New taxes will be levied on wealthy people
Real estate taxes Real estate is a source of wealth for Pakistan’s affluent class, said Miftah Ismail.
“It is a two-edged sword. It results in the accumulation of non-productive assets on one hand and increases house prices for those with limited income. We want to fix this imbalance.”
He means that people with houses, keep them, or hold on to empty plots (non-productive assets) while other Pakistanis can’t afford real estate because they don’t earn enough.
Hence, in the case of people who own more than one immovable property in Pakistan valued at more than Rs25 million, the profit will be assumed to stand at 5% of the fair market value of the property. Hence, the tax on this property will be 1% of the fair market value of the property. One’s personal residence will be exempted from this tax.
Tax on transfer of immovable properties: The government is proposing a 15% tax on capital gains on immovable property for a one-year holding period.
This tax will decrease 2.5% annually, meaning it would be zero after a holding period of 6 years.
Meanwhile, the government is proposing an advanced tax on the sale and purchase of immovable properties be raised to 2% from 1% for filers. For non-filers, the advance tax will be increased to 5%.
Mobile phones A levy of Rs100 to Rs16,000 has been proposed on imported mobile phones.
- Rs100 levy on mobile phone worth $30 (at current conversion rate, its around PKR 6,000)
- Rs200 levy on mobile phones between $30 to $100
- Rs600 levy on phone worth $200
- Rs1800 on phones worth $350
- Rs4,000 on phones worth $500
- Rs8,000 on phones worth $700
- Rs16,000 on phones worth more than $700