KARACHI: The federal government has announced to provide a financing of Rs 539 billion to the exporters through State Bank of Pakistan (SBP) to facilitate the export sector.
According to the budget announcement for the next fiscal year (FY25), in order to support the export sector, the federal government has enhanced the allocation of the Export Refinance Scheme (ERS) through EXIM bank.
The Finance Minister, Muhammad Aurangzeb, in his budget speech announced to enhance the allocation from Rs 3.5 billion to Rs 13.8 billion for the export refinance scheme.
The federal government believed that with this move the portfolio of export refinance will increase Rs 100 billion to Rs 280 billion.
The government will also provide financing of Rs 539 billion to the export sector through the State Bank of Pakistan to support the exporters. The government has also decided to focus on the SME sector, and has asked banks to provide at least 20 percent financing to this sector.
Under the SMEs Strategy, the government has planned to increase credit to SMEs up to Rs 1.1 trillion from Rs 540 billion and initially Rs 100 billion will be increased during the next fiscal year (FY25). Government believes that these steps will give a lifeline to the export sector of the country.
The government has assured to make payments under the drawback of local taxes and levy (DLTL) phase wise. The government is also considering announcing a Risk Sharing Scheme for the export sector to help them in a difficult situation,
In addition, the government has also included a number of project in the Public Sector Development Program (PSDP) in order to support the exports, increase the production capacity of the export oriented industries, to enhance the competitiveness, promote digital infrastructure, innovation driven enterprises, for the promotion of Agro Industry, seed development, blue economy, research and development and other innovative reforms.
Copyright Business Recorder, 2024
ISLAMABAD: The government has curtailed the scope of the Export Facilitation Scheme (EFC) of exporters under the Finance Bill 2024.
The Finance Bill 2024 proposed the elimination of the zero rating on local supplies under the Export Facilitation Scheme (EFS).
According to Arshad Shehzad-a tax expert, the provision for local supplies of commodities, raw materials, components, parts, and plant and machinery to registered exporters authorized under the Export Facilitation Scheme, 2021, as notified by the board, is proposed to be removed.
Shehzad highlighted that zero-rating supplies under the Export Facilitation Scheme constitute a significant relief for the export sector, as exporters are progressively transitioning to the EFS scheme to obtain duty- and tax-free purchases for export purposes.
Shehzad believed that the proposal to omit this provision may significantly impact exporters who are already contending with the challenges of a demanding operational environment. The elimination of the zero-rate facility under the EFS scheme has provided much-needed cash flow support and relief for exporters. Consequently, the withdrawal of this facility is likely to detrimentally affect the export industry, requiring exporters to initially pay taxes on local procurements and subsequently seek refunds.
Copyright Business Recorder, 2024
PESHAWAR: President, Sarhad Chamber of Commerce and Industry Fuad Ishaq said the government has attempted to present a progressive budget for fiscal year 2025-25 but the business community was expecting a revolutionary budget which was unseen.
Speaking at a news conference after the presentation of the federal budget by Minister for Finance Senator Muhammad Aurangzeb at the floor of the national assembly on Wednesday, Fuad called for a review on the budget proposals, and to make them business-friendly in consultation with businessmen and stakeholders. SCCI proposals were not incorporated, he said. However, he added, some proposals presented in the budget were appreciated by the chamber and business community.
Fuad said the tax-collection target has been set for the next fiscal year, and would be difficult to achieve. He said tax-proposals presented in the budget would be proven hurdle in progressive economy and Pakistan.
He emphasized it is essential to make a reduction in the ratio of taxes, particularly to bring down sales tax to one percent of the total turnover. He said the increase in tax ratio would increase undocumented transactions, which would be detrimental for the country's economy.
During the presser, the SCCI senior vice president Sanaullah Khan, vice president Ejaz Khan Afridi, former senior vice presidents Ziaul Haq Sarhadi, Imran Khan Mohmand, executive members Affaf Ali Khan, Pervez Khan Khattak, Hamza Ibrahim Butt, Qurat Ul Ain, Saddar Gul, Faiz Rasool, Ihsanullah Mohmand, Fazal e Wahid, Hamayun Khan, Aftab Iqbal, Ihsanullah, trader leaders and member of the business community present.
Fuad expressed hope that CPEC-II would increase investment in the country and provide maximum employment opportunities for establishment of new industries. The chamber president welcomed the introduction of Tajir Dost Scheme, however, he asserted this scheme should be passed by parliament for the next 20 years and must give sovereign guarantee to traders that no new tax will be imposed after this scheme.
Fuad called the IPPs a cancer for the economy and country and demanded to immediately get rid the nation from it. He said PESCO and SNGPL should be handed over to the army as these institutions cannot be fixed without the army.
To a question, Fuad said SCCI has given proposals for reduction in tax ratio to signal digit, relief and duty-free import of machinery and other business-industry friendly recommendations but these were not incorporated in the budget. He said there is nothing special for Khyber Pakhtunkhwa, FATA and PATA, except some funds allocations.
The chamber president called for deregulating the economy and initiatives for uplift of the agriculture sector. He welcomed the launch of a free-lunch scheme for schools in the federal capital.
To another question, Fuad replied that lost-making national institutions should be privatized.
Copyright Business Recorder, 2024
KARACHI: The federal government has proposed to allocate Rs 86.9 billion for the reimbursement of TT charges to banks aimed at promoting home remittances through formal channels.
Federal Minister Finance Muhammad Aurangzeb, in his budget speech said that overseas Pakistanis are the backbone of the country and workers’ remittances have an important role in the economic growth, therefore the federal government has decided to launch some new initiatives for the overseas Pakistanis.
As a part of these initiatives, Rs 86.9 billion has been allocated for the reimbursement of TT charges on the home remittances to facilitate the overseas Pakistanis. This amount will be reimbursed against the TT charges of different home remittances schemes like ‘Sohni Dharti’.
The federal government has also decided to set up a “Center of Excellence” to train the workforce as per international requirements.
The government has also announced to digitize the emigration landscape aimed to ease the immigration procedure for the overseas Pakistanis and reduce the cost.
In order to timely address the complaints of the overseas Pakistanis, the federal government has decided to introduce a Complaint Resolution system and an international call center will be set up.
To settle the new immigrants aboard, the government is also working to provide them financing.
Government is also going to launch “Mohsin-e-Pakistan” Award for the overseas Pakistanis to honor their services for the country.
Minister Finance said that these initiatives show the government’s will to facilitate the overseas Pakistanis and appreciate their services for the country.
Copyright Business Recorder, 2024
KARACHI: Tough measures have been adopted in the federal budget 2024-25, and it is not at all a ‘people-friendly’ budget, said Ateeq ur Rehman, and economic and financial analyst.
He said the budget should have provided protection to the salaried class (the biggest contributor in the tax net); however, no relief has been given to them by reducing the imposed tax slabs. Tax is deducted at source on gross income and no expense is allowed in the computation of taxable income; rather it has been maintained at maximum, which is exorbitant, said Ateeq.
Copyright Business Recorder, 2024
ISLAMABAD: The government has announced a set of new revenue measures for the budget 2024-25, with a special focus on strict enforcement including imprisonment for traders, who would fail to register with the Tajir Dost Scheme.
As per new Finance Bill 2024, the penalty of sealing of shop is being proposed for traders and shopkeepers who fail to register under a scheme such as Tajir Dost Scheme. Further, failure to register by a shopkeeper or trader is proposed to be made an offence punishable on conviction with imprisonment for six months or with fine, or both.
The changes made through Finance Bill 2024 are in line with the new enforcement and administrative measures. However, the government has also proposed to increase the tax burden on personal incomes, particularly for the salaried class.
A tax expert explained that the exemption limit of salaried class has remained unchanged for the past three years. In the past two years, the tax rate in the first two slabs has also remained unchanged. However, the government has proposed drastic changes that directly impact salaried individuals.
Under the Finance Bill 2024, the tax rate for salaried individuals earning monthly salaries between Rs50,000 to Rs100,000 has been raised. The proposed increase would see the tax incidence go up from 2.5 percent to 5 percent. This significant rise in tax liability will impact employees who fall into this category.
The individuals earning a monthly income between Rs100,000 to Rs200,000 will be significantly impacted by the tax changes. The tax rate for this category has been increased to 15 percent from 12.2 percent, and a fixed amount of Rs30,000 has been raised from Rs15,000.
In case of individuals earning between Rs200,000 to Rs366,000 per month, the tax rate has been raised from 22.5 percent to 25 percent. Additionally, the fixed tax amount has been increased from Rs165,000 to Rs180,000. In case the monthly income range of Rs266,000 to Rs342,000 now falls under a higher tax rate of 30 percent, up from the previous rate of 27.5 percent. Furthermore, the fixed tax rate has also been raised to Rs430,000 from Rs300,000. The income limit of the upper two slabs has been reduced, which will increase the tax liability for the salaried class with low income. As a result, this category is widened to bring more salaried individuals under it. The tax rate of 35 percent will now be applied to a monthly salary of Rs342,000, which was previously for Rs1 million per month. On the other hand, the salaried class will see a reduction of Rs395,000 in the fixed amount falling under this top category.
Moreover, there are changes proposed in the taxable slabs for non-salaried individuals, with tax rates increasing progressively from 15 percent to 45 percent.
Copyright Business Recorder, 2024
KARACHI: Pakistan Business Council (PBC) here Wednesday said that expecting a single year’s budget to cure all the deep-rooted economic ills is unrealistic. This year, another challenge is to win PPP’s support and meet IMF’s conditions.
Nevertheless, the expectation was for a budget to contain inflation, revive investment, and level the playing field with the informal sector, thus generating higher taxable profits and tax revenue.
Also, as exports are the only sustainable way to balance the external account, exports and exporters were expected to be encouraged. However, the budget proposals failed to live up to these expectations though there are some positives.
First, the positives: Phasing out the concessional fiscal regime for FATA and PATA, which was being misused to undermine manufacturing in the rest of the country, is a good step. So is raising the penalties for non-filers through higher withholding and advance taxes.
However, the 2.25% advance tax on wholesalers and retailers will only affect the supplies by tax-registered manufacturers and eventually lead to higher prices, making their products less competitive vs. those of non-tax registered manufacturers and smuggled products.
An increase in the top tax rate to 45% for non-salaried individuals should encourage corporatization. However, it would also provide an added incentive for evasion.
Now, the negatives: The 20-25% salary increase across federal and (eventually) provincial government employees will cost an estimated Rs. 1.5 trillion. It will also set expectations for the private sector to emulate. A lower increase would have made sense if accompanied by a cut in headcount, especially as digitalisation and modernisation of regulations are planned.
Reducing the level at which the 35% top tax rate is levied on salaries will only accelerate the brain drain of good talent from the country. There is also no proposal to arrest the flight of capital of high-net-worth Pakistanis relocating abroad due to the CVT and some surrendering their nationality. This is at a time when the country is looking to attract FDI.
Neither is there any proposal to make investment more attractive by bringing the corporate tax rate in line with other Asian countries. With a Super Tax of up to 10% and double taxation of inter-corporate dividends, the effective tax rate for shareholders in a holding company can amount to over 50%.
The withdrawal of the holding period for the levy of Capital Gains Tax will be detrimental to the capital market, which was just seeing the revival of foreign portfolio investment. There is also a proposal to disallow 25% of sales promotion and advertising costs if royalties and technical fees are paid to an associated company. This will mainly affect foreign companies.
The Fixed Tax Regime (FTR) under which exports were liable to 1% tax on turnover will be withdrawn and replaced by normal taxation at 29% of taxable profit. In exchange, the government promises prompt sales tax refunds, competitive energy, and other facilities. Surely, they need to provide these, irrespective of the fiscal regime but have failed to do so.
The FTR scheme has been in vogue for decades. It provides the government with a very transparent way to tax export proceeds.
Under the scheme, exporters were not required to file tax returns and could avoid harassment by tax officers. Revising the FTR rate would have made more sense instead of subjecting exporters to harassment. The budget proposals need to be reconsidered.
Copyright Business Recorder, 2024
ISLAMABAD: The federal government on Wednesday budgeted Rs2,128.8 billion for defence affairs and services for 2024-25 as compared to the revised disbursement of Rs 1,859.3 billion reflecting an increase of 17.6 percent from the original budget of Rs 1,809.5 billion (14.5 percent from the revised budget).
This new budget constitutes 11.28 percent of the total budget, addressing high inflation rates and security concerns, according to defence sources.
A detailed examination of the budget indicates that the original allocation for the outgoing fiscal year was Rs 1,809.5 billion, which was later revised upwards to Rs 1,859.3 billion.
IMF projects FY25 defence budget at Rs2.152trn
Defence budget excludes pensions, which have been budgeted at Rs 662 billion. This figure represents a 13.6 percent increase from last year’s revised pension expenditure of Rs 583 billion. The pensions were originally budgeted at Rs 563 billion, reflecting a 17.6 percent increase.
Additionally, major defence-related procurements and strategic programmes, including the nuclear weapons programme, are not itemised in the budget.
For defence administration, Rs 6,781 million has been allocated, up from Rs5,312 million in the revised estimates of the outgoing year. The previous budget for 2023-24 had allocated Rs 5,467 million for this purpose.
Defence services are budgeted at Rs2,122 billion against Rs1,854 billion in the revised estimates of last year against the budgeted Rs1,804 billion rupees. This includes (i) employee-related expenses at Rs815.2 billion including salaries and allowances paid to troops in uniform and civilian employees; (ii) operating expenses budgeted at Rs513.3 billion that include transport, POL (petroleum, oil and lubricants), rations, medical treatment, training, etc; (iii) Rs548.6 billion for physical assets utilised for local purchases and import of arms and ammunition and related procurements; and (iv) Rs244.9 billion budgeted for civil works that include funds marked for maintenance of existing infrastructure and construction of new buildings.
In addition, Rs5,636 million has been allocated under the head of PSDP to the defence division and Rs3,776million to the defence production division.
The International Monetary Fund (IMF), in its second and final review documents of the Stand-By Arrangement, projected Pakistan’s defence budget for the next fiscal year at Rs 2,152 billion, indicating a 19.29 percent increase over the Rs 1,804 billion budgeted for the outgoing fiscal year.
Copyright Business Recorder, 2024
ISLAMABAD: The government has budgeted no amount from the International Monetary Fund (IMF) loans for budgetary support for next fiscal year, 2024-25, against Rs 696 billion budgeted for the current fiscal year, which was later revised to zero.
A total of Rs 5.906 trillion is budgeted from external resources for 2024-25 compared to the revised estimates of 5.035 trillion rupees in the outgoing fiscal year – a rise of 17 percent and almost 18 percent lower than the budgeted Rs7.169 trillion for the outgoing fiscal year.
This includes Rs1.144 trillion borrowing from commercial banks abroad against Rs1.305 trillion for 2023-24 which was later revised to Rs 285 billion. However, as per Economic Affairs Division (EAD) data, no money was received under this head till end April.
Pakistan’s budget on Wednesday will aim to set stage for IMF bailout, say analysts
The government has budgeted Rs 323.266 billion under project loans for 2024-25 compared to Rs 68.311 billion for 2023-24 which was later revised to Rs290.644 billion.
Under the head of programme loans the government has budgeted an external assistance of Rs 277.890 billion for 2024-25 compared to Rs 788.170 billion for 2023-24, which was later revised downward to Rs 373.457 billion.
The government has budgeted no assistance under the head of Saudi Arabia (oil facility) for next fiscal year. Further no amount has been budgeted from Saudi Arabia (Time Deposit) for 2024-25 compared to Rs870 billion for 2023-24 which was later revised to Rs 570 billion.
Further, no amount has been budgeted from Saudi Arabia (import of petrol) compared to Rs 174 billion budgeted for 2023-24 which was later revised to Rs 171 billion.
However Rs 1.475 trillion has been budgeted from KSA time deposit against Rs 580 billion for 2023-24 which was later revised to Rs 1.425 trillion. Further the government has budgeted no amount under the head of new deposit UAE for 2024-25 compared to Rs 290 billion for 2023-24 which was later revised to zero.
The government has budgeted Rs 1.180 trillion from Safe deposit for 2024-25 against Rs1.160 trillion for 2023-24 which was revised to Rs 1.140 trillion.
The government has budgeted Rs 295 billion from Euro bond for 2024-25 against Rs 435 billion for 2023-24 which was later revised to zero. Further Rs 137.145 billion has been budgeted from Naya Pakistan Certificate for 2024-25 against zero for 2023-24 which was later revised to Rs 134.235 billion.
Copyright Business Recorder, 2024
ISLAMABAD: Finance Minister Muhammad Aurangzeb, Wednesday, moved a copy of the Finance Bill 2024 in Senate, which received an outright rejection from the opposition for ‘imposing excessive taxes on the common man’.
In the brief Senate sitting, the finance minister laid a copy of the new federal budget in accordance with the relevant constitutional provisions, following which, Chairman Senate Yousaf Raza Gilani directed the senators to share their recommendations, if any, on the Finance Bill 2024 latest by this Friday noon.
The chairman then referred the finance bill’s draft to the Senate’s finance panel with the direction to finalise its recommendations on the bill by Friday, June 21, and submit the related report to the house by June 22.
Major changes in tax laws expected through Finance Bill 2024
Taking the floor, Leader of the Opposition in Senate Shibli Faraz criticised the budget for imposing heavy taxes on the common man.
In response, Leader of the House in Senate Ishaq Dar referred to increase in salaries of government employees and pensions of retired government employees in the new federal budget, claiming these steps were part of government’s policy to give relief to the masses.
The chairman Senate announced that the house would start debate on the new federal budget from today (Thursday) and adjourned the session.
The upper house of the parliament can hold extensive debate on the finance bill and devise recommendations accordingly, but it has no significant role in budgetary legislation, since it is completely up to National Assembly to either completely or partially accept those recommendations or reject them, partially or completely.
Article 73 of the constitution, which deals with parliamentary business with respect to money bills, reads a money bill shall “originate in the National Assembly: Provided that simultaneously when a money bill, including the finance bill containing the annual budget statement, is presented in the National Assembly, a copy thereof shall be transmitted to the Senate which may, within 14 days, make recommendations thereon to the National Assembly.”
Copyright Business Recorder, 2024
ISLAMABAD: The government has earmarked a sum of Rs4.37 billion for Interior Division for fiscal year 2024-25 under Public Sector Development Programme (PSDP), against Rs9.09 billion in fiscal year 2023-24.
The budget document showed a decrease of 48.07 percent in funds allocated for various attached departments of the Interior Ministry, including Federal Investigation Agency (FIA), Islamabad police, Immigration and Passport (I&P), Frontier Constabulary (FC), Pakistan Coast Guards and Pakistan Rangers, and Islamabad Capital Territory (ICT) Administration.
According to budgetary documents released on Friday, the Interior Division would execute four new and 17 ongoing projects during next financial year 2024-25.
Budgeted allocation for PSDP projects: Planning ministry authorises Rs507.98bn
Out of Rs 4.37 billon, Rs 800 million are allocated for National Police Hospital, Rs 600 million for construction of a Model Prison at Sector H-16 Islamabad and Rs 500 for Islamabad development package.
The government has allocated Rs 400 million fore construction of 10th Avenue, Rs 285 million for establishment of change management unit within Islamabad Capital Territory (ICT) Police Islamabad and Rs277.280mn for construction of a Wing Headquarters at Ahmedwam, South Waziristan district.
As per the budget breakdown, Rs 237.280 million has been allocated for construction of a Wing headquarters at Gomalzam, South Waziristan district, Rs 142.217 million has been earmarked for acquisition of land for construction of National Counter Terrorism Authority (NCTA) headquarters, Mauve Area G-11 besides setting asides another Rs 114.723 million for up-gradation of 163 RPOs and 49 Pakistan Foreign Missions abroad.
The government has allocated Rs150 million for Integrated Border Management System (IBMS Phase-II) and earmarked another Rs150 million up-gradation of Biometric Identification System (BSI) for passport application. Immigration and Passport (I&P), headquarters Islamabad. Another Rs 108 million are earmarked for construction of buildings for 13 regional passport offices in Sindh Province and Rs 109 million tagged for foreign national security and allied facilities.
In the budget 2024-25, Rs 100 million are allotted for operation management & maintenance of Metro Bus to New Islamabad International Airport (NIIA) and Rs100 for revamping of Cyber Crime Wing (CCW) of Federal Investigation Agency (FIA).
Out of the total budget allocated for Interior Division, Rs 65 million are tagged for construction of office and troops accommodation of quarter guards at FC Headquarters Peshawar and Rs 50 million for construction of additional family suits for the members of parliament including 500 servant quarters at G-5/2, Islamabad.
Copyright Business Recorder, 2024
ISLAMABAD: The federal government has proposed an increase in petroleum levy to Rs 80 per litre on petrol and diesel (HSD) in the Finance Bill, as opposed to the current maximum limit of Rs 60 per litre, to generate Rs 1,281 billion for the next fiscal year 2024-25.
This amount is Rs 201 billion higher than what was projected for next year under this head by the International Monetary Fund in its second and final review under the Stand-By Arrangement (SBA) dated May 2024.
The government has proposed a raise in the petroleum levy (PL) rate on other petroleum products like high octane blending component (HOBC), Light Diesel Oil (LDO), and E-10 Gasoline from Rs 50 to Rs 75 per litre. However, the PL rate for superior kerosene oil (SKO), widely used for cooking purposes, remains at Rs 50 per litre.
Economic Survey: Jul-Mar POL import bill down on lower intake
While the originally budgeted PL for the outgoing year was Rs 869 billion, the budgeted amount for next year represents an increase of 47.4 percent.
The PL revenue has been given a high priority by successive federal governments as it is not part of the Federal Divisible Pool (FDP) that has to be shared with the provinces as per the National Finance Commission (NFC) formula.
The government has also proposed to maintain the Gas Infrastructure Development Cess (GIDC) collection at Rs 2.5 billion for the fiscal year 2024-25, identical to the revised target set for the current financial year. The GIDC was originally budgeted at a much higher amount of Rs 40 billion for the current fiscal.
In June 2020, the Supreme Court of Pakistan ruled that various sectors of the economy must clear outstanding Rs 407 billion GIDC in 60 months but the government has yet to realize this amount due to stay orders obtained by various companies.
Natural Gas Development Surcharge (GDS) - the difference between prescribed and sale price of gas that goes to provinces - is projected to bring Rs 25.618 billion next year against budgeted Rs 40 billion and revised Rs 27.169 billion in the current year.
On the directives of Finance Ministry, Auditor General of Pakistan (AGP) is auditing the GDS claims of both gas Companies-Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company (SSGC) to ascertain the real collection.
The government has also envisaged to collect Rs 3.537 billion for the PL on Liquefied Petroleum Gas (LPG) in fiscal year 2024-25. This is compared to the revised target of Rs 3.516 billion for the current fiscal year. The original budget for the PL on LPG in the current fiscal year was significantly higher, at Rs 12 billion.
The budget for fiscal year 2024-25 envisaged Rs 25 billion to be retained as a discount on local crude oil prices. This is the same amount as the revised estimate for the current fiscal year (2023-24). The original budget for the current year was lower, at Rs 20 billion.
The budget for next year also proposes a decrease in royalty on crude oil and increase in royalty on natural gas for provinces. The budgeted amount for royalty on crude oil is set at Rs 58.654 billion for next financial year against the revised estimates of Rs 57.017 billion for the outgoing year. The government has budgeted Rs 103.751 billion in royalty on natural gas in the next financial year against a revised target of Rs 93.567 billion and budgeted Rs 75 billion in 2023-24.
The next year’s budget envisages Rs 28 billion on account of windfall levy on crude oil against budgeted amount of Rs 20 billion for the current financial year 2023-24. Windfall levy on gas has been budgeted at Rs 400 million which was Rs 220 million in current fiscal year.
Miscellaneous receipts of oil and gas companies are budgeted to generate Rs1528.46 billion in next financial year against a revised target of Rs 1197.8 billion and budgeted estimates of Rs 1141 billion in the outgoing financial year.
Copyright Business Recorder, 2024
ISLAMABAD: The federal government earmarked Rs1368.874 million for 10 ongoing and seven new schemes of the Ministry of Law and Justice in the Public Sector Development Programme (PSDP) for the fiscal year 2024-25.
As per the budgetary documents, the government allocated Rs1131.00 million for ongoing schemes, which include Rs143 million for automation of federal courts/tribunals phase-II; Rs8 million for archiving and digitalising of legislations and record of the Ministry of Law and Justice; Rs300 million for the construction of legal facilitation centre, Islamabad High Court (IHC); and Rs16 million for strengthening of Planning and Monitoring Unit in the Ministry of Law and Justice.
FD agrees to provide Rs1.2trn for FY25 PSDP
Similarly, the government also specified Rs50 million for the ongoing scheme of construction of the new building for the Supreme Court, Branch Registry, Karachi; Rs32 million for strengthening and capacity enhancement of legal wings of Law Ministry and other federal ministries; Rs50 million for construction of Federal Courts/Tribunals Complex in Lahore; Rs32 million for the establishment of ICT enabled libraries at Federal Judicial Complexes at Islamabad and Peshawar; and Rs500 million for the construction of Litigants Facilitation Centre for litigants of District Courts, Islamabad.
However, no allocation was made for the construction of the camp office for the Federal Shariat Court at Peshawar.
Likewise, for seven new schemes the federal government allocated Rs237.874 million, which are Rs100 million for the acquisition of land and construction of boundary wall/guard room for the project construction of official residences of the chief justice and judges of IHC; Rs15.975 million for a feasibility study for the construction of official residences of the chief justice and judges of IHC; Rs100 million for remodelling and up-gradation work of Federal Judicial Academy, Islamabad; and Rs21.899 million for a feasibility study for the construction of Federal Courts/Tribunals complex in Quetta (PC-II).
Nothing has been allocated for new schemes of the establishment of mediation, human rights training centre and ADR; expansion of IT systems of the office of Federal Tax Ombudsman, including computerisation of five newly-established regional offices; and upgradation of IT infrastructure for automation and e-governance of the Federal Ombudsperson Secretariat for Protection against Harassment and its provincial regional offices.
Copyright Business Recorder, 2024
ISLAMABAD: The federal government has set a budgeted target of collecting Rs30 billion through privatisation proceeds in the upcoming fiscal year 2024-25.
The government intends to privatise 25 state-owned entities, including Pakistan International Airlines (PIA), Roosevelt Hotel, First Women Bank, Utility Stores Corporation, and various power distribution companies.
The federal government projected with the International Monetary Fund for next year in its second and final review under the Stand-By Arrangement (SBA) dated May 10, 2024 that it set a target to complete, by June 2024, the bidding for PIA’s core business, of which, the government would likely seek to sell a (controlling) 51 percent stake.
SOEs: PM for speeding up sell-off process
The IMF report says that Pakistan is moving forward with plans to privatise PIA and other assets and has advanced its broader privatisation agenda.
Several smaller SOEs are also currently on an active privatisation list, the report stated.
Copyright Business Recorder, 2024
ISLAMABAD: Benazir Income Support Programme (BISP) has been budgeted at Rs598.71 billion in financial year 2024-25, an increase of 27 percent in the programme’s annual budget in comparison to Rs 471.23 billion it has received in the outgoing financial year.
This increase in the budget is more than BISP’s estimate which was not expecting an increase of more than 20 percent in its budget, Business Recorder has learnt.
The reports received from informed officials indicate that BISP was projecting Rs 550 billion in the budget, an increase of 17 percent compared to its budget in the outgoing FY 2023-24.
Rs313.4bn disbursed among 9.4m BISP beneficiaries
The outgoing fiscal year’s budget initially showed an increase of only 10 percent compared to previous financial year—from Rs 408 billion to Rs 450 billion. Later, this figure was revised upward to Rs 471 billion showing a 15 percent increase.
But, like in the outgoing FY2023-24, the budgetary BISP data for upcoming FY 2024-25 has serious discrepancies.
According to budget documents issued by the federal government, Wednesday, BISP’s budget in the outgoing fiscal year is Rs 471.23 billion. Just a day earlier, the Economic Survey for outgoing financial year issued by the federal government showed BISP’s budget at Rs 466 billion.
The International Monetary Fund’s (IMF’s) country report on Pakistan from the last month mentioned BISP’s budget for FY2023-24 at Rs 472 billion.
In addition, federal government has repeatedly claimed that 9.3 million female beneficiaries receive financial aid under BISP’s flagship Kafaalat initiative.
However, the data received by Business Recorder from informed sources in BISP showed that 9.27 million beneficiaries were receiving quarterly stipend of Rs 10,500 each under Kafaalat programme. But, the federal government’s Economic Survey claimed that 9.4 million beneficiaries were receiving this stipend.
In April, last year, the then BISP Chairperson Shazia Marri first claimed that government increased BISP’s budget by 60 percent—from Rs 250 billion in FY 2021-22 to Rs 400billion in FY 2022-23 but then “revised” this claim, saying, the government increased BISP budget by 70 percent from Rs 235 billion in FY 2021-22 to Rs 400 billion in the FY 2022-23. This claim was contradicted by other the relevant government documents that showed BISPs budget at Rs 250 billion in FY 2021-22, and not Rs 235 billion.
Budget documents further suggest that BISP’s budget in 2022-23 was Rs 408 billion and not Rs 400 billion.
Copyright Business Recorder, 2024
ISLAMABAD: The government has introduced a new category of “Late Filers” in the income tax law under the Finance Bill 2024.
Earlier, income taxpayers were placed in two categories, Filers and non-Filers. Now, a new category of “Late Filer has been created which will attract higher rate of tax for late filing of income tax return. This measure will enforce timely filing of tax return.
In order to safeguard from higher rate of withholding tax and normal tax, it is imperative that individuals and association of persons are given more time for filing of their tax returns after close of financial year on June 30.
Major changes in tax laws expected through Finance Bill 2024
Another significant amendment is withholding tax regime of property transactions wherein slabs have been introduced according to the value of property. The highest slabs for filer would be 4% where value exceeds Rs 100 million.
Whereas highest slab for late filers will be 8% .The related measure is higher tax rate of 15% on gain from sale of immovable property acquired on or after 1st July 2024 regardless of holding period. This will discourage the investment in immovable properties and may shift the surplus funds either to bank schemes or stock market which will be beneficial for the economy as well.
Explaining Finance Bill 2024, a tax expert explained that recently, SIMS of non-filers were blocked but the same has not resulted into any compliance or increase in revenue.
Now more stringent measures are intended which include bar on foreign travel with exception from Hajj and Umrah travels, minors, students and overseas Pakistani. Such a restrictive and punitive measure is unprecedented in the tax history of Pakistan.
Another significant amendment is intended in respect of exporters. Since 1991 there was final tax regime for exporters and 1% tax collected by the banks on realisation of export proceeds was final discharge of tax liability. Now it is proposed that the exporters will pay tax at normal rate on their income.
Whereas, 1 percent tax deducted by a bank would be minimum tax. These measures will attract strong criticisms from the exporters as they are already facing challenges of higher cost of energy as compared to other countries in the region, tax expert added.
Copyright Business Recorder, 2024
ISLAMABAD: The government has increased the income tax rate for non-filers purchasing prepaid internet and phone cards, as well as, units for electronic mediums to a hefty 75 percent of the bill or sale price.
In order to broaden the tax base, the government has incorporated major changes for non-filers of income tax returns.
11,252 SIM cards of non-filers blocked so far
Budget 2024-25 documents revealed that the government has proposed changes in income tax withholding tax rates and proposed that in the case of persons mentioned in income tax general order issued under section 114B (income tax return non-filers mobile users), the rate of collection of tax shall be 75% of the amount of bill or sale price of internet pre-paid card or prepaid telephone card or sale of units to any electronic medium or whatever form.
Copyright Business Recorder, 2024
ISLAMABAD: The government has budgeted Rs32.612 billion from 4G/5G licenses under the head of non-tax revenue for the next fiscal year of 2024-25 against Rs7.597 billion budgeted for the outgoing fiscal year, which was later revised upward to Rs30.941 billion.
According to the budget documents 2024-25, the government has budgeted Rs10 billion from mobile handset levy for the next fiscal year against the budgeted Rs10 billion for the outgoing fiscal year which was later revised to Rs8 billion.
Under the head of income from property and enterprise (Pakistan Telecommunication Authority (Surplus), the government has projected to generate Rs1.2 billion for the next fiscal year against the budgeted Rs1.628 billion for the outgoing fiscal year which was later revised to Rs2.802 billion.
5G licenses: Shortfall of Rs32bn likely in non-tax revenue
The government has budgeted Rs10.036 billion in the budget for 2024-25 from regulatory authorities (surplus/ penalties) against Rs7.203 billion budgeted for the current fiscal year which was later revised to Rs1.168 million.
Copyright Business Recorder, 2024
ISLAMABAD: The federal government has increased subsidy for power sector by a whopping 103.7 percent – from the revised estimates of 584 billion for 2023-24 to Rs 1.190 trillion for FY 2024-25.
Total subsidies increased by 28 percent – from the revised estimates of 1,071,000 billion rupees to 1,363, 412 billion in FY 2024-25.
In power sector, the amount of subsidy for Inter-Disco tariff differential has been increased to Rs 276 billion for 2024-25 from Rs 150 billion allocated for 2023-24 showing an increase of 54.36 per cent. Subsidy for tariff differential to agri tubewells in Balochistan will be Rs 9.5 billion in 2024-25 which is at the same level of FY 2023-24. And Rs 120 billion has been earmarked in the name of additional subsidy, but no details have been provided in budget documents.
Power sector: MoF agrees to extend Rs1.094trn subsidy
The government has budgeted Rs 65 billion for WAPDA/ PEPCO receivables – merged districts of KP, erstwhile FATA.
The government has earmarked Rs 108 billion for AJ&K TDS in 2024-25 against budgeted Rs 25 billion in 2023-24. For FATA subsidy arrears, an amount of Rs 86 billion has been earmarked.
An amount of Rs 48 billion has been earmarked under Pakistan Energy Revolving Fund (PERA), to make payment of Rs 4 billion every month to IPPs established under China Pakistan Economic Corridor (CPEC). The total arrears of Chinese IPPs have reached Rs 500 billion.
For K-Electric, the government has earmarked Rs 174 billion under the head of TDS for FY 2024-25against Rs 171 billion earmarked for 2023-24 whereas Rs 500 million have been allocated as subsidy for agriculture tubewells in Balochistan. For arrears of KE’s TDS an amount of Rs 88 billion has been estimated for 2024-25 against 127 billion in 2023-24.
The government has also allocated Rs 509 billion subsidy for 2024-25 under the head of lump sum provision for power subsidy against Rs 444.075 billion of 2023-24, of which Rs 215 billion will be meant for GPPS-equity against Rs 262.075 billion in 2023-24.
The government has earmarked Rs 18.400 billion as subsidy for petroleum for FY 2024-25 , against budgeted amount of Rs 50.60 billion in 2023-24, of which Rs 2.4 billion will be as shortfall in guaranteed throughout of PEPCO, Rs 6 billion payment of shortfall to Asia Petroleum and Rs 10 billion domestic consumers through SNGPL (RLNG).
For Passco, Rs 12 billion have been earmarked for wheat operation and wheat reserved stock during FY 2024-25, of which Rs 8 billion will be meant for wheat reserve stock and Rs 4 billion for cost differential for sale of wheat, against Rs 10 billion in 2023-24.
An amount of Rs 65 billion has been estimated for Utility Stores Corporation USC) operation during 2024-25 against actual allocation of Rs 35 billion for 2023-24, of this Rs 10 billion will be for Ramazan package, Rs 50 billion on account of PM package and arrears and Rs 5 billion for sugar subsidy arrears.
For production and supply of urea fertilizer (fertilizer plants) an amount of Rs 3 billion has been earmarked for 2024-25 against Rs 25 billion in 2023-24.
The amount of subsidy under the head of other subsidies has been earmarked at Rs 75.012 billion for 2024-25 against actual allocation of Rs 49.6 billion and revised allocation of Rs 366.4 billion.
Details of total amount of Rs 75.012 billion for other subsidies are as follows: (i) wheat to Gilgit Baltistan, Rs 15. 972 billion;(ii) subsidy on import of urea fertilizer, Rs 10 billion; (iii) subsidy on NAYA Pakistan Housing Society, Rs 1 billion; (iv) Mera Pakistan Mera Ghar Scheme (mark-up subsidy on housing finance scheme, Rs 21.080 billion;(v) mark-up subsidy and risk sharing scheme for farm mechanization/Kissan package, Rs 5 billion; (vi) refinance and credit guaranteed scheme (SME Asaan Finance) Rs 3.2 billion; (vii) subsidy for enhancing financing to SME sector Rs 2 billion; (viii) mark up subsidy to support phasing out of the SBP’s refinancing scheme, Rs 13.860 billion and; (ix) Metro Bus subsidy Rs 3 billion.
Copyright Business Recorder, 2024
ISLAMABAD: The Finance Bill 2024 has proposed a sales tax withholding rate of 80 percent on supplies of coal, gypsum, plastic waste, crushed stone, paper, and paperboard.
Arshad Shehzad, a leading sales tax expert, explained that the government, in the new Finance Bill, has proposed to broaden the scope of sales tax withholding provided under the 11th schedule of the Sales Tax Act 1990.
He informed that the sales tax withholding on supplies of coal, gypsum, plastic waste, crushed stone, paper, and paperboard is proposed to be set at the rate of 80% by the purchaser. These items are commonly used in the manufacturing sector, in which their supply is well-documented.
Supplies by importers: Reduced rate of 1-4pc for purpose of tax withholding likely
However, the government has been facing significant tax evasion in their supply chain, which is often not properly documented or exploits the benefits of input tax adjustment.
Arshad stated recently, the government uncovered a significant tax fraud involving fake and flying invoices related to the supplies of these items. In an effort to reduce tax fraud and leakages, the government has shifted the responsibility for tax payment to the manufacturing sector by expanding the scope of sales tax withholding.
Shehzad appreciated this move; however, he is uncertain whether the genuine supply chain will be able to absorb the adjustment of such a high rate of sales tax withholding from their output tax. This aspect yet to be seen, he concluded.
Copyright Business Recorder, 2024
ISLAMABAD: Prime Minister Shehbaz Sharif-led coalition government’s Finance Minister Muhammad Aurangzeb has unveiled a Rs8.5 trillion or 6.9 percent deficit federal budget for the next fiscal year and called for the need to shift to a market-driven economy.
The finance minister, after an unusual delay in the session consequent to the coalition partner, Pakistan People’s Party (PPP), threatening not to attend the session for not being taken into confidence on provincial projects in the PSDP, said that he was feeling honoured to present the 2024-25 budget as he recounted that the government has been engaged with the International Monetary Fund (IMF) for a new Extended Fund Facility (EFF) programme to build on the economic gains achieved under the nine-month SBA as well as to bring about reforms in tax, energy sector and SOEs, and to take the privatization process ahead.
Govt all set to present over Rs18trn budget today
He called for structural reforms to get out of the low growth cycle and correct the incentives such as shifting the government-determined economy to a market-driven economy and to bring about improvement in regulatory and climate investment.
He said structural factors led to economic challenges and a home-grown reforms programme and political consensus can only turn around the economy and needed growth for employment creation.
The government has unveiled federal budget of Rs18.877 trillion with a 6.9 percent overall budget deficit and Rs12.97 trillion Federal Board of Revenue (FBR) tax collection, Rs7.438 trillion would be transferred to the provinces leaving the net income of the federal government at Rs9.119 trillion including Rs3.587 trillion non-tax revenue.
The primary deficit has been estimated at one percent of the GDP for the next fiscal year, GDP growth of 3.6 percent and inflation at 12 percent.
The finance minister said that the reduction in fiscal deficit through an equitable tax system by improving government income and reducing unnecessary expenditure would be a priority, besides SOEs’ restructuring and privatisation.
He deplored the low tax-to-GDP ratio and promised to bring the undocumented economy into the tax net.
The government has allocated Rs1.5 trillion for federal PSDP including Rs100 billion PPP for the next fiscal year with Rs824 billion for infrastructure, (energy Rs253 billion, Rs279 billion for transport and communication, Rs206 billion for water sector) and Rs280 billion for the social sector.
The government has earmarked Rs2.122 trillion for defence, civil administration Rs839 billion, Rs1.014 trillion for pension, and subsidy Rs1.363 trillion for gas, electricity and others.
Rs1.771 trillion grants for Benazir Income Support Programme (BISP), AJK, GB and the merged district of Khyber-Pakhtunkhwa, HEC, Railways, remittances and for the promotion of IT have been earmarked.
The government has proposed a 25 percent increase in salaries of grade1-16 employees, a 20 per cent increase in the salaries of the officers of grade 17-22,an increase of 15 per cent in pensions, and has fixed minimum wage at Rs37,000.
The government has allocated Rs593 billion for BISP for the next fiscal year and Rs5 billion for mark-up and risk-sharing scheme for farm mechanisation for the agriculture sector.
He assured improvement in the power sector through transmission and distribution as well as the privatisation of nine Discos and stated that Rs253 billion have been allocated for the power sector, Rs79 billion for the IT sector, and Rs7 billion for the digitisation of the FBR.
The government has allocated Rs86.9 billion for the promotion of remittances and the amount would be used for the reimbursement of TT changes, Sohni Dharti, and other schemes besides the introduction of Mohsin card.
Rs13.78 billion are being allocated for the export refinance scheme under EXIM Bank for an increase in exports and the SBP would provide Rs539 billion for export credit, and SME credit is being increased to Rs1.1 trillion from Rs540 billion with Rs100 billion increase in the next fiscal year.
The government is also allocating Rs4 billion for E-bikes.
The finance minister also promised that the tax policy principle would be an increase in the tax base by bringing the undocumented economy into the tax net through digitisation as well as by an increase in the tax rate for the non-filers on transactions.
The government has proposed tax collection on vehicles at the price of vehicle instead of engine capacity and proposed a rate of default surcharge to be aligned with the SBP’s policy rate of KIBOR+3 per cent.
The government has withdrawn zero rating and exemption on some items and proposed a standard rate of 18 percent GST for tier-1 retailers of branded textiles and leather goods.
The government has proposed a standard rate of 18 percent on mobile phones, and a withholding sales tax regime on scrap of coal, paper, plastic and copper.
The government has exempted iron and steel scrap from sales tax.
The government proposed federal excise duty of Rs44,000 on per kg Acetate tow to discourage the informal sector and FED on cement has been increased to Rs3 per kg from Rs2 per kg and five percent FED has been proposed on residential as well as plots and commercial properties.
The government has announced to withdraw exemptions on import of hybrid vehicles, as well as on luxury vehicles, besides withdrawal of duty on the import of glass as well as increase in duties on steel and paper goods ball bearings to increase domestic industry.
The government extended income tax exemption to the residents of FATA and PATA up to June 30, 2025.
The government has decided to maintain income tax exemption up to Rs0.6 million and also proposed that there would be no increase in the maximum slab in the salaried class but some changes in tax slabs have been proposed.
However, the maximum tax rate of 45 percent is being proposed for non-salaried slabs with some changes in the slabs of salaried class.
A tax rate of 15 percent has been proposed on capital gains from the disposal of immovable property for filers and up to 45 percent rate for non-filers.
A capital gains tax on the sale of securities at 15 percent for filers and for non-filers a maximum rate of 45 percent have been proposed. Different rates of withholding tax on immovable properties for late-filers of returns have also been proposed.
FED at the rate of five percent is proposed on immovable residential, commercial properties, and plots has been proposed.
Scope of advance withholding tax on retailers, wholesalers, and supply chain is proposed to be increased from one per cent to 2.25 per cent. Withdrawal of zero rating and reduced tax rate exemptions have been proposed.
Copyright Business Recorder, 2024
ISLAMABAD: The government has imposed/raised regulatory duty on the import of a wide range of items to encourage local manufacturing.
According to the Finance Bill 2024 issued on Wednesday, the FBR has rationalized RD on the import of new and used vehicles, increased/levied RD on flat-rolled products of iron and non-alloy steel, withdrawal of exemption of RD on the import of ground nuts and margarine imported by food confectionary, continuation of RD on import of chloroparafins liquid, withdrawal of RD on import of sliver cans and lollipop sticks.
The customs duty relief measures revealed the exemption of additional customs duty (ACD) on raw materials of fluids and powders for use in Hemodialyzers and an exemption of customs duties on bovine lipid extract surfactant.
FBR plans to collect Rs1.296trn thru duties
The review of Exemption Regime revealed withdrawal of concession of customs duties on import of fresh and dry fruits, review exemption of duties on import of inputs for home appliances, withdrawal of concessions of duties on import of hybrid vehicles, reduction in concession of customs duties on import of electric vehicles having value above US$ 50,000, incentives for manufacturing of solar panels and allied equipment, extension in scope of exemptions on import of machinery and equipment for farming and processing of fish/shrimp and seafood.
Under the tariff rationalisation, the government has increased customs duty on the import of containers for aerosol products, rationalisation of customs duty on the import of parts of submersible pumps, rationalisation of customs duties on the import of wheat, sugar, HSD, LNG streamlining the imports of aviation-related good.
The FBR has levied ACD on localized auto parts to incentivise the local manufacturing sector, creation of new PCT codes for rice flour, night vision goggles, blood collection tubes, solar cables, and tyre tube valves to facilitate trade.
The definitions of “Nuclear Material” and “Radioactive Material” included, for implementation of the National Nuclear Detection Architecture (NNDA) regime, the establishment of the Directorate General of National Targeting Centre (NTC), as a national single window of enforcement for all LEAs and Directorate General of Trade Based Money Laundering for cognizance of offences related to trade-based money laundering, officers of National Command Authority (NCA) and Pakistan Nuclear Regulatory Authority (PNRA) empowered to implement and enforce Customs Act, Intelligence Bureau (IB) added in the list of government agencies mandated to assist Customs in investigations, power for extension of detention period assigned to additional collector or additional director for smooth functioning, two new penal clauses are proposed to take cognizance of offences related to nuclear and radioactive material, rationalisation of pitch of penalty for the importers seeking clearance of declared confiscated goods against payment of redemption fine, enhanced prescribed penalty against a police officer who having seized goods fails to deliver such goods to custom house, penalties enhanced to deter smugglers and miscreants from attacking customs personnel, in view of recent attacks on customs staff, to deter the possibility of illegal removal and pilferage of smuggled goods liable to confiscation placed in the custody of owner, penal provision is proposed, changes are made with the objective of making the system more efficient by accelerating the disposal of pending cases in the Customs Appellate Tribunal, changes are made with a view to ensure that the cases are swiftly decided in the High Courts and also to meet the principles of natural justice and fair trial, strengthening the provision of alternate dispute resolution mechanism.
Copyright Business Recorder, 2024
ISLAMABAD: The government has announced progressive tax rates on purchases and sales of properties, categorised into three categories: filers, late-filers, and non-filers.
According to the Finance Bill 2024, on purchase of property by filers, the rates of tax would be 3% for values of properties up to Rs50 million, 3.5% for values of properties between Rs50 million and Rs100 million, and 4% for value of properties above Rs100 million.
Late-filers would face slightly higher rates: 6%, 7%, and 8%, respectively for the same property value brackets. Non-filers would experience significantly higher rates, set at 12% for properties up to Rs50 million, 16% for Rs50-100 million, and 20% for properties exceeding Rs100 million.
The proposed progressive advance tax rates at source for filers on sale of immovable property are 3% for properties valued up to Rs50 million. For properties valued between Rs50 million and Rs100 million, the withholding tax rate is 4%, and for properties valued above Rs100 million, the rate is 5%. For non-filers, the rate is 10% for properties of any value. Further, for late filers, the rate of tax will be 6%, 7% and 8%, respectively depending on the value of property.
Finance Bill 2024 further revealed that a flat 15% rate of tax on gains from the disposal of immovable property acquired on or after July 1, 2024 by filers regardless of the holding period is proposed, and for non-filers, progressive tax rates based on the prescribed slab rates in Division I of Part I of the First Schedule, with a minimum tax rate of 15% is proposed.
At present, capital gains on sale of securities is taxed on the basis of holding period with maximum rate at 15% and no tax if the holding period exceeds 06 years. Now, for the securities acquired on or after July 1, 2024, the capital gain on sale of such securities will be taxed at flat rate of 15% for filers, and for non-filers, the gain will be taxed at normal rates with minimum rate of 15% and maximum rate of 45%.
Further capital gains income from mutual funds and collective investment schemes is also enhanced from 10% to 15%.
Dividend income from mutual funds is taxed @ 15% at present. However, in order to reduce the arbitrage between individual persons deriving income from profit on debt and persons earning dividend income from mutual funds deriving income from profit on debt, it is proposed that rate of dividend derived from a mutual fund which earns 50% or more of its income from profit on debt be enhanced from 15% to 25 percent, Finance Bill added.
Copyright Business Recorder, 2024
ISLAMABAD: The government has announced new taxation/enforcement measures of nearly Rs 1,800 billion through withdrawal of exemptions and increase in withholding tax rates on buying/selling of properties, increased tax rates on late-filers, higher tax on salaried/non-salaried classes and retailers and 18 percent sales tax on mobile phones, dairy products (milk) and 5 percent Federal Excise Duty (FED) on commercial properties to meet target of Rs 12,970 billion for 2024-25.
This was stated by Federal Board of Revenue (FBR) Chairman Amjad Zubair Tiwana while giving technical briefing to the media on Finance Bill 2024 at the FBR Headquarters here on Wednesday. Out of policy measures of nearly Rs 1,800 billion, the administrative and enforcement measures stand at Rs 250 billion for 2024-25.
The FBR has estimated to generate Rs 2,000 billion from autonomous growth in the next fiscal year. We would be required an additional revenue of Rs 3,800 billion in the next fiscal year, he said. The income tax measures totalled at Rs 443 billion and personal income tax (PIT) changes amounted to Rs 224 billion. The sales tax measures totalled at Rs 485 billion and Federal excise duty measures amounted to Rs 289 billion. The customs duty measures totalled at Rs 70 billion.
Tax exemptions, zero-rating cost kitty over Rs3.87trn
The FBR has withdrawn exemptions of Rs 434 billion.
Within the category of sales tax, the exemption has been withdrawn to the tune of Rs350 billion.
The FBR chairman said changes in withholding tax regime would result in generating revenue of Rs 125-Rs 130 billion.
“To meet FBR’s annual tax collection target of Rs 12.97 trillion in the next fiscal year, the FBR calculated that it will collect Rs 2 trillion through nominal growth and collection out of stuck-up revenues cases into superior courts while the remaining Rs 1.761 trillion will be generated in the shape of additional taxation and enforcement measures,” FBR Chairman said.
However, Tiwana said that there was pressure for increase GST standard rate from 18 to 19 percent but they did not increase it.
The increase in tax rates for salaried class would have a revenue impact of Rs 100 billion and non-salaried class Rs 150 billion, he added.
The FBR imposed 18 percent sales tax on all locally produced milk, infant milk and other dairy products.
FBR Chairman pointed out that the FBR has also proposed a ban on foreign traveling of non-filers.
The government has imposed 10 percent sales tax on poultry feed; 10 percent tractors, 10 percent on oil residue and 10 percent sales tax on edible vegetables from Afghanistan.
Tiwana said that the newsprint would be subjected to 10 percent sales tax, imported personal computer 10 percent and sales tax on stationery items and many others items.
The prices of motor vehicles have substantially increased, therefore in order to capture true potential of tax it is proposed that basis of tax collection may be changed from engine capacity to percentage of value in cases of all motor vehicles. Moreover, it is also proposed that percentage of tax collection may also be increased in cases of vehicles having engine capacity of more than 2000cc.
The government has withdrawn various exemptions/zero rating and reduced/fixed rates. Mobile phones to be taxed at standard rate (other than mobile phones valuing exceeding US$ 500 which will remain chargeable to existing rate of 25%).
The FBR has enhanced reduced rate of sales tax from 15% to 18% on supplies made by the POS retailers dealing in leather and textile products. withholding regime for lead, coal, scrap of paper and plastic, silica etc. Iron and steel scrap to be exempted from levy of sales tax.
A phased withdrawal of exemption granted to ex-FATA/PATA. Board has been empowered to fix minimum price of the goods falling under Third Schedule. Zero-rating of petroleum products is being converted into exemption. Rate of default surcharge is to be aligned with the SBP’s policy rate of KIBOR plus 3%.
The FBR has imposed FED on acetate tow @ Rs. 44,000; FED on nicotine pouches @ Rs. 1200 per kg; enhanced FED on e-liquids; FED @ Rs. 15 per kg on commercial supply of sugar to manufacturers.
The rate of FED on cement is being enhanced from Rs 2 per kg to Rs. 3 per kg. FED on commercial properties and first sale of residential properties @ 5%. Rate of FED on filter rod to be enhanced from Rs.1500 per kg to Rs.80,000 per kg. power to seal business premises of retailers selling illicit cigarettes and price threshold for local manufactured cigarettes increased from Rs9,000 to Rs.12,500.
FBR Chairman said that the government has raised taxes on salaried, non- salaried class, real estate, retailers, and vehicles, removed GST exemptions, and slapped taxes on milk and milk products, mobile phones, tier-1 retailers of branded stores at 18 percent
At present, persons deriving income from exports have to pay a 1% tax on their export proceeds which is the final tax. On the principle of horizontal equity that taxpayers with equal income should pay equal tax, it is proposed income from exports be subjected to normal rates with one percent tax collection on their export proceeds be treated as minimum tax. To penalize non-filers, the rate for non-filers for dealers, distributors, and wholesalers is being enhanced from 0.2% to 2% and for retailer non-filers from 1% to 2.5%. The tax rates for non-salaried individuals and associations of persons and salaried individuals have changed. The limit of taxable ceiling has been kept unchanged at Rs 600,000. Beyond this threshold, tax rates for non-salaried individuals have five taxable slabs with progressive tax rates ranging from 15% to 45%.
For salaried individuals, beyond the threshold of Rs.600,000 per annum, there are five taxable slabs ranging from 5% to 35%.
Five years exemption from tax on income and from withholding taxes with effect from 1st day of July, 2018 was provided to FATA/PATA up to 30th day of June, 2023 which was extended for one year up to 30th day of June, 2024. It is proposed that further exemption from income and withholding taxes may be extended for another one year up to June 30, 2025.
Copyright Business Recorder, 2024
ISLAMABAD: The country will spend around Rs 9.775 trillion on debt servicing including interest payments and retiring its principal amounts during the next financial year 2024-25 which is 51.8 percent of total budget outlay of Rs 18.877 trillion.
The government earmarked Rs 9.775 trillion in the budget 2024-25 for this item against Rs 7.302 trillion for the current fiscal year which was later revised to Rs 8.251 trillion.
Foreign debt servicing has been budgeted at Rs1.038 trillion against Rs 872.219 billion allocated for the current fiscal year which was later revised to Rs 1.039 trillion.
Jul-Apr govt debt stock up 8.6pc to Rs66.08trn YoY
On domestic debt servicing, the government will spend Rs 8.736 trillion in 2024-25 against Rs 6.430 trillion in 2023-24 which was later revised to Rs 7.211 trillion.
Pakistan’s total public debt was recorded at Rs 67.525 trillion end-March 2024, registering an increase of Rs4.644 trillion during first nine months of current fiscal year, as it was Rs62.881 trillion on June 30, 2023.
Copyright Business Recorder, 2024
ISLAMABAD: The government has budgeted overall fiscal deficit at an unsustainable 6.9 percent of GDP for 2024-25 against the revised -7.4 percent for 2023-24 which was higher by 0.9 percent than the actual budgeted -6.5 percent.
In total terms the federal budget deficit is projected at Rs 8500 billion for 2024-25 against Rs 7506 billion budgeted for 2023-24 revised upwards to Rs 8388 billion.
The primary deficit is budgeted at 2 percent as percentage of GDP for 2024-25 against the International Monetary Fund (IMF) projection of 0.4 percent as noted in the second ad final review of the Stand By Arrangement dated May 2024.
Mid-year review: 77pc borrowing for financing fiscal deficit thru domestic sources: MoF
In total terms the primary deficit is projected at Rs 2492 billion for 2024-25 against Rs 397 billion for 2023-24 which was later revised to Rs 402 billion.
Provincial surplus is budgeted at Rs 1217 billion for 2024-25 against Rs 600 billion for 2023-24 which was later revised to Rs 539 billion.
Copyright Business Recorder, 2024
The government of Pakistan presented the budget for the fiscal year 2024-25 on Wednesday. Business Recorder takes a look at some of the key highlights of the documents.
Economic growth target fixed at 3.6% for fiscal year 2024-25
Inflation seen at 12% in FY2024-25
Total outlay of the budget for FY25 is Rs18.9 trillion
Gross revenue receipts expected at Rs17.8 trillion
Non-bank borrowing expected at Rs2.662 trillion
Rs5.142 trillion expected from bank borrowing
Rs666 billion earmarked for net external receipts
Privatisation proceeds expected at Rs30 billion
Rs9.775 trillion earmarked for interest payments
Rs1.014 trillion to be spent on pensions
Rs2.122 trillion allocated for Defence affairs and services
Rs1.777 trillion earmarked for grants and transfers to provinces
Rs1.363 trillion to be spent on subsidies
Running of civil government and emergency provision expected to consume Rs1.152 trillion
Rs1.674 trillion allocated for development and net lending
Overall fiscal deficit is at Rs7.283 trillion
Overall fiscal deficit at GDP 5.9%, down from the revised 7.4% of FY2023-24
FBR taxes envisaged at Rs12.97 trillion, around 40% higher than outgoing fiscal year
Non-tax revenue envisaged at Rs4.8 trillion
Federal PSDP budgeted at Rs1.400 trillion
Increase in allocation of BISP from Rs466 billion to Rs592 billion, subsidy allocation of Rs65 billion for utility stores corporation, Rs10 billion kept for Ramzan package
Pensions of government employees to be increased by 15%
25% increase in salaries of Grade 1 to 16 and 20% in Grade 17 to 22
Rs37,000 minimum wage proposed
Extra Federal Excise Duty (FED) of Rs1,000 per ton imposed on cement, bringing total FED to Rs3,000 per ton of cement dispatched
GST exemption granted to the FATA/PATA region to be removed
Sales tax rate for point-of-sale (POS) retailers dealing in leather and textile products increased from 15% to 18%
Maximum limit for petroleum levy enhanced for petrol and diesel to Rs80 per litre
Withdrawal of custom duties exemptions on CBU imports of hybrid vehicles
Withdrawal of concession on import of electric vehicles with value exceeding US$ 50,000
Advance tax on registration of motor vehicles above 2,000 cc will be fixed at a certain amount in proportion to the value of the vehicle
Iron and steel scrap to be exempted from levy of sales tax
Rs253 billion allocated for development of energy sector
‘National Fiscal Pact’ proposed with all provinces
A new category of ‘Late Filers’ introduced in the income tax law under the Finance Bill 2024
The story, originally published June 13, 2024, was updated on June 15, 2024 as further details came to light.
Pakistan Software Houses Association (P@sha), a major representative body of the IT sector, said none of its budget proposals have been considered by the government.
“None of the demands made by P@sha in budget proposal have been met,” said M. Zohaib Khan, Chairman P@sha.
“On the contrary, the skilled salaried class is now burdened with higher income tax, which could cause brain drain of the talent.”
Pakistan’s salaried group has seen increased tax liability for all persons earning more than Rs50,000 a month in Budget 2024-25.
Tax slabs in Finance Bill 2024 reveal that the highest impact would be on anyone earning equal to or more than Rs6 million a year (Rs500,000 a month). The tax liability for these earners increases by Rs22,500.
Interestingly, the tax increase for salaried persons earning as high as Rs12 million a year (Rs1 million a month) is also Rs22,500.
While the government did not touch the income tax exemption threshold – which still stands at Rs50,000 – liability has increased across all other levels of salaries.
Meanwhile, Zohaib said the allocation of Rs79 billion is primarily for the government projects and IT parks.
“Payroll incentives for IT industry have not been accepted to cater remote worker issues, which is hurting industry growth,” he said.
Meanwhile, the IT professional added that the General Sales Tax on IT hardware has also been increased from 5% to 10%, which will also hurt efforts of digitalisation.
“We will reach out to authorities to seek clarification and ask for necessary amendments that are necessary for Pakistan’s IT to continue on its growth trajectory,” he added.
“The current budget does not show the promise that’s repeatedly made by the government,” he said.
The latest budget proposals in Pakistan have raised concerns in the telecommunications sector. The government’s decision to impose a sales tax on mobile handsets below $500 is seen as a substantial setback for the country’s digitalisation efforts and overall connectivity.
An industry official privy to the matter said this move is poised to adversely impact the provision of essential connectivity, pushing Pakistan away from its digitalisation goals and potentially halting progress made in increasing internet usage across the nation.
“The budget proposal regarding the imposition of sales tax on mobile handsets below $500 will adversely impact the provision of essential connectivity, digitalisation efforts and internet usage in the country, pushing it towards the dark ages,” read a Telecom Operators Association of Pakistan (TOA) statement to the media.
It added that the proposal regarding the imposition of 75% advance tax on telecom usage for over half a million persons mentioned in the income tax general order is also unimplementable.
“The Telecom Operators Association of Pakistan urges immediate review of these proposals,” the statement added.
Mobile phones play a crucial role in bridging the digital divide in Pakistan, especially among the lower-income population. The proposed sales tax of 18% on handsets priced below $500 will likely make these devices less affordable for a significant portion of the population.
Federal Minister for Finance and Revenue on Wednesday brushed off the impression that the government targeted the already burdened salaried class.
“We have protected the salaried class,” said Aurangzeb while talking to a private channel after his Budget 2024-25 speech. “The Rs600,000 per year salaried segment remains exempted from tax. While there have been changes in the slabs, you will find there is minimal impact,” he said.
The remarks made by the Finance Minister come after the government increased tax liability for all persons earning more than Rs50,000 a month in Budget 2024-25.
Tax slabs in Finance Bill 2024 reveal that the highest impact would be on anyone earning equal to or more than Rs6 million a year (Rs500,000 a month). The tax liability for these earners increases by Rs22,500.
On the other hand, the debt-ridden government announced an increase in the salaries of Grade 1 to 16 government employees by 25%, while salaries of officers from Grade 17 to 22 were raised by 20%. Additionally, a 15% increase in pension for retired employees was also recommended.
When queried on the said move, Aurangzeb said the decision was taken given the inflation rate which stood at 24-25% during the outgoing fiscal year.
“Keeping the inflation rate in view, the government took this decision, which is a short-term compensation for the inflation-related expenses of these employees,” he said.
On the IMF programme, the former banker said that the priorities of Pakistan are “very aligned on these themes” with the International Monetary Fund (IMF).
“The budget presented was an important milestone as considerations made with the IMF were to be reflected in this,” he said.
“We remain in talks, which are continuing virtually, with the lender on other aspects. By early July, we should be looking at the broad contour of the staff-level agreement,” he said.
Aurangzeb said tax exemptions to the tune of Rs3.9 trillion were given during the ongoing fiscal, which need to be removed “in terms of bringing equity and fairness into the tax system”.
The government has set an ambitious tax revenue target of Rs12.9 trillion, nearly 40% higher than the last year.
However, Aurangzeb sounded confident that the Federal Board of Revenue (FBR), which has shown a revenue growth of about 30% in the outgoing fiscal, would achieve the target.
“I am very optimistic as we plug these loopholes, put measures in place and bring additional sectors into the net, we will be able to meet the target”
On taxing the agriculture sector, the finance minister said that the issue can be resolved through negotiation between the federal and provincial governments.
Income tax calculator for FY 2024-25
In the Finance Act 2024, the government added the following amendment:
“Subject to this Ordinance, a surcharge shall be payable by every individual and association of persons at the rate of ten percent of the income tax imposed under Division I of Part I of the First Schedule where the taxable income exceeds rupees ten million”
Net effect: If monthly salary exceeds Rs833,333, a surcharge of 10% of the income tax needs to be added to monthly tax amount.
For example, for a salaried individual earning Rs900,000 per month (Rs10,800,000 annually), the annual tax liability is Rs3,045,000. However, a 10% surcharge means the individual will pay another Rs304,500 during the year. Effectively, the monthly salary after tax comes down to Rs620,875 instead of Rs646,250.
The Pakistani government announced a shift in car taxation policy as part of its latest budget 2024-25 proposals. The new policy changes the basis for applying taxes on vehicles from just engine size to the price of the car.
According to Finance Minister Muhammad Aurangzeb, the new policy aims to rectify these inconsistencies by basing taxes on the car’s price, creating a more straightforward while also increasing tax revenues.
“Cars prices have gone up significantly. To tap the actual potential to increase taxes, this new proposal has been given,” he said in the budget announcement.
New taxes
For consumers, the new tax structure means that the cost of ownership for vehicles will be more closely aligned with the actual value of the car.
Luxury car buyers, who previously benefited from lower taxes due to smaller engines, will now face higher taxes reflecting the true market value of their vehicles.
An industry source said the impact will not be very significant as filers can adjust it as advance.
Auto sector analyst at AKD Securities Usama Rauf said this move will further increase the advance income tax, resulting in higher prices at the consumer-end.
“Nevertheless, I believe that the price increase won’t be significant enough to greatly impact demand for new autos,” he added.
Imported hybrid cars: end of concessions
In a related development, the government also proposed removing the concession on imported hybrid cars. This policy had been in place to encourage the adoption of hybrid technology and reduce environmental pollution.
However, with local manufacturing of hybrid vehicles now underway, the government believes it is time to level the playing field.
Indus Motor Company and Sazgar Engineering are making hybrid vehicles – Toyota Corolla Cross and Haval H6 in Pakistan.
However, an industry source said the government has also removed concessions on local manufacturing of hybrid vehicles.
Concessions removed on imported luxury electric cars
In another noteworthy change, the budget also includes the removal of concessions on imported luxury electric cars. Previously, these vehicles enjoyed tax benefits to promote the adoption of electric mobility and reduce carbon emissions.
However, it is seen that the affluent group in the country was purchasing imported luxury EVs.
“People who can buy expensive luxury electric can also pay tax on it,” said Aurangzeb in his budget announcement.
Promoting e-bikes
In an effort for climate change mitigation, the government is also planning to promote adoption of e-bikes. An allocation of Rs4 billion was made for e-bikes and another Rs2 billion for energy saver fans. However, Aurangzeb did not elaborate on how these allocations would be utilised.
Authorities in Islamabad have budgeted Rs5.685 trillion or over $20.3 billion to be acquired through external financing for the fiscal year 2024-25, showed the Finance Bill 2024.
As per the documents released as part of the Budget 2024-25 announcement, the government has budgeted foreign loan repayments to the tune of Rs4.99 trillion or nearly $18 billion in the coming fiscal, while Rs29.95 billion will be paid off of short-term credits.
However, it did not provide a breakdown of the source of external financing.
Consequently, net external sources the government seeks for the coming fiscal amount to Rs666.338 billion or $2.5 billion.
The federal government earlier today announced the budget for the next fiscal year FY2024-25, with a total budgeted outlay of Rs18.9 trillion, up 30% compared to the budgeted outlay of FY24.
Earlier, Finance Minister Muhammad Aurangzeb, while presenting the Economic Survey 2023-24 on Tuesday, had sounded a confident tone, saying that Pakistan will meet its external debt obligations in the coming fiscal year, amid reports that the country’s requirements surpass its current level of foreign exchange reserves.
“On the external finance side, once the International Monetary Fund (IMF) programme is in place, I don’t see that as a big challenge,” said Aurangzeb.
The State Bank of Pakistan (SBP) in its post-Monetary Policy Committee (MPC) briefing said in FY24 the total external debt to be serviced amounted to $24.3 billion with $3.9 billion allocated for interest payments and the remaining $20.4 billion as principal repayments.
Earlier this year, it was reported that Pakistan plans to seek a new loan of at least $6 billion from the International Monetary Fund (IMF) to help the government repay billions in debt due this year.
Last summer, Pakistan averted default thanks to a nine-month Extended Fund Facility (EFF) inked with the global lender, the programme expired in April and the government initiated negotiations for a long-term arrangement to keep the South Asian country’s economy afloat.
Proposals presented by Muhammad Aurangzeb in his first federal budget set aside Rs75 billion for special areas, including AJK and Gilgit Baltistan, Rs64 billion for merged districts, and Rs79 billion for Science and IT, according to Radio Pakistan.
The finance minister said that Rs50 billion are being set aside for the production sector including agriculture.
KSE-100 rises over 200 points ahead of budget announcement
He said priority will be given to the projects approved following the guidelines of the National Economic Council.
Finance Minister Muhammad Aurangzeb presented his first federal budget with a total outlay of Rs18.9 trillion.
Pakistan’s budget for the upcoming year aims for a modest 3.6 percent GDP growth.
Earlier, there were reports of rifts between the government coalition partners – Pakistan Peoples Party (PPP) and Pakistan Muslim League-Nawaz (PML-N) – over budgetary measures.
It was reported earlier that Prime Minister Muhammad Shehbaz Sharif signed the documents of the Federal Budget 2024-25 after its approval from the Federal Cabinet.
The fear of Pakistan’s salaried group became reality on Wednesday as the government increased tax liability for all persons earning more than Rs50,000 a month in Budget 2024-25.
Tax slabs in Finance Bill 2024 reveal that the highest impact would be on anyone earning equal to or more than Rs6 million a year (Rs500,000 a month). The tax liability for these earners increases by Rs22,500.
Interestingly, the tax increase for salaried persons earning as high as Rs12 million a year (Rs1 million a month) is also Rs22,500.
While the government did not touch the income tax exemption threshold – which still stands at Rs50,000 – liability has increased across all other levels of salaries. For example, a person earning Rs100,000 a month will now pay Rs2,500 a month, up from the earlier level of Rs1,250.
The government had also imposed a higher income tax on salaried persons last year on what it saw as ‘high earners’.
PERSPECTIVES: Pakistan’s salaried group is rightly anxious ahead of the budget
Finance Minister Muhammad Aurangzeb, during his budget speech, said the government did not change the number of slabs. While the number of slabs did not in fact change, the composition within them changed drastically.
In an article written by this correspondent two days ago, it was stated that during the outgoing fiscal year, the salaried group has contributed around Rs330 billion in 11 months.
“This amount is projected to stand at Rs360 billion over the entire fiscal year, a phenomenal 36% increase during a year when inflation stood at an average of 24.5% in 11 months of the outgoing fiscal year,” it was written in the article.
Income tax calculator for FY 2024-25
Bilal Memon is the Head of Digital Content at Business Recorder. His Twitter handle is @bilalahmadmemon
Finance Minister Muhammad Aurangzeb announced Pakistan’s federal budget 2024-25, targeting a modest 3.6% growth for the coming fiscal year, as Islamabad looked to appease the International Monetary Fund (IMF) and balance its burgeoning books with higher taxation.
The salaried group came out frustrated, while capital markets rejoiced at ‘status quo’. It was the real estate and IT sectors that were left disappointed. Government employees were offered raises, while pensions also increased.
Minimum wage was enhanced to Rs37,000, and some proposals discussed privatisation and the energy sector.
Inflation, which has proved to be a headache for Pakistan’s policymakers in recent years, was projected at 12% for the coming fiscal year.
The budget was announced with a total outlay of Rs18.9 trillion (up 30% compared to the budgeted outlay of FY24), and gross revenue receipts are expected at Rs17.8 trillion. The Federal Board of Revenue (FBR) taxes are envisaged at Rs12.97 trillion, an amount nearly 38% higher than the outgoing fiscal year.
Business Recorder reported the budget speech live underneath.
Updates
GST on tier-1 textile retail sector enhanced from 15% to 18%, says Aurangzeb.
Capital markets
CGT on non-filers to go as high as 45%, while on filers of income tax returns, it will stay at 15%, says Aurangzeb.
Slabs for salaried group will change, says Aurangzeb.
“For non-salaried individuals, income tax can go as high as 45%.”
The government intends to maintain income tax exemption up to Rs0.6 million.
While Aurangzeb did not share the slabs during his speech, calculations done later by various bodies tax suggest much higher taxation on all income levels.
Rs12.97 trillion is FBR’s target, which is 38% higher than the outgoing fiscal year, says Aurangzeb.
“Rs1.5 trillion for PSDP, which is 101% higher than the previous year.”
“Rs4 billion allocation made for ‘e-bikes’ and another Rs2 billion for energy-saving fans that promote energy conservation,” says Aurangzeb.
Rs86.9 billion allocated to promote remittances in Pakistan, says Aurangzeb.
Rs79 billion allocated for IT sector, says Aurangzeb.
An IT park in Karachi. Allocation of Rs8 billion made for it, says finance minister.
Aurangzeb highlights focus on these areas for energy sector:
Reduce transmission and distribution losses
9 DISCOs privatisation
Reduce theft
Promote solar, energy, and wind
Rs253 billion allocated for energy sector
BISP programme allocation has been increased by over 27%, says Aurangzeb.
“We have prepared a three-pronged strategy to reduce pension burden, and discussions on this has started,” says Aurangzeb.
“The government should not be doing business. We are starting a comprehensive programme to privatise state-owned enterprises,” says Aurangzeb.
“Pension reforms on the cards. I will mention them later in the speech,” says Aurangzeb.
Aurangzeb proposes what he calls a ‘National Fiscal Pact’ with all provinces
Pakistan engaging with IMF on a bigger programme, says Aurangzeb.
Aurangzeb begins budget announcement.
“This is a great honor for me to present the budget for fiscal year 2024-25,” says Aurangzeb.
“We are working on a homegrown reform to accelerate the economic growth of Pakistan.”
Ruckus in National Assembly mars start of session
Earlier, the delay came amid reports of rifts between the government coalition partners – Pakistan Peoples Party (PPP) and Pakistan Muslim League-Nawaz (PML-N) – over budgetary measures.
It was reported earlier that Prime Minister Muhammad Shehbaz Sharif signed the documents of the Federal Budget 2024-25 after its approval from the Federal Cabinet.
Muhammad Aurangzeb, former CEO and president of one of Pakistan’s largest banks, faces his toughest challenge yet – present the budget for a coalition government that is under pressure on three counts; satisfying the International Monetary Fund (IMF), providing some relief to the inflation-weary public, and ensuring growth for an economy that has faced stagnation in the last few years.
The PML-N-led coalition government is looking to balance requirements for the IMF, public, and a struggling economy. But it also has to take PPP onboard over the budgetary measures as it stands on a weak footing in the National Assembly.
The budget is likely to have an estimated outlay of over Rs18 trillion.
It is also being presented at a time when background talks are ongoing with the IMF which is likely to keep a close eye on any subsidies and unsanctioned expenditures that go against the contours of the new programme.
While Islamabad is hoping for a larger, longer facility with the IMF, its requirements are also likely to be tougher for Pakistan in pursuit of its 24th bailout.
Some areas of interest:
GDP growth target
External financing estimates
Taxation on salaried group
GST level
PSDP size and focus
Taxing the under-taxed sectors
Widening tax base
Super tax
CGT and tax on dividends
The budget comes a day after the government said economic growth of 2.4% is expected in the outgoing fiscal year and it would miss a target of 3.5%, although revenues were up 30% over last year, and the fiscal and current account deficits were under control.
Aurangzeb, during his press briefing while unveiling the Pakistan Economic Survey 2023-24, had said there were “no sacred cows”, offering a sneak peek into the budget announcement.
Finance Minister Muhammad Aurangzeb will announce budget proposals for the coming fiscal year in a short while today, but experts are torn and have little expectations that any innovative measures would be introduced to increase tax revenue that would enable the government to divert resources to Pakistan’s economic growth.
“A lot of revenue measures will be taken. It seems a lot of it will be indirect in nature, and targeted towards under-taxed sectors,” said Samiullah Tariq, Head of Research and Development, Pakistan Kuwait Investment Company.
Tariq said the whole supply chain will probably be taxed.
“It will appear that the tax base is widening, but eventually it will be passed on to the consumers.”
Renowned economist Kaiser Bengali, however, said a stagnant economy cannot be burdened with more taxes.
PERSPECTIVES: Pakistan’s salaried group is rightly anxious ahead of the budget
“A greater priority should be non-development including non-combat defence expenditure to reduce the budget deficit,” he said.
Pakistan Software Houses Association (P@sha) Chairman M. Zohaib Khan said that the body has asked the government to reduce taxes on the IT sector workforce from 35% to 5%.
“It will help increase tax revenues for the government too,” he said.
He said that most of the IT sector companies have listed their employees as freelancers so that tax is paid 1% for unregistered and 0.25% for registered freelancers.
He added that the IT sector was also expecting a 100% dollar retention account and tax holiday as it will serve as a marketing tool to attract foreign companies to open offices in Pakistan.
Former P@sha chief Syed Ahmad said that he is expecting Rs26 billion for the IT sector.
“However, Rs16 billion is actually loans from Koreans for tech parks, a decade old project, and Rs10 billion for skills and marketing for PSEB and NAVTCC (both government entities).”
Meanwhile, auto sector expert Mashood Khan said the auto industry, already weakened over the past 2.5 years, is in urgent need of support and strategic direction. As observed in the last Finance Minister’s speech, the industry’s growth has been stagnating at a mere 1.25%.
“I expect that the upcoming budget will set the tone for the next five years, establishing clear trends and priorities for the sector’s revival. The government must prioritise industrialisation as its top agenda.”
Additionally, there should be measures to ease access to financing, reduce bureaucratic hurdles, and provide incentives for innovation and modernisation.
“Our primary focus must be on increasing our foreign exchange reserves and enhancing local production and localisation. If we fail to take these crucial steps, we risk finding ourselves in economic trouble again in a few months.”
Earlier, Business Recorder reported the government is likely to fix over and above Rs12 trillion tax collection target of the Federal Board of Revenue (FBR) for 2024-25 as compared to Rs9.4 trillion for 2023-24, reflecting a massive increase of over Rs2.6 trillion.
Sources told Business Recorder that the revenue measures to the tune of Rs1,500 billion to 2,000 billion are expected to be announced today (Wednesday).
The Finance Bill 2024 is also expected to further raise regulatory duties and other duties on the import of non-essential/luxury items and finished products.
The withholding tax rates including imports, contracts, services and supplies are likely to be increased in budget (2024-25). In the case of non-filers, the withholding tax rates would be increased on different financial transactions of un-registered persons.
The government may increase advance income tax on the import of raw materials by commercial importers by one percent.
The FBR has proposed 2.5 percent tax on the entire business supply chain, from manufacturers to retailers. The income tax slabs for the salaried class is expected to be revised under the new Finance Bill, sources said.
One of the revenue measures proposed is to raise advance tax on the purchase of immovable properties. The FBR has imposed three percent tax on filers and 10.5 percent tax on non-filers during the current fiscal year, and it collected nearly Rs80 billion during this year.
Sources said that a three percent tax has been proposed on filers and six to seven percent tax on non-filers for the purchase of property upto Rs50 million.
Similarly, four percent tax on filers and 12 percent tax on non-filers have also been proposed for the purchase of property worth Rs50 million to Rs100 million.
Furthermore, five percent tax on filers and 15 percent tax on non-filers have been proposed for the purchase of property worth over Rs100 million.
The government is all set to impose federal excise duty (FED) on nicotine pouches and e-cigarettes. At present, there is no FED on nicotine pouches.
The measure is estimated to generate revenue to the tune of billions. The FBR has proposed a standard rate of 18 percent sales tax on a number of zero-rated items and exempted goods including dairy and stationery items in the budget (2024-25).
ISLAMABAD: The incumbent government is all set to present its first growth-oriented federal budget for the fiscal year 2024-25, with an estimated outlay of over Rs18 trillion, on June 12 (Wednesday).
The budget for fiscal year 2024-25 would be presented before the National Assembly by Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb.
The budget had been formulated while considering the existing challenges being faced by the economy at domestic and international fronts. Hence, mitigating people’s sufferings, transforming agriculture sector, promoting Information Technology (IT), boosting exports, promoting industrial growth and bolstering businesses, would be the main focus of the document, the sources said.
Pakistan’s salaried group is rightly anxious ahead of the budget
The government is firmly committed to presenting a pro-people, business-friendly and progressive Federal Budget FY 2024-25. It will pursue policies aimed at fiscal consolidation to contain budget deficit.
In addition to fiscal management, revenue mobilization, measures for economic stabilization and growth, reduction in non-development expenditures, job creation and people-friendly policies for the socioeconomic prosperity of the country, would feature in the budget.
It would also focus on social sector development besides introducing reforms for improving governance and boosting the private sector for investment.
On the revenue side, the government would introduce measures for bringing improvements in the system of tax collection, broadening the tax base, and facilitation to tax-payers.
Keeping in view the robust growth of revenues during the current fiscal year (2023-24), the government is likely to set the revenue collection target at over Rs.12 trillion for the fiscal year 2024-25.
The sources said the preparations for the announcement of the federal budget for fiscal year 2024-25 continued in full swing in accordance with the prescribed timeliness.
The budget is being prepared in close coordination between all departments and ministries involved in budget related events including the presentation of the budget in the Parliament and launching of the Economic Survey, sources added.
ISLAMABAD: The government is likely to fix over and above Rs12 trillion tax collection target of the Federal Board of Revenue (FBR) for 2024-25 as compared to Rs9.4 trillion for 2023-24, reflecting a massive increase of over Rs2.6 trillion.
Sources told Business Recorder that the revenue measures to the tune of Rs1,500 billion to 2,000 billion are expected to be announced today (Wednesday).
Finance Bill 2024 to be revealed on Wednesday (June 12) is expected to further raise regulatory duties and other duties on the import of non-essential/luxury items and finished products.
The withholding tax rates including imports, contracts, services and supplies are likely to be increased in budget (2024-25). In the case of non-filers, the withholding tax rates would be increased on different financial transactions of un-registered persons.
The government may increase advance income tax on the import of raw materials by commercial importers by one percent.
Jul-Dec tax collection: FBR surpasses target
The FBR has proposed 2.5 percent tax on the entire business supply chain, from manufacturers to retailers. The income tax slabs for the salaried class is expected to be revised under the new Finance Bill, sources said.
One of the revenue measures proposed is to raise advance tax on the purchase of immovable properties. The FBR has imposed three percent tax on filers and 10.5 percent tax on non-filers during the current fiscal year, and it collected nearly Rs80 billion during this year.
Sources said that a three percent tax has been proposed on filers and six to seven percent tax on non-filers for the purchase of property upto Rs50 million.
Similarly, four percent tax on filers and 12 percent tax on non-filers have also been proposed for the purchase of property worth Rs50 million to Rs100 million.
Furthermore, five percent tax on filers and 15 percent tax on non-filers have been proposed for the purchase of property worth over Rs100 million.
The government is all set to impose federal excise duty (FED) on nicotine pouches and e-cigarettes. At present, there is no FED on nicotine pouches.
The measure is estimated to generate revenue to the tune of billions. The FBR has proposed a standard rate of 18 percent sales tax on a number of zero-rated items and exempted goods including dairy and stationery items in the budget (2024-25).
Copyright Business Recorder, 2024
