Govt revisits Budget FY24: A last-ditch effort to secure stalled IMF tranche

ISLAMABAD: The government has revised the budget for the next fiscal year by increasing new taxes to Rs438 billion, Rs223 billion on June 9, 2023 and additional taxes of Rs215 billion, besides slashing expenditure by Rs85 billion – in an effort to complete the pending 9th review of the International Monetary Fund (IMF) programme.

While winding up ongoing debate on budget for the next fiscal year on Saturday, Finance Minister Ishaq Dar said that after Prime Minister Shehbaz Sharif’s meeting with the Managing Director (MD) IMF and subsequent discussions of the economic team with the Fund some changes have been made in the budget to complete the pending review. He said that Rs215 billion additional new taxes are being imposed and expenditures are being reduced by Rs85 billion. He maintained that there would be no impact of these changes on the development budget and increase in the salary and pension of the government employees.

He said that after these changes, the Federal Board of Revenue (FBR) tax collection target has been revised upward to Rs9, 415 billion for the next fiscal year from earlier projected at Rs9200 billion, and provinces' share has been increased from Rs5276 billion to Rs5399 billion. He said that the federal government’s expenditures have been increased to Rs14, 480 billion from Rs14,460 billion, whereas, pension allocation to be increased from Rs751 billion to Rs801 billion.

Pakistan will look to impose Rs215bn additonal taxes after IMF talks: Dar

The finance minister said that allocation for subsidy would be Rs1,064 billion and grants Rs1,405 billion. He maintained that overall budget deficit would improve following these changes.

Earlier, the finance minister said that very good suggestions were proposed by Foreign Minister Bilawal Bhutto Zardari, opposition leaders, as well as, parliamentary leaders of allies parties to the budget for the next fiscal year with regard to food security, climate change, the BISP, expansion of the USC, and solarization of agriculture tube-wells, prevention of population growth, etc.

He also mentioned erstwhile FATA and Balochistan-related proposals besides those forwarded by the Senate Standing Committee on Finance and Finance Standing Committee of the National Assembly after taking input from the business community.

He said that the government has received total 59 recommendations, of which, 19 were of general nature, especially for increase in defence budget, interest-free economy and privatisation of the PSEs. He said that some members have also expressed concern on super tax, and withholding tax of 0.6 per cent cash withdrawal from banks by non-filers. The minister said that super tax has been made progressive and limit that had been Rs300 million has been increased to Rs500 million and tax rate has been made progressive and rate of tax starts from one per cent, two per cent, three per cent, and four per cent and goes up to 10 per cent.

Dar said that 0.6 per cent tax on cash withdrawal is a step towards making economy documented. He said some members have expressed concern over tax on bonus shares, but explained that tax has been imposed on dividend and bonus shares, adding that the government has proposed reduced rate of 10 per cent tax on bonus shares. He said that some members have also expressed reservations on 99 D-Sections for windfall gain and stated that this law is enabling provision and is not targeted towards a company or individual; rather it would be for the entire sector. He said that many countries have imposed tax on windfall gain.

He said that the government would ensure that business activity is not affected. He said on the recommendations of Anomaly Committee, five years period is being reduced to three years and will be implemented from fiscal year 2020-21. He said that this law is not witch-hunting and as the committees have been urging the government to impose tax on windfall profit of banks and entire sector would come under it.

This has been decided to impose Rs2,000 FED on inefficient electricity fans that are consuming more energy, the companies have sought time to improve their technology; therefore, the government has decided to implement the FED from January 1, 2024 instead of July 1, 2023, thereby, providing them six month time period to do so, he said.

The finance minister said that the government has also decided to review the Alternate Dispute Resolution Committee with formation of a three-member committee to be headed by high court or superior court retired judge and one member of the committee would be taxpayer and one of FBR tax officials to expedite Rs2.3 trillion tax cases in litigation at different forums.

He said that the ADRC decision would be binding on the FBR but would not be binding on taxpayers and they would be allowed to challenge ADRC majority decision to other forums.

The present government to ensure supply of edible food items had decided to provide Ramazan package of Rs5 billon, and Rs24 billion under PM package and allocation of BISP has been increased from earlier proposed Rs450 billion to Rs466 billion for the next fiscal year.

Dar said that the government would release funds for the defence budget in time and Rs30 billion has been allocated in the budget for climate change, and for promotion of agriculture and national food security. He said that pension and salary of civil and military personnel has been significantly increased, as well as, minimum wage and EOBI pension.

He said that the under National Saving Scheme, Bahbood Saving Certificate, and Shuhadas Family Welfare Accounts and Pensioners Benefit Accounts’ limit has been increased from Rs5 million to Rs7.5 million; whereas, Petroleum Development levy limit has been increased from Rs50 per liter to Rs60 per liter. To facilitate overseas remittances, Rs80 billion have been allocated in the budget for the next fiscal year, while Rs90 billion has been earmarked for the SDGs. For Science and IT Rs35 billion and for agriculture Rs13 billion outside PSDP has been allocated and for tube-wells solarization Rs30 billion, and for the PM scheme and for youth Rs31 billion has been allocated. Other then, NRE 15 per cent has been reduced under austerity scheme and austerity measures announced by the prime minister would be confined for the next fiscal year, as well.

He told about some new suggestion for Public Finance Management (PFM) with implementation of Treasury Single Account (TSA) and new general financial and treasury rules and cash and debt management rules.

The finance minister said that pension expenditure are unsustainable and needs urgent reforms and contributory fund for federal employees has to be implemented. He said that the pension fund has been established in budget for the next fiscal year and work on its rules and procedure has been started. He said that decision taken to reform the pension included; (i) one retired person would get pension only from one department and multiple pensions are being abolished, immediately; (ii) at the time of computation of the pension ah-hoc pension allowance would be included in the net pension without compounding ad-hoc pension allowance and; (iii) after the demise of the pensioner and his spouse family pension would be allowed for 10 years only and; (iv) in case of reemployment one would have to opt for either pension or salary.

Copyright Business Recorder, 2023