The 2009-10 Federal budget, to be unveiled in the National Assembly on Saturday, has been widely publicised by Prime Minister''s Advisor on Finance Shaukat Tarin at several forums, with a total outlay of around Rs 2.9 trillion with a projection of Rs 750 billion deficit, i.e. five per cent of the gross domestic product (GDP).
This is 1.6 percent higher than what is contained in the letter of intent (LoI) submitted by the government on November 20, 2008 to the International Monetary Fund (IMF) and which was reconfirmed in the government''s LoI dated March 16, 2009. The government is expected to announce new taxation measures that would increase revenue by Rs 60 billion against a targeted increase of Rs 84 billion in the outgoing fiscal year. Defence budget is expected to be Rs 375-380 billion.
Salaries of government employees are likely to be increased by 15-20 per cent, whereas pensioners (civilian and defence) will also get a proportionate raise. Minister of State for Finance and Economic Affairs Hina Rabbani Khar will read out the budget speech. Before unveiling the Federal budget in the National Assembly, a special Cabinet meeting will be held under the chairmanship of Prime Minister Syed Yousuf Raza Gilani to discuss the budget clause by clause, including the increase in salaries.
The government has reportedly dropped two major taxation proposals - increase in sales tax from 16 to 17 percent and withholding tax at the import stage from two to four percent. The Federal Bureau of Revenue (FBR) had worked out revenue impact of Rs 30-35 billion due to proposed increase in sales tax from 16 to 17 percent. In addition, increase in withholding tax on bank accounts and withdrawals have been proposed.
THE NEW EXPECTED TAX MEASURES ARE AS FOLLOWS:
-- Five percent CED is proposed on import of coffee and its local sale; electrical appliances like refrigerators and air conditioners are likely to have five-10 percent excise duty; 16 percent GST is proposed on computer software; and real estate sector is likely to have 2-3 percent new taxes.
-- Advertising sector, related to the electronic media, is to be brought into the tax net in various brackets.
-- Federal excise duty (FED) on cement and other construction material items, produced in Pakistan, is proposed to be reduced by Rs 200-300 per ton.
-- Cosmetics, perfumes and other luxury import items would receive additional 3-5 percent duty.
In addition, some taxation proposals include taxing the NSS schemes, expected to generate per annum revenue intake of Rs 30-35 billion; packaging material used for eatables, and construction sector material/input of 2-5 percent.
DEVELOPMENT SECTOR ALLOCATIONS The government will allocate Rs 38 billion for development projects in AJK, Fata and Northern Areas. An allocation of up to Rs 15 billion is proposed for good governance, focusing on project reforms, improving tax administration reforms, audit and account system and public sector capacity building.
-- Transport and communication sector will get Rs 70 billion.
-- Social sector to benefit from the following initiatives:
-- Technical institutes of international repute in 27 districts, costing a total of rupees seven billion.
-- Benazir Income Support Program (BISP), costing Rs 70 billion.
-- Grain storage facilities with an investment of Rs 27 billion.
-- Dairy projects in Public-Private Partnership (PPP) with government equity of Rs 3.5 billion.
The government will also allocate rupees three billion for Reconstruction Opportunity Zones (ROZs) in NWFP and Balochistan, besides increasing allocation for health sector from Rs 14 billion to Rs 26 billion, and Rs 32 billion will be earmarked for education and training. Education, information technology (IT), environment and housing sectors to be allocated an increase of 10-15 percent in comparison to last year.
Substantial package of subsidies for textile and clothing sector in budget 2009-10 is proposed since it is recording nine percent negative growth. The proposed package is likely to be between Rs 20 to Rs 32 billion. Five-year textile policy, featuring textile investment fund, human resource development and public-private partnership schemes to be unveiled, consisting of additional budgetary support. Revised rates of duty drawbacks to be included in the package.
The government will encourage establishment of new ports and shipyard in Balochistan under the package of ROZs and rupees one billion for Thar Coal Infrastructure Development. A possible allocation of Rs 55 billion for Balochistan in the Federal PSDP is likely to be proposed.
In addition to the package for Balochistan, announced by the Prime Minister totalling Rs 59 billion, rollover of Rs 21 billion unutilised during 2008-09 will be allowed. A special package is expected to be announced for the cellular companies, which claim that the number of customers have declined due to massive taxation.
To plug revenue leakage''s, the Federal Board of Revenue (FBR) is to be advised to take stringent measures. The enforcement measures would generate additional revenue of Rs 15 billion, including rupees five billion each for sales tax, Federal excise and customs duty in coming fiscal year. Under invoicing of exported goods to be checked and discouraged through implementation of a new system from next fiscal year.
The FBR will post the customs counsellors in the embassies, which would verify valuation of goods sent to Pakistan, as the normal embassy channels are slow. A special computer software to be developed that would identify prospective under-filers, which would be audited either by the FBR or by third party audit. The FBR will suggest to the SBP to look into higher banking spread that is hurting the industry by introducing banking sector reforms.
Value-added taxation mode to be proposed in order to fully documents the economy and check pilferage''s. The FBR will be asked to suggest measures to check revenue leakage''s in local production sector, which include cigarette, sugar, cement, beverages etc. A sizeable allocation for development of housing facilities for government employees in the Federal and provincial governments will be proposed.