Capital Value Tax (CVT) was levied by the federal government in 1989 on transactions relating to acquisition of immovable properties. This tax, which was effectively a tax on immovable property, was devolved by the 18th Amendment to the provincial governments, and they adopted it. This means that it is the wealth tax on immovable property that is now devolved.
In the Finance Bill 2022, another tax by the name of Capital Value Tax 2022 has been levied on the capital value of domestic and foreign assets. At the outset it is stated that if any immovable property falls within the purview of this tax then it is clearly invalid as the same has been devolved to the provinces under the 18th amendment. The federal government is not empowered to levy taxes on capital value of immovable property under Article 50 of the Federal Legislative List of the Fourth Schedule to the Constitution of Islamic Republic of Pakistan.
This means that the Capital Value Tax 2022 on domestic and foreign assets can only be levied on moveable properties. In this respect another important question that is expected to arise is about the right to tax immovable properties outside Pakistan. The question is whether or not the federal government has the right to tax capital value of any immovable property if that property does not fall within the territory of any province. In my view, the restriction is absolute and unless there is an amendment in the Constitution to this effect the citizens of Pakistan cannot be taxed on the capital value of immovable properties outside Pakistan by the federal government in any manner whatsoever.
The second question is the validity of tax on movable capital assets held by a resident of Pakistan outside Pakistan. There is no restriction on the parliament to levy such capital value tax. Nevertheless under the present circumstances the corollary question is that foreign assets held by persons resident consist of assets of two kinds. These are:
Assets declared under Asset Declaration laws of 2018 and 2019; and
Assets other than those declared under the aforesaid laws.
The asset declaration laws of 2018 and 2019 have a special character. These are the assets which have been claimed by a resident person to be his/ her assets. The Government of Pakistan by way of two special laws provided that if a sum as laid down in these laws is paid by the resident person within a stipulated time then no law of the country including income tax law, wealth tax law, foreign exchange law, corporate law, anti-money laundering law, etc., will apply on those assets. Now with the introduction of Capital Value Tax 2022 the question is whether such assets can now be subjected to the wealth tax in the nature of capital value tax under the Finance Bill 2022. My answer to this question is that no such tax can be levied. In order to understand that rationale it would be better to reproduce from the Indian law through which tax has been levied in that on undisclosed assets. The law states:
(11) “undisclosed asset located outside India” means an asset (including financial interest in any entity) located outside India, held by the assessee in his name or in respect of which he is a beneficial owner, and he has no explanation about the source of investment in such asset or the explanation given by him is in the opinion of the Assessing Officer unsatisfactory;
(12) “undisclosed foreign income and asset” means the total amount of undisclosed income of an assessee from a source located outside India and the value of an undisclosed asset located outside India, referred to in section 4, and computed in the manner laid down in section 5;
CHAPTER II BASIS OF CHARGE.
(1) There shall be charged on every assessee for every assessment year commencing on or after the 1st day of April, 2016, subject to the provisions of this Act, a tax in respect of his total undisclosed foreign income and asset of the previous year at the rate of 30 percent of such undisclosed income and asset:
Provided that an undisclosed asset located outside India shall be charged tax on its value in the previous year in which such asset comes to the notice of the Assessing Officer.
As against this the Pakistan law states as under:
There is a very subtle difference between the laws promulgated in India and Pakistan. In India, the tax under the special law is being collected as effectively being an undisclosed income or asset that can be taxed as income under the income tax law. It means that in India it is a substitute to the income tax that has not been paid. It is not a tax on the value of assets though so calculated. It is effectively undisclosed unexplained income which in Pakistan is taxable under Section 111 of the Income Tax Ordinance 2001.
In Pakistan, the status of the law is completely different; it is in the nature of a one capital value tax and such amount has also been taken away from the charge of income tax that could have been levied on such income. In short, in India, it is a substitute income tax whereas in Pakistan it is a wealth tax. We have not related the same in any manner to the undisclosed unexplained expenditure and assets. I was part of the team that was involved in the original draft preparation for this law under the direction of the Supreme Court of Pakistan and we knew the aforesaid issue and we framed the aforesaid law in this manner as we were aware of harassment that would have been entailed if any provision similar to India’s would have been introduced. We gave the concession intentionally. The matter was decided through deliberations.
Having established the same, the next question is whether the provisions of Foreign Asset Declaration Law 2018 and 2019 which override the Income Tax Ordinance or any subsequent law being Capital Value Tax 2022 introduced by the Finance Bill 2022 shall apply. This is a case of one special law against another general law. This matter has already been well thrashed by the Supreme Court of Pakistan in the case reported as 2017 SCMR 1218 written by Justice Saqib Nisar. In his judgement, Justice Nisar has relied upon the judgement of Justice Afzal Zullah who in my opinion was one of the most learned judges that Pakistan has ever produced. His judgements are comparable to those pronounced in India and the UK. The text of both the judgements are stated as under:
(i) If the provisions of a later Act are so inconsistent with those of an earlier Act that both cannot stand together, the earlier stands are impliedly repealed by the latter. This principle is based on the maxim legesposteriorespriorescontrariasabrogant. In other words, it means that the latest expression of the will of the Legislature must prevail. This, of course, is subject to the condition contained in the next principle. That is: if the prior enactment is special and the subsequent enactment is general, the earlier special Legislation will not be, indirectly, repealed, altered or derogated from merely by force of the general words of the later statute, without any indication of a particular strong intention to do so.
(ii) A general law enacted later does not abrogate, by mere implication, an earlier particular or special law which deals with a special object or a special class of objects. This principle is based on the maxim generaliaspecialibus non derogant. But when a general Act is incorporated into a special one, the provisions of the latter would prevail over any of the former with which they are inconsistent. If one statute enacted something in general terms, and afterwards another statute is passed on the same subject, which, although expressed in affirmative language, introduces special conditions and restrictions, the subsequent statute will usually be considered as repealing by implication the former, for affirmative statutes introductive of a new law do imply a negative. However, if a subsequent statute merely creates an exception from the operation of a previous statute, the previous statute is not necessarily repealed.
(iii) When the latter of two general enactments is couched in negative terms or in such affirmative terms which unequivocally involve negative which proves fatal to the earlier enactment, the earlier one is impliedly repealed.
(iv) When the two statutes are expressed in negative terms, they may be affirmative inter se and may not be contradictory to each other; though the effect of both may be that they are negative as regards a third statute at which both of them may have made some inroadsâ€TM. When seen in this light, an apparent conflict of two statutes is found as without any reality. Because they (sic) objects may be different and both may be parallel; and each may be restricted to its own particular subject or locality.
(v) If the co-existence of the two inconsistent statutes would be destructive of the object for which the later was passed, the earlier would be deemed to have been repealed.
(vi) In so far as the Penal Acts are concerned, if a later statute again describes an offence created by a former one, and provides a different punishment, creates a new jurisdiction and remedy and varies the procedure-modifying the manner or changing the forum of trial or appeal, the earlier statute is impliedly repealed by the later unless, of course, both of them can exist in parallel application to different localities, subjects or objects.
(vii) When the words are clear and capable of proper operation, the revocation or alteration of a statute by construction is not permissible. The Legislature is normally not presumed to have intended to keep two contradictory enactments on the statute-book with the intention of repealing the one with the other, without expressing an intention to do so. Such an intention cannot be imputed to the Legislature without some strong reasons and unless it is inevitable. Before adopting the last-mentioned course, it is necessary for the Courts to exhaust all possible and reasonable constructions which offer an escape from repeal by implication.
(viii) All other considerations being equal, if the inconsistency, in spite of applying all general principles of interpretation of statutes, cannot be resolved, a statute more beneficial in remedy or method of taking action will override the statute which is not so beneficial.
The list of the principles on the subject is, by no means, exhaustive. Departures from the above principles have been made in individual cases on the basis of the language used in, and the intention found in respect of, particular statute. The approach in Pakistan on various questions of interpretation of statutes, as compared to India, has usually been pragmatic rather than technical. It was observed in the case of Badrul Haque (PLD 1963 SC 704), that the fundamental rule of interpretation to which all others are subordinate is that a statute is to be expounded according to the intent of those who made it. Therefore, it has to be laid down as a governing rule that whenever there are two possible interpretations, the one destroying the intention of the Legislature in passing the Act should not be adopted. But once the intention having been discovered and words having been given correct meaning and interpretation, the Courts will not refuse to give effect to the Legislation merely because it appears to be harsh, unreasonable or even vindictive; because these attributes of a statute fall within the field of policy of the Legislature and go beyond the ambit of the jurisdiction of the Courts. This, of course, is subject to the question of mala fides of the Legislature in enacting a law and the further question whether or not on that basis the Courts can go into validity of a particular law. That subject is not relevant to the discussion of the present case. Therefore, no comments are made thereon.
The principles laid down in Mir Ahmed Shah’s case (supra) were cited with approval in the judgement of this Court reported as I. G. HQ Frontier Corps and others v. GhulamHussain and others (2004 SCMR 1397). Thus, when there are two special laws both of which contain overriding clauses, in the case of conflict between the two laws generally the statute later in time will prevail over the statute prior in time. However, we are of the opinion that this presumption is not automatic: instead a host of other factors including the object, purpose and policy of both statutes and the legislature’s intention, as expressed by the language employed therein, need to be considered in order to determine which of the two special laws is to prevail.
The Asset Declaration Laws of Pakistan have taxed the foreign assets at a particular rate and the tax paid on those assets is a one-time tax that absolves all past liabilities relating to those assets. The amount collected is not income tax. It is a special tax under a special statute. The question now under consideration is that when such assets have been taxed in a particular manner under a particular statute and they are entitled to be included in the wealth statement as a special case then whether such assets can be taxed again under a statute which is general in nature. In this respect perhaps the judgement of the Supreme Court says that a host of other factors including the object, purpose and policy of both statutes and the legislature’s intention, as expressed by the language employed therein, need to be considered in order to determine which of the two special laws is to prevail. In this judgement both the statutes were special legislations. That was a stronger case. Here there is a comparison between a special law and a general law. On this basis it is my opinion that on account of the special nature of enactment laid down in the asset declaration laws of 2018 and 2019, there cannot be any further tax on the value of assets which were declared under those statutes. The assets emanating from those assets would however be subject to tax under the general provision as are applicable. In this respect I reiterate the differences in the nature of asset declaration laws of India in comparison to Pakistan’s. Indians have taken care of this matter by placing the law within the ambit of the specific regime as is prevalent there. In Pakistan, however, we have intentionally not done so for various reasons. As I stated earlier I was part of the team that was involved in the original draft preparation for this law under the direction of the Supreme Court of Pakistan and we knew the aforesaid issue and the matter was decided through deliberations. In the light of the aforesaid comments it is my view that Capital Value Tax 2022 is not applicable on those foreign assets which form part of the wealth statement on account of their declaration under the asset declaration laws of 2018 and 2019. This is in addition to the fact that immovable assets even outside Pakistan cannot be taxed by the federal government.
Copyright Business Recorder, 2022
ISLAMABAD: The Federal Board of Revenue (FBR) Chairman Asim Ahmad Saturday said the net revenue impact of the taxation measures taken in the federal budget (2022-23) is expected to be increased from Rs355 billion to Rs480 billion following a rise in the income tax rates for salaried class of Rs125 billion for 2022-23.
At the conclusion of the Senate Standing Committee on Finance, the FBR Chairman said that the figure of the revenue measures would obviously go up following changes in the tax rates of the salaried class through the amended Finance Bill 2022. However, it depends upon the final estimates of the figure projected from Personal Income Tax reforms.
The issue involved in the taxation of the salaried class is not revenue generation, but reform of the income tax slabs. It is very easy to impose additional taxes of Rs125 billion on other sectors, but the issue involved is to reform the structure of the tax slabs of the salaried class. Since 2019, the Personal Income Tax reforms were pending and were deferred every year due to one reason or the other. Now, the tax slabs are being adjusted in such a manner to ensure minimum burden on the lower brackets of the salaried class, the FBR chairman added.
When asked whether the FBR can generate additional taxes of Rs125 billion from tobacco, steel, beverages, and other potential sectors, Asim responded that the issue is not to generate additional revenue from the salaried class but to reform the tax slabs of the salaried individuals falling under different brackets.
Budget 2022-23: here are revised tax rates and slabs for the salaried income group
“This is not the demand of the IMF to only increase revenue from the salaried class, but to introduce reforms in the personal income tax regime,” the FBR chairman added.
The government has taken taxation measures of Rs440 billion and enforcement measures of Rs200 billion in the budget (2022-23) to meet the annual target of Rs7,004 billion.
Total taxation measures have been proposed at Rs440 billion for 2022-23. Around 75 percent of the taxation proposals are related to direct taxes. The total relief measures stood at Rs85 billion. The net impact of the measures stood at Rs355 billion.
Sales tax/federal excise measures amounted to Rs90 billion, whereas, sales tax relief totaled Rs30 billion. The net impact of the sales tax/federal excise measures stood at Rs60 billion.
The income tax measures have been projected at Rs316 billion, whereas, relief has been provided of Rs49 billion. The net impact of the income tax measures totaled Rs267 billion.
Through amendments in the Finance Bill 2022, if Rs125 billion has been added to the income tax measures, then the total revenue impact of income tax measures comes to Rs441 billion.
The revenue from the administrative and enforcement measures has been estimated at Rs200 billion for 2022-23 as compared to Rs175 billion in 2021-22.
Copyright Business Recorder, 2022
ISLAMABAD: Chairman Federal Board of Revenue (FBR) Asim Ahmad Saturday informed the Senate Standing Committee on Finance that the exemption to the Independent Power Producers (IPPs) has been limited to the lifecycle of the power project or 25 years period.
Chairman FBR Saturday explained to the Senate Standing Committee on Finance about the amendment relating to the profits and gains derived by a taxpayer from an electric power generation project setup in Pakistan on or after July 1, 1988.
Through the Finance Bill 2022, the FBR has added an explanation that for the removal of doubt it is clarified that exemption under this clause shall continue to remain available to those persons to whom exemption under this clause was available on or before June 30, 2021, before insertion of the sixth proviso vide Finance Act, 2021. Provided further that the exemption under this clause shall be available for the lifecycle of the project or 25 years from the date of commencement of commercial production, whichever is earlier, it added.
Tax exemptions cost govt over Rs1.757trn
Under the Finance Bill 2022, a tax expert explained, in respect of tax exemption available to electric power generation projects, the legislature, through Finance Supplementary Act, 2022, specified a condition that such exemption would be available to persons who are issued letter of intent (LOI) by the Federal or Provincial Government by June 30, 2021 and who obtain letter of support (LOS) by June 30, 2023. Such legislative amendment led to the ambiguity/ debate as to whether Projects, where the exemption was not dependent upon LOI and LOS under relevant power policy, stood excluded from the scope of such exemption or not. In this background, through the Finance Bill, it is proposed to be clarified that the above exemption would remain available to persons who were exempt from tax on or before June 30, 2021.
Copyright Business Recorder, 2022
ISLAMABAD: Additional measures will be needed to bring Pakistan's budget for FY2022-23 in line with the key objectives of its International Monetary Fund (IMF) programme, the lender's resident representative in Islamabad said on Monday.
Pakistan unveiled a Rs9.5 trillion ($47 billion) budget for 2022-23 on Friday aimed at tight fiscal consolidation in a bid to convince the IMF to restart much-needed bailout payments.
"Our preliminary estimate is that additional measures will be needed to strengthen the budget and bring it in line with key program objectives," Esther Perez Ruiz told Reuters.
Pakistan's Finance Minister said on Saturday that the IMF had expressed concerns about the budget numbers, including fuel subsidies, a widening current account deficit, and the need to raise more direct taxes.
He, however, added that his government was confident they could adjust the budget to bring the IMF on board and was hopeful of securing a successful review this month.
Tax on banking sector enhanced to 42% from 39%, says Miftah while announcing budget proposals
"Discussions with the authorities continue to obtain more clarity on certain revenue and spending items and allow for a full assessment," Ruiz said.
She said the fund was ready to continue to support the authorities’ efforts and in the implementation of policies to promote macroeconomic stability.
Pakistan is halfway through a $6 billion, 39-month IMF programme that has stalled over the lender's concerns over the status of some of its objectives, including fiscal consolidation.
The next tranche that Pakistan is to receive upon a successful review is $900 million, and a green light from the IMF would also open up other global funding avenues.
Pakistan urgently needs funds in the face of dwindling foreign exchange reserves, which have reached $9.2 billion - enough for less than 45 days of imports.
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Finance Minister Shaukat Tarin has said the government will now impose a tax of Rs0.75 on mobile phone calls lasting longer than five minutes, adding that relief extended earlier to cars up to 850cc will now be expanded to vehicles up to 1,000cc as well.
In a session of the National Assembly on Friday, Tarin added income tax exemption on medical expenses will be given back to the salaried class while the tax on the provident fund income of government employees has been withdrawn.
Tax on milk and other dairy products, which was earlier announced to be increased to 17%, has been withdrawn as well, added the finance minister.
Stressing on Real Estate Investment Trusts (REIT), Tarin said, on the recommendation of stakeholders, tax has been reversed from 25% to 15%.
On the topic of oil refineries, he said incentives will be given.
The session, chaired by Deputy Speaker Qasim Suri, comes after the budget announcement earlier this month where Pakistan announced that it will target a growth of 4.8% in the coming fiscal year.
As it looked to strike a balance between growth and rising expenditure, some of the budget measures came under severe criticism including the tax on mobile internet usage.
However, Tarin said the tax on mobile internet usage and SMS has been withdrawn.
The ex-banker said "harassment" by the Federal Board of Revenue is a problem for all citizens, because of which taxpayers do not file their returns and the country is unable to broaden its income tax net.
He shared that the government has been notified about at least 15 million people who are currently not paying their taxes, reiterating that the FBR will not approach these people directly. Instead, under the government's new plan, a third party will approach non-taxpayers.
Pakistan eyeing sustainable growth, says Tarin
Tarin stated that the government plans to set up a third party with a legal structure, adding that "we will only do an audit and talk to the tax payer", emphasising that the tax payer will not be penalised.
The Khyber Pakhtunkhwa (KPK) government presented on Friday a Rs1,118.3-billion budget for fiscal year 2021-22, with an allocation of Rs371 billion for the annual development program (ADP) and Rs747.3 billion for current budget expenditure.
Chief Minister Mahmood Khan said the budget 2021-22 was aimed at resurgence and growth, adding that the provincial government was fully committed to investing maximum resources in the development of KPK and providing quality service delivery to its citizens.
He said it was due to the successful handling of the Covid-19 pandemic that the government had an opportunity to present a budget focused on growing the economy and providing maximum relief to the people.
“We plan to introduce long-overdue reforms on pensions: accountability and rewards of public servants; championing e-government and strengthening management of public finances,” he said.
The KPK government announced a 37pc increase in salaries of all those employees who did not take special allowances from the government.
Presenting the third budget of the government, KPK Finance Minister Taimur Jhagra said out of the total budget allocation, Rs919 billion has been earmarked for settled districts and Rs199.3 billion for the development of merged tribal districts during FY 2021-22.
Out of the total Rs371 billion ADP, the province has earmarked Rs270.7 billion for settled districts and Rs100.3 billion for merged tribal districts. Likewise, Rs648.3 billion has been earmarked for settled districts and Rs99 billion for merged districts in a total allocation of Rs747.3 billion for current budget expenditure.
The minister said the budget was based on five main pillars including a record increase in salaries of government employees, development budget, devoted services to people, increasing KPK's own resource revenue, and introduction of goal-oriented reforms and innovation in the overall governance system.
He said two innovative approaches, ‘development plus budget’ and ‘service delivery budget’, were being introduced under which Rs500 billion would be spent on mega projects such as Sehat Plus Cards, provision of furniture to govt schools, and increase in medicines' budget to public sector hospitals. Meanwhile, Rs424 billion out of Rs747 billion would be spent on 'service delivery' with priorities to payment of salaries of doctors, nurses, and teachers besides provision of medicines to hospitals and fuel to Rescue 1122 ambulances.
About the generation of income and revenue during 2021-22, the minister said Rs1,018 billion revenue and income target was set for FY 2021-22 that would be achieved from different financial resources, duties, and taxes.
He said Rs475.6 billion would be collected through federal taxes, Rs57.2 billion through a federal divisible pool of 1pc share under terrorism affected province, Rs26.5 billion under Gas and Oil royalty and surcharge (direct transfer), Rs74.7 billion under hydel new profit (according to MoU 2015-16) and arrears, Rs75 billion for provincial tax and non-tax revenue, Rs85.8 billion through foreign development assistance (for settled areas) and Rs3.3 billion as foreign development assistance (for merged areas), Rs187.7 billion under special assistance grant for the merged areas and Rs132.5 billion from other revenue resources.
About details of expenditure during FY2021-22, the minister said a total of Rs374 billion would be spent on salaries including Rs60 billion in merged areas and Rs314 billion in settled districts. Similarly, Rs92.1 billion would be utilised for payment of pension including Rs0.1 billion for merged areas and Rs92 billion for settled districts.
An amount of Rs244.6 billion was proposed for expenditures under Provincial Development Program including Integrated Implementation Program (AIP) for merged areas, he said, adding Rs17.4 billion is being earmarked for the Annual Development Program including Rs2.4 billion for merged areas and Rs85.8 billion for settled districts while a record Rs19.9 billion is to be obtained from the federal government PSDP.
The salaries of government employees are being increased by 37% including a 20% increase in Functional or Sectoral Allowance, 10% increase in Adhoc Relief Allowance, and 7% in house rent for those employees who do not benefit from government’s accommodation scheme.
Jhagra said a 100% increase in pension expenditure has been witnessed in the last couple of years and the share of pensions, which was only 1% in 2003-04, had jumped to a record 13.8 percent of the total budget in 2021-22.
To overcome pension expenses, he said two proposals including an increase in the upper age limit of govt employees ie 55 years for early retirement or completion of 25 years of service were under consideration that would save Rs12 billion per year.
Similarly, Rs1 billion per year would be saved from a change in the pension rules under which widows, children, and parents of deceased employees would be entitled to pension benefits. The minister announced that minimum wages of laborers and daily wagers were being increased to Rs21,000.
Presenting the budget, Jhagra said that an amount of Rs23 billion has been allocated for the health insurance scheme.
Talking about the government’s achievements in 2020-21, he said that more than 7 million households can now receive free healthcare system in 35 districts of the province.
He said that KPK has become the first province to roll out comprehensive health coverage for every citizen.
While talking about economic achievements, he said that the province has attracted 50 million dollars of foreign investment by providing gas and electricity to Rashakai Economic Zone.
The budget also allocates funds to construct, rehabilitate and upgrade over 2,100 schools to increase enrollment capacity.
The Balochistan government approved on Friday the budget for fiscal year 2021-22 in a meeting chaired by Chief Minister Jam Kamal Khan, after protests and chaos outside the assembly delayed the start of proceedings by at least two hours.
An amount of Rs346.9 billion has been marked as non-development expenditure, while development expenditure will stand at Rs237.2 billion, up from Rs156.5 billion in 2020-21. Foreign project assistance has been estimated at Rs16.7 billion, up from Rs12.2 billion in 2020-21.
Additional Chief Secretary Planning and Development Hafiz Abdul Basit also briefed the meeting about the proposed Annual Development Program.
Finance Secretary Pasand Khan Buledi gave a separate detailed briefing to the cabinet about budget estimates, revenue and expenditure and financial discipline
The chief minister said all relevant stakeholders were consulted in the preparation of the budget, adding that his government will ensure financial discipline in the next financial year.
"The first priority of my government is to increase revenue for betterment of the province," he added.
An amount of Rs71.9 billion has been announced to be allocated to the education sector, a negligible increase over 2020-21, while health would be given Rs38.53 billion, 23% higher than the amount budgeted for 2020-21, in the next fiscal year. A 100% increase in allocation was witnessed for Social Protection initiatives, as the Balochistan government decided to put aside Rs10.8 billion, up from Rs5.3 billion in FY21.
Protests by opposition
Earlier, in what has become the norm this year, the budget session of the Balochistan Assembly started at least two hours late, amid protests by opposition lawmakers over what they claimed was an unjust distribution of funds.
Opposition lawmakers had blocked roads leading to the assembly premises in an effort to stop the government from presenting the provincial budget for the new fiscal year.
The budget session, scheduled for 4 pm, could not start as opposition members locked all gates in an attempt to prevent administrative officials from entering the hall.
Meanwhile, police baton-charged opposition members outside the assembly building. A police-armored personnel carrier (APC) also crashed into the gate of the MPAs' Hostel as it tried to clear the entry point of the building.
Following the administration’s successful negotiations with the opposition, the assembly’s gates were opened.
The budget session began under the chair of Speaker Abdul Qudoos Bizenjo. An opposition lawmaker, Nasrullah Zehray, accused the police of using violent methods to disperse the protesters outside the assembly.
Sana Baloch, another MPA, criticised the government, saying that the “province was at its worst state”.
The opposition members, comprising lawmakers from several parties, have been protesting for four days over the alleged neglect of their constituencies in the budget.
Leader of the opposition, Malik Sikandar Hayat, said the government "did not take us into confidence regarding the budget and their four-day protest was not taken seriously".
"Today, we were forced to close the gate," he said.
On the other hand, Balochistan government spokesman Liaquat Shahwani said opposition members have crossed all boundaries of morality, and taken the assembly hostage. "The sanctity of the assembly has been violated by immoral acts," Shahwani said.
A day earlier, supporters of opposition parties blocked national highways in several cities of Balochistan, including Quetta, Chagai, Washuk, Kharan, and Nushki.
Opposition lawmakers had also announced that they would not let the provincial government present the budget on Friday.
(Karachi) Pakistan Peoples Party (PPP) Chairman Bilawal Bhutto Zardari has termed the budget session as 'illegal', saying the government is playing the role of the opposition instead of running the government.
Addressing on Friday the National Assembly session about the recently presented budget, Bilawal said that the government has compared Pakistan to the state of Madina, which is not appropriate.
Questioning the PTI’s ability to run the government, he said that seems the ruling party is playing the role of the opposition instead of a party in power.
Shehbaz comes down hard on govt's budgets
He maintained that people are well aware of the fact that the government's claim of achieving 4 percent economic growth is not true. Bilawal asked if the country has seen economic growth, as claimed by the PTI-led government, then why does it have to beg before the International Monetary Fund (IMF)?
"If the economy has significantly improved, then the government should immediately opt out of the IMF's deal," he said. "I think both this budget and the budget session are illegal," he remarked.
The PPP chairman stated that the PTI government has failed to give the National Finance Commission (NFC) Award to the provinces, which is meant to distribute financial resources between the federal government and the provinces.
"Every budget will be unconstitutional until the NFC Award is given," said Bilawal.
Regarding inflation, Bilawal said that the PTI government has made the lives of the people miserable and put them in destitute conditions.
"The government has pushed the people below the poverty line and they will never forgive it," he said.
He highlighted that the government has raised the prices of petrol, gas, and electricity in the budget, putting the burden on the common man.
"If the budget raises petrol, gas, and electricity prices, then every Pakistani has to bear the burden of the government's incompetence," said Bilawal.
"The prime minister had promised to grant 10 million jobs to people, but on the contrary, even those who were previously employed have now been rendered jobless," the PPP chairman said.
Acknowledging that there had been inflation during PPP's tenure, he said the difference between our government and PTI's government is that we had not abandoned the people.
"We introduced the revolutionary Benazir Income Support Programme (BISP) but this government, on the other hand, harps on about the Ehsaas [programme], when you have no realisation [of the people's predicament]."
Criticizing the government's relief for the construction and real estate sector in the budget, Bilawal said the government had given an “ NRO [amnesty]” to these sectors.
“If this budget offers any relief, it is for the rich,” he added.
Azhar reacts to Bilawal's speech
Giving his reaction over Bilawal's speech, Federal Minister for Energy Hammad Azhar challenged that if the opposition is brave enough to listen to the truth then they should stay in the House till the end.
He criticised Bilawal for switching between English and Urdu during his speech, saying English skills are not enough to remove the stains of corruption from someone's character.
He stated that the PPP chairman delivered an immature speech on the budget and economic policies.
He asked the opposition to go through the budget documents once again and point out what taxes, as they claim, have been levied in Azad Jammu and Kashmir.
Azhar said that the rate of inflation was higher during the tenure of the PPP government, adding that it was the PPP that went to the IMF more than any other government in the past.
(Karachi) Leader of the Opposition in the National Assembly Shehbaz Sharif came down hard on the government for its budgets, saying that 20 million people have been pushed below the poverty line due to the rulers' negligence.
After being sidelined for three sessions amid ruckus in the National Assembly, Shehbaz took the chance to give his two cents on the government's recently-announced budget for fiscal year 2021-22.
Hunger, inflation on the rise
Criticising the PTI government, Shehbaz said that in the last three years several taxes have been imposed on the poor that have resulted in millions being pushed below the poverty line. He added that there is hopelessness in the country due to previous budget announcements, adding that the upcoming one would also further increase inflation.
He stated that 20 million people have fallen below the poverty line in the last three years while the income of the people has been reduced by 20 percent. "People are asking where are the 10.5 million jobs promised by the PTI. As a result of these fake budgets, 5 million people have lost their jobs."
Shehbaz maintained that 15 percent unemployment and 16 percent inflation convey a grim situation. "They say we will create Naya Pakistan. It is obvious that the old Pakistan was better when the country was somehow made to progress," he said.
"There are unprecedented differences between the provinces. If the government only develops Punjab and leaves out the rest of the provinces, then this is not development," the opposition leader said. "If only Punjab progresses and the rest of Pakistan does not, then it is not progress," he emphasised.
Revenge from opposition
He highlighted that the government devoted all its energy to take revenge from the opposition instead of pursuing accountability. "The Opposition has been subjected to the worst kind of revenge," he remarked.
He lamented that PPP's Khurshid Shah, his son, and PML-N's Khawaja Asif remain behind bars to date.
Shehbaz said nobody is against accountability but it should be done fairly.
Covid pandemic
Shehbaz also criticised the PTI government's response to the Covid-19 pandemic.
The Rs1.2 trillion package to deal with the coronavirus that was announced by the government also fell victim to incompetence and negligence, the PML-N leader said.
Break begging bowl
The PML-N leader said per-capita debt in Pakistan has risen to 0.14m, adding that "every last hair of our coming generations is mortgaged."
"Can any nation remain alive like this — with an atomic bomb on the one hand and a begging bowl on the other?" he asked.
Shehbaz stressed that the country would have to generate resources, saying, "If we want to end dictation, then we will have to break the begging bowl."
He questioned what the government had done to increase exports in the last three years. "The rupee has fallen 35 percent against the dollar. When the value dropped, imports became expensive. Our exports could not increase since 2018. The PTI government could not increase exports in three years."
He claimed that the government had increased fiscal deficit by Rs10tr in the last years. "What did they do in three years? Did they build any hospital or university or technical institute or LNG storage?"
He added that people would "laugh" if he gave them examples of how the PTI government has set up signboards and ended projects started during PML-N's tenure.
The opposition leader said Finance Minister Shaukat Tarin claims the country's economy is growing, but despite that, wheat prices have gone up.
Shahbaz said 1.1 million tonnes of sugar were exported with the prime minister's approval, and a subsidy worth billions of rupees was given on it.
Addressing the post -budget conference on Wednesday, Chief Minister Murad Ali Shah said that the provincial government has given special attention to poverty alleviation.
He said 20% salaries of government employees have been increased in the province.
Expressing concern over the coronavirus pandemic, CM Murad said that the province is facing issues regarding vaccine supply. He urged the federal government to take responsibility and solve this issue.
The Sindh government Tuesday presented Rs1.477 trillion budget for financial year 2021-22 with estimated deficit of Rs25.738 billion. The provincial government did not introduce any new tax in the budget, and proposed 20% increase in the salaries of government employees and 10% raise in pensions. The Sindh government also proposed the minimum wage at Rs25,000 against the existing Rs17,500, in the new fiscal year.
Talking about provincial taxes, Chief Minister Sindh said that Rs329 billion have been allocated for total tax and nontax receipts. “We believe that the Sindh Revenue Board will be our biggest revenue source and we have set a target of Rs150 billion for the next financial year."
He said that provincial government has set a target of Rs120 billion for excise and taxation department for the next financial year. The collection target for the Board of Revenue Department has been earmarked at Rs30.64 billion.
CM Murad said Rs24 billion has earmarked to be collected under nontax revenue including home department receipts, chalan and fees.
He said the receipts on account of foreign project assistance, budgetary support loans and grants were estimated at Rs71 billon.
Coming to the expenditure side, CM Murad said that a major portion of the total budget outlay comes into the current revenue expenditure head, also called the non-development expenditure.
“This includes salaries and pensions and funds given to the local government, which for this year has been allocated at Rs82 billion,” said CM.
Other major recipients of this expenditure are the grants given to major institutions including both government and private institutions, he said.
“Rs6.5 billion will be given in grants to public sector universities, Rs2 billion grant for SSC and HSC students, Rs14 billion has been allocated for NICVD, Rs7.1 billion for SIUT and Rs8.2 billion grant for PPHI,” he said.
For current capital expenditure, which includes repayments of loans and funds for private partnerships projects, Rs59.5 billion has been allocated.
He said that a poverty alleviation programme for small business is being initiated under which loans between Rs200,000 and 500,000 would be given for which Rs2 billion has been earmarked.
Similarly, for small farmers Rs200,000 will be given as loans, and Rs3 billion has been allocated for this purpose. For small technology-based startups, the provincial government has earmarked Rs1 billion.
PRIME Institute has termed Pakistan's federal budget for fiscal year 2021-22 pro-growth, but added that economic gains could be wasted if inflation rises.
In its post-budget comments, PRIME, an Islamabad-based think tank, said that the federal budget strategy for FY22 is pro-growth and spending-led. The latest budget has called for a reduction in existing indirect taxes with no new direct tax on salaried class and businesses.
"However, the gains from higher growth rate can be wasted in the case of increased food inflation," stated PRIME.
It commented that if international oil prices do not come down, a possible hike in petroleum levy is likely to result in cost-push domestic inflation.
The federal government on Friday announced its third budget in an attempt to generate stimulus and offer enough incentives that would help it reach a growth target of 4.8%. The government total budget outlay was set at Rs8,487 billion, while the national PSDP outlay at Rs2,102 billion.
The report pointed out that the budget FY22 entails increase in power subsidies but not food subsidies.
Commenting on the budget, PRIME Executive Director Ali Salman said that “the government has presented a pro-growth budget by tax cuts and demonstrating fiscal prudence, though some of the additional indirect taxes on key commodities will backfire.” He also said that the budget sanctity has to be ensured and hoped that no mini-budgets are introduced in the next fiscal year.
Salient features of Budget 2021-22
PRIME report says the government’s commitment to improved recoveries from state-owned enterprises as well as higher targets from privatisation proceeds is appreciable. "This is high time that the government delivers on its promises of turning around loss-making public sector enterprises."
The report highlighted that contrary to the claims of being a pro-poor budget, ambiguity remains as to how this budget will reduce food inflation in the upcoming fiscal year.
Under the federal budget FY22, the government has proposed to increase the turnover tax on wheat from 0.25 percent to 1.25 percent, while sales tax on flour bran is set to enhance from 7 percent to 17 percent. Moreover, Rs7 billion would also be collected from sales tax on sugar. “Since both are essential commodities, increase in their prices is likely to worsen food inflation,” said the report.
It said that the direct and indirect cash transfers to low-income group through the Ehsaas programme is a short-term solution for mitigating the effects of food inflation and other socio-economic issues, which this budget entails. “However, a long-term and a more sustainable approach calls for increasing real incomes, employment opportunities, human capital development and sustaining economic growth in order to achieve a definite improvement in socio-economic indicators,” it said.
KARACHI: The Sindh government Tuesday presented Rs1.477 trillion budget for financial year 2021-22 with estimated deficit of Rs25.738 billion.
Sindh government didn’t introduce any new tax in the budget whereas it proposed 20 percent increase in the salaries of government employees and 10 percent raise in pensions. Provincial government also proposed the minimum wage at Rs25,000 against the existing Rs17,500, in the new fiscal year.
Terming it a ‘citizens budget,’ Sindh Chief Minister Syed Murad Ali Shah amidst the uproar by opposition parties, announced that total budget outlay for Financial Year 2021-22 is estimated at Rs1.477 trillion against budget estimate of Rs1.241 trillion for current FY, showing overall increase of 19 percent.
Current expenditure of the province has been projected at Rs.1.14 trillion, which includes current revenue expenditure of Rs.1.089 trillion and current capital expenditure of Rs.59.49 billion in the budget. “This is 78% of total expenditure of the province and shows an increase of 14% over estimates of Rs.1 trillion for last year,” Shah said.
The CM highlighted that for the next financial year government tried to align development as well as non-development expenditure priorities in line with the post-Covid situation.
The development expenditure of the province in the budget has been proposed at Rs.329.032 billion, which include Rs.222.5 billion for Provincial ADP and Rs.30.0 billion for Districts ADP, foreign project assistance of Rs.71.16 billion and Rs.5.4 billion from Federal PSDP Grant for schemes being executed by Government of Sindh.
Murad said that in FY 2021-22, 1,033 schemes have been identified for completion in first and second quarter and maximum resources will be provided for their timely completion. On-Going schemes with remaining throw-forward up to Rs100 million have been fully funded for completion by June, 2022. On-Going Schemes where 70% expenditure is made have been fully funded for completion by June, 2022. Murad announced that total revenue of the province has been estimated at Rs1452.168 billion whereas the budget outlay was Rs1477.903 billion.
The Chief Minister said that a 20% increase had been proposed for the government employees and a 10% raise in pensions of retired government workers had been proposed. He said the minimum salary of the laborers would be increased from Rs17,500 to Rs25,000.
Chief minister said that health remains a priority sector and after advent of Covid-19, Government reprioritized its allocation and earmarked maximum resources in 2020-21 for prevention, isolation, and treatment for Covid-19; besides, significant resources were also spent containing and mitigating the economic damage due to job loss and business closure. For the next financial year, an allocation of Rs.172 billion is proposed as against an allocation of Rs.132.88 billion in 2020-21.
The budget for the education in next budget has been proposed Rs.277.5 billion against Rs.244.5 billion in the current fiscal.
The Chief Minister announced that as part of pro-poor and sustainable development measures, a social protection and economic sustainability package of Rs.30.9 billion has been proposed for the next financial year 2021-22.
Murad Shah announced that budget estimates for current revenue expenditure of Energy Department are estimated at 23.26 billion, which includes Rs.21 billion for clearance of outstanding liabilities of electricity dues of various government departments pertaining to DISCOs such as KE, Hesco and Sepco.
He said that In order to exploit on Thar coal potential, Sindh has requested federal Government to consider progressing on Kati Bandar Project and laying a railway line from Islamkot to Mirpurkhas for coal logistics. The two approaches are essential as industrial expansion in Thar is challenged by extreme weather conditions and water availability.
The Chief Minister said that during the current financial year Rs78 billion are earmarked for local councils in Sindh. For the next financial year allocation of Rs82 billion has been proposed.
He stated that Government of Sindh provided Rs4.02 billion as relief grant and for distribution of compensation to the victims of monsoon during CFY. For 2021-22, an allocation of Rs500 million has been kept for various relief measures.
Shah announced that the Finance Department is working on various Public Financial Management (PFM) and Public Sector Reforms with the assistance of donor partners, ie, the World Bank and European Union. PFM is a cross-cutting theme that can positively impact the fiscal discipline, public service delivery and economic development. Reforming this critical area has a gross positive impact on governance on multiple accounts.
Murad Ali Shah pointed out that actual transfers to Government of Sindh in a fiscal year always fall short of the estimates provided, as FBR falls short in collection of its set targets. The Federal Government is the major contributor to Sindh’s finances comprising of 72.5% in its entirety. It is a fact that these shares inevitably fall short of the estimates we provide every year.
As a result, our development expenditure has to be adjusted to offset the effect, Shah stated and desired to work in close coordination with the Federal Government in the larger interest of the people of Pakistan to overcome these issues. “We expect that the Federal Government would also support us in all our endeavors and help to come up with viable solutions to the issues being faced by Sindh,” he stated.
Copyright Business Recorder, 2021
Sindh announced the budget for fiscal year 2021-22 with an estimated outlay of Rs1.48 trillion, with Chief Minister Syed Murad Ali Shah's speech drowned in noise by opposition benches as the tradition to disrupt budget announcements continued.
The current expenditure of the province is estimated at Rs1.14 trillion, while the development component is projected to be Rs329 billion, which includes Rs222.5 billion of the provincial ADP, Rs30 billion for district ADP, foreign project assistance at Rs71 billion and Rs5.4 billion in Federal PSDP grants.
He said that in the upcoming fiscal year, the provincial government intends to create 2,600 jobs, and aims to complete 1,033 schemes.
The chief minister, who also holds the portfolio of Sindh finance minister, said the budget is ‘pro-people’, but the coronavirus pandemic has fundamentally altered way of life.
Talking about the health sector, CM Murad said funds to the tune of Rs24.7 billion have been allocated specifically to deal with the coronavirus pandemic. "Over 960 new posts will be created at different levels of health management," said Murad.
An amount of Rs18.3 billion has been proposed for the purchase of drugs and medicines while Rs2 billion is being allocated to purchase PCR testing kits.
Moving to education, CM Murad said this is the single most important factor that contributes to the development of a country. "The provincial government has allocated Rs277.5 billion, up from the current Rs244.5 billion. The provincial government has increase ADP allocation for education sector to Rs26 billion."
An amount of Rs1.2 billion has also been allocated for scholarships to students securing highest grades in SSC, HSC educational boards of Sindh, he said.
Hitting out at the federal government, he said that out of the total transfers of Rs760 billion, Sindh has actually received Rs617 billion to date.
Sindh government at loggerheads with federal
Earlier on Monday, CM Murad said the Pakistan Peoples Party (PPP)-led provincial government has been at loggerheads with the centre over federal transfers.
"We are facing a shortfall of Rs82 billion in federal transfers, therefore our entire budgetary commitments have been affected ," Murad had said in a presser.
The CM said that the FBR has shown a growth of 17% during the last three years, but the Sindh Revenue Board (SRB) has shown a growth of 21%. "Our growth rate is four percentage points higher than the FBR's," he said, adding that he was criticising the performance of the FBR because its failure to achieve targets affected the provincial share in the revenue.
Murad Ali Shah said that the Sindh government was told that it would be given Rs742 billion from divisible pool and straight transfers and we had framed our budget accordingly. At the end of day, the federal government revised Sindh government share from Rs742 billion to Rs680 billion that caused a Rs62 billion shortfall just in revision. He added that during the last 11 months, the Sindh government was faced with Rs82.5 billion shortfall of its share.
• Rs2.653trn budget presented
• Development outlay raised by record 66pc; Rs560bn reserved for ADP; Rs405bn tax collection target set
LAHORE: The Punjab government on Monday presented the budget for the fiscal year 2021-22 with an estimated outlay of Rs 2,653 billion which is 18 percent more than the current fiscal year’s budget and includes an Annual Development Programme (ADP) worth Rs560 billion.
The budget session was the maiden one in the newly-constructed building of Punjab Assembly. Punjab Finance Minister Hashim Jawan Bakht presented the budget. The government expected to get Rs 5,829 billion from federal Divisible Pool and is expected to get Rs 1,684 billion from the National Finance Commission Award which is 18 percent more than the current fiscal year’s allocation.
In his speech, Hashim said a target of Rs 405 billion had been set for provincial tax collection which is 28 percent more than the current fiscal year. The current expenditure estimates in the budget is around Rs 1,428 billion. The government has increased the development budget by 66 percent which shows that it is committed to bringing economic prosperity in the province. He said the government allocated Rs 189 billion for the South Punjab which is 34 percent of the total annual development budget of Punjab. The government has allocated Rs 12 billion for the development of industrial sector and more than Rs 28 billion for Lahore considering its importance as a business hub, he added.
He also said that health and education sector is the priority of the government as it has allocated Rs 370 billion for health sector. The government has allocated Rs 96 billion for development budget of health sector which is 182 % more than more than current fiscal year and it is initiating universal health insurance program with the allocation of Rs 82 billion. Under this program, 100% population of Punjab will get free and quality health services. It is expected that government will issue health cards to 110 million people of the province.
Moreover, the minister said, the government has allocated Rs 442 billion for the education sector which is Rs 51 billion more than the current year and more than Rs 54 billion has been earmarked for the development budget while Rs 388 billion has been allocated for the current expenditure. More than Rs 6 for the upgradation of schools and Rs 23 billion for the schools run by Punjab Education Foundation and Punjab Education Initiative Management Authority billion has been reserved. The government has allocated Rs 15 billion for higher education which is 285% more than the current fiscal year.
In order to ensure food security and increase agricultural productivity, the minister added, the government has made a whopping increase of over 300% in the agriculture development projects. It allocated more than Rs31 billion for the agriculture transformation and Rs 100 billion for Agriculture Transmission Plan. Moreover, Rs 55 billion has been set aside for the irrigation sector.
For livestock and dairy development projects, Rs5 billion have been allocated, and for the improvement of watercourses, Rs5 billion have been earmarked. For environmental protection, an allocation of Rs4 billion has been made, out of which Rs2.5 billion will go to the Prime Minister's flagship 10 billion tree tsunami project.
The government has earmarked Rs 380 billion for construction, repair and expansion of roads in the province. In order to provide relief to the tax payers and revival of business, the government has proposed tax concessions of Rs 50 billion. There will be no change in the rate of stamp duty and it will remain 1% only. The ratio of sales tax on services will remain 5%. The government has proposed reduction of tax ratio on call centers from 19 % to 16 %. The government has also proposed a 10% increase in salaries and pension of provincial employees besides increasing the minimum wage of workers from Rs17,500 to Rs20,000.
Earlier, Chief Minister Punjab Sardar Usman Buzdar chaired a cabinet meeting to approve budgetary proposals for the financial year 2021-22. The finance secretary briefed about the budget details while chairman P&D apprised the participants about the salient features of the ADP.
The cabinet also approved the supplementary budget of 2020-21 along with the approval of revised estimates of the current budget 2020-21. Finance bill 2021 was also approved by the meeting and the cabinet approved a ten per cent increase in salaries and pensions of provincial government employees. The CM and the cabinet, however, unanimously rejected the proposal of the Board of Revenue to enhance the agriculture tax.
Addressing the meeting, the CM emphasized that the peasants will not be burdened, adding that the farming community will be made more prosperous by the PTI government. He appreciated that the cabinet has enhanced the minimum wage of workers from Rs.17,500 to Rs.20,000 and congratulated the finance minister, Advisor Dr Salman Shah, Chief Secretary, Chairman P&D, secretary finance and others for the balanced budget.
A record increase has been made in the development budget for the first time, he said. A separate development package has been devised for every district and realistic targets have been identified to facilitate the common man, he emphasized. The priorities have been identified according to the basic needs of the people, he continued. This budget is not a jugglery of words but a document of balanced development, the CM stated. A continuous liaison will be maintained with parliamentarians during the budget session, he further said.
The CM said inefficient opposition is only meant for making hue and cry at every occasion and advised it to avoid indulging in criticizing every good work done by the government. It also caused uproar in the corona pandemic while leaving the people in the lurch, the CM regretted.
The meeting endorsed the decisions of the 57th and 58th meetings of the cabinet standing committee for finance and development along with the decisions made in the 60th, 61st and 62nd meetings of the cabinet standing committee for legislation.
Copyright Business Recorder, 2021
When all is said and done, not every budget measure impacts everyone directly. But almost all of them have a trickle-down effect on every Pakistani. Here are Business Recorder’s picks of some features of Budget 2021-22 that have stood out at first glance, and are apart from the usual allocation numbers.
- Federal excise duty proposed on internet data usage at Rs5 per GB.
Many have criticised the proposal, and it is likely to be removed before the budget is implemented from 1 July.
- No change in tax rates for salaried class individuals.
Contrary to earlier belief that the salaried class will get a ‘relief’, they have to be satisfied with having no new taxes imposed on their monthly incomes.
- Removes WHT on bank transactions.
This comes as a positive for filers of income tax returns, and is likely to help traders and businesspersons.
- Federal excise duty to be removed from small cars with engine capacity up to 850cc. Reduced rate of sales tax at 1% on local supply of electric vehicles.
This is likely to bring the prices of small cars down. In the case of electric vehicles, we will have to wait and watch when Pakistan starts producing them locally.
- Tax on the so-called ón’ money on vehicles, if vehicle is disposed without registration, is to be retained.
This proposal is not going to sit down well with car dealers who rely on early deliveries to make a profit.
- Reduction in threshold of monthly electricity bill for withholding tax on electricity consumption from 75,000 to 25,000 from domestic users not appearing on Active Taxpayers’ list.
If you are a non-filer, and your electricity bill is Rs25,000 or more, then bad news for you. This measure is meant to serve as a punishment for non-filers.
- Reduction in tax rate on capital gain tax on disposal of securities from 15% to 12.5%.
One of the most keenly-awaited measure for stock market investors, and is likely to give a boost to the KSE-100 Index.
- Reduction in tax liability by 25% for women entrepreneurs.
This is being seen as a positive for women's inclusion in the formal sector.
- Exemption from tax on import of books and agriculture equipment.
Good news for those who want to read books, and import agricultural equipment. We wonder why the two exemptions were clubbed together in one sentence.
- Removal of requirement of updating tax profile.
This requirement, when first introduced, drew a lot of criticism. However, all you needed to do was update your profile on the FBR website, just like you would on a social media page. Nonetheless, it has been removed.
- Deletion of withholding tax on domestic & international air travel.
This is likely to bring the cost of travel down. How much of it is passed on by the airline to the consumer is another matter.
Finance Minister Shaukat Tarin has said that an additional tax of Rs500 billion will be collected for the next financial year, as the government seeks to achieve sustainable growth.
Sitting alongside the government’s economic team including Minister for Economic Affairs Khusro Bakhtyar and Commerce Adviser Razak Dawood, Tarin addressed the post budget conference on Saturday. "We have presented a total growth budget and our challenge is to achieve sustainable growth,” said Tarin.
The target is to take the growth rate to 20% in 8 to 10 years, said Tarin.
Under the budget unveiled on Friday, the government has taken measures of around Rs506 billion, including taxation measures of Rs264 billion and enforcement measures of Rs242 billion to meet the annual target of Rs5,829 billion.
The measures include 17% sales tax on crude oil, Federal Excise Duty (FED) on phone calls/SMS messages/internet data usage, 17% sales tax on silver/gold jewellery, and 7.5% withholding tax on monthly electricity bill of above Rs25,000 of domestic users not appearing on the Active Taxpayers' List.
Addressing the press conference, Tarin said that the country needs to earn dollars, which can only be achieved by increasing exports.
The finance minister said the government intends to broaden its tax base as well. “We are in dialogue with the IMF on this issue, as we want to broaden the tax base and not impose further taxes on the taxpayer,” he said.
He said the government has set up a tax collection target of Rs5.8 trillion for the next fiscal year which will be achieved through innovative approach including the use of latest technology.
Pakistan targets 4.8% GDP growth in upcoming fiscal year
Targeting the retail sector, he said that large retailers have sales of Rs1,500 billion, and sales tax has to be levied on all big stores. “I have figures from independent sources. Large- and middle-tier retailers have sales of Rs1.5 trillion.”
The finance minister said that consumers will be rewarded if they get a sales receipt. He said such schemes have been successfully implemented in Turkey and other countries.
The ex-banker said that after much deliberation it was understood that the resources to be distributed to the poor are in the banking sector. “The government does not have the fiscal space to disburse Rs 600-700 billion every year,” he said.
The finance minister said that in order to benefit the masses, four million households, to be accessed through the Ehsaas Survey, will be provided with interest-free business and farming loans. Besides, they will be given health cards and one member of each family will be imparted technical training.
Highlighting the measures taken in the Budget 2021-22, Tarin said taxes on the IT sector have been rationalized in order to exploit its full potential.
Tarin said duties have been abolished on almost all the raw materials, which will strengthen the local industries and reduce imports.
Talking about reducing taxes on automobile sector, the finance minister expressed confidence that the prices of cars with engine capacity of up to 850 cc will come down.
The government on Friday announced exemption from FED on motor vehicles up to 850 cc and reduced sales tax from 17% to 12.5% in addition to withdrawing value-added tax (3%) on motor vehicles up to 850 cc.
Tarin said the incentives given to the SMEs will also help achieve higher growth in the industry.
Talking about the power sector, Tarin said the government has increased subsidies to bring efficiency. “DISCOs will be operated through independent boards and they will be privatized, while line losses will be reduced and recoveries will be enhanced.”
Salient features of Budget 2021-22
Finance minister said that the prime minister and the cabinet had opposed the imposition of tax on mobile calls, internet data and SMS after which all of them would not be taxed.
The Federal Minister said that increase in agricultural production is essential to control prices and the government will introduce integrated systems to protect farmers from exploitation.
Tarin, on Friday, presented a Rs8.495 trillion spending-led outlay for fiscal year 2021-22 designed to achieve six to seven percent GDP growth in the next two to three years.
In his budget speech, he came down hard on the economic policies of the previous governments, and stated that Prime Minister Imran Khan helped the country avert a default and put it back on the path of economic growth.
• Rs8.49trn FY22 outlay is based on 4.8pc growth target and increased spending on public sector development
• Ad hoc relief of 10 percent raise in basic pay and pensions of the federal government employees announced
ISLAMABAD: Finance Minister Shuakat Tarin, on Friday, presented a Rs8.495 trillion spending-led outlay for the fiscal year 2021-22 designed to achieve six to seven percent GDP growth in next two to three years 4.8 percent for FY2021-22 by facilitating auto, telecom, agriculture as well small and medium enterprises for job creation amid roaring protest from the opposition.
The finance minister, in his budget speech, came down hard on the economic policies of the previous governments, and stated that Prime Minister Imran Khan helped the country avert a default and put it back on economic growth of 3.4 percent in the outgoing (current) fiscal year.
The finance minister said that a 40 percent increase on development outlay to Rs900 billion from Rs650 billion for the current fiscal year would pave the way for much-needed growth.
Gross revenue for the next fiscal year has been estimated at Rs7,909 billion, higher by 24 percent over Rs6,395 billion for the current fiscal year, and the Federal Board of Revenue (FBR) tax collection at Rs5,829 billion for 2021-22 from Rs4,691 billion for the current fiscal year.
Provinces' share has been estimated at Rs3,411 billion, Rs707 billion higher over allocation for current fiscal year, and the federal government's share after transferring provinces' share in the tax collection would be at Rs4,497 billion, while a 22 percent increase in non-tax revenue.
The expenditures are estimated at Rs8,495 billion against Rs7,341 billion for the outgoing fiscal year, up by 15 percent and subsides have been allocated at Rs682 billion. The GDP growth target for the next fiscal year is projected at 4.8 percent.
The government has allowed 10 percent ad hoc relief allowance to all federal government employees from 1 July 2021 and 10 percent increase in pension to all pensioners increased in orderly allowance from Rs14,000 to Rs17,500 besides increase in minimum wage to Rs20,000.
Fiscal deficit is projected at 6.3 percent against the revised target of 7.3 percent for the current fiscal year, and primary deficit target is 0.7 percent. The government has reduced the primary deficit to 3.2 percent in three years from 3.7 percent in 2018-19.
Tarin said that the government wanted to restructure the tax regime and as a first step self-assessment scheme would be restored in actual shape.
Tax on income and expenditure would be primary instruments and information technology would be used to broaden the tax base.
The minister asked the rich to pay their due taxes and announced that exemption in terms of professions would be withdrawn.
No new tax would be imposed on salaried class and trace and track initially implemented in four industries would be gradually expanded to the other sectors, he said, adding that the government wants to increase GST net and entire wholesale and retail sector linked with the Federal Board of Revenue (FBR) would be brought into the tax net.
Pakistan single window is being launched, added the finance minister.
The finance minister said that minimum turnover threshold for cottage industry has been increased from Rs3 million to Rs10 million, local production of 850cc vehicles to be exempted from federal excise duty (FED) and sales tax is being reduced from 17 percent to 12.5 percent and value-added tax is being removed.
The minister said the export of IT sector would be provided zero-rating; for promotion of electric vehicles, sales tax on local production of CKD is being reduced from 17 percent to one percent and tax would be exempted on their export value addition.
There would be exemption of FED on four-wheel electric vehicle as well.
The minister said that there is exemption of tax on import of machinery and raw material for SEZs, and locally-constructed storage of agriculture products would be given tax exemption.
On telecom industry, the FED is proposed to be reduced from 17 percent to 16 percent.
The FED on mobile phone calls exceeding three minutes, internet data usage and SMS messages is being proposed.
The government has also proposed inclusion of sugar in the Third Schedule.
The minister said that 12 withholding taxes are being withdrawn from banking transactions, Pakistan Stock Exchange and margin financing, air travel service, international transactions through credit/debit cards, exploration of minerals. Withholding tax (WHT) on use of mobile phones would be reduced from 12.5 percent to 10 percent while WHT on different services - oil field services, warehouses and travel and tourism services - would be reduced from eight percent to three percent.
Disposable and CGT tax is proposed to be reduced and CGT would be reduced from 15 percent to 12.5 percent.
Turnover tax threshold for individuals and association is being increased to Rs100 million, and tax is being reduced from 1.5 percent to 1.25 percent.
He said that withholding tax on import of stationery books and agriculture products is being exempted.
There is proposal that block taxation in property tax should be removed and limit block tax on non-transferable property.
There is a proposal of special tax regime for SMEs and those who have turnover of Rs100 million would be required to pay tax at the rates of 0.25 percent or 7.5 percent of their income and those whose turnover is of over Rs100 million would be required to pay 1.5 percent of their turnover.
All services receipts should be taxed at one percent and IT-related exports are brought under the provision of 100 percent tax credit.
Turnover tax of SEZs was abolished, and under SEZA, zone developers and zone enterprises are being exempted from tax for a period of 10 years.
Tax on warehouses services, logistics services and platinum management is being reduced from eight percent to three percent.
He said that in the Finance Bill 2021, textile-related 164 tariff headings regulatory and custom duty have been removed.
The minister said that Prime Minister Imran Khan wanted to change the course of history and four to six million people low-income households would be protected through a bottom-up approach.
The government would disburse every household Rs0.5 million interest-free business loan, every farming household will be given Rs0.25 million interest-free farming loan, and Rs0.2 million interest-free loans for tractors and machineries besides low-interest housing loans of up to Rs2 million as well as Sehat Card and free technical training to one member of each family.
The finance minister said that Rs900 billion development budget for the next fiscal year would pave the way for development as its development priorities would be to ensure provision of water and energy security, infrastructure development, progress on CPEC implementation, development of SEZs and their operation, SDGs targets as well as measures against climate change.
These measures would help achieve sustainable development besides reducing poverty and unemployment.
The government would initiate national agriculture transformation plan to develop the agriculture and livestock on modern lines and Rs12 billion has been allocated in the budget for the next fiscal year.
Rs91 billion for water sector and completion of Diamer-Bhasha and Mohmand dam would be a priority of the government.
Rs57 billion has been allocated for Dasu hydropower and Rs23 billion for Diamer-Bhasha dam and Rs6 billion for Mohmand dam.
He said that Rs14 billion has been allocated for Neelum-Jhelum hydropower.
The government, he said, wants to expedite work on the China-Pakistan Economic Corridor (CPEC) and so far 17 big projects of $13 billion worth have been completed and 21 projects of $21 billion worth are being implemented besides 26 strategic-level projects (worth $28 billion) are in the process of planning. ML-I with a cost of $9.3 billion is being implemented in three packages and a first package has already started.
The government has allocated Rs118 billion in the budget for power transmission projects and secondary transmission line Hyderabad-Sukkur would also be constructed at Rs12. 5 billion, whereas Rs22 billion is allocated for production of 1200MW of electricity from coal at Jamshoro power project, and Rs15.5 billion has been allocated for K-1, K-2, and Tarbela hydro project expansion in the next fiscal year's budget.
The government has allocated Rs20 billion for southern Punjab development plan and would provide Rs98 billion in the PSDP for the Karachi transformation plan.
Gigit-Baltistan to get Rs40 billion, and KP for merged areas Rs54 billion. There have been allocations of Rs14 billion for Ten Billion Tsunami project and Rs118 billion for social sector and Rs100 billion for Covid-19 expenditure as well.
The government has also allocated Rs12 billion for SMEs support programme, Rs10 billion for Kamyab Jawan Programme, and Rs100 million for anti-rape fund.
The finance minister said that Rs66 billion is being allocated for the High Education Commission (HEC) and Rs44 billion for development budget.
Support to the export sector under various schemes would be continued and PIA and Pakistan Steel Mills would be provided Rs20 billion and Rs16 billion, respectively.
He said that for Kashmir Rs60 billion, Rs47billion for G-B have been allocated. Sindh would be provided Rs12 billion special grant while Balochistan would be provided additional Rs10 billion.
Copyright Business Recorder, 2021
In an attempt to generate stimulus and offer enough incentives that would help it reach a growth target of 4.8%, the federal government unveiled its third budget on Friday.
Here are the salient features:
• GDP growth target has been set at 4.8%
• Total budget outlay set at Rs8,487 billion
• National PSDP outlay set at Rs2,102 billion
• Federal PSDP outlay set at Rs900 billion for FY22, up 43% year-on-year compared to Rs630 billion in FY21
• Large-scale manufacturing to grow by 6.0%
• Debt repayment to cost Rs3,060 billion
• Government sets NFC distribution target at Rs3,412 billion
• FBR's tax collection target set at Rs5.8 trillion for FY22 compared to PKR 4.7 trillion in FY21.
• An amount of Rs12 billion set aside for emergency agriculture program to ensure food security
• Total subsidy expenditure for FY22 stands at Rs682 billion
• No new tax implied on salaried class
• Minimum wage to be increased to Rs20,000
• Interest-free loans upto Rs500,000 to be provided to help alleviate poverty concerns
• Foreign auditors to be selected for E-audit system
• Karachi's transformation plan will be allocated Rs98 billion from the PSDP
• Reduction in rate of capital gains tax on disposal of securities from 15% to 12.5%
• Defence spending to be Rs1.37 trillion in the upcoming year
• Federal government employees' salaries and pensions would be increased by 10%
• Federal excise duty proposed on internet data usage at Rs5 per GB
• Tax on the so-called ón’ money on vehicles, if sold without registration, is to be retained
• Reduction in tax liability by 25% for women entrepreneurs.
• As per a brokerage house, the budget announcement is positive for the following sectors: Flat Steels (cut in HRC duties), Pharmaceuticals (cut in duties on import of APIs), IT (Zero Rating), Textiles/Consumers/Foods (reduction in duties) and Refineries (exemption on tax on BMR).
It was deemed neutral to positive for: Power (allocation of subsidy towards PHPL and IPPs), Banks (removal of WHT for non-filers), Cements and Rebar Steel (higher allocation for development expenditure) and Autos (reduction in duties on car below 850CC).
However, the an initial analysis suggested it is negative for telecom operators (higher taxes).
PESHAWAR: Business community here on Friday termed the federal budget for fiscal year 2021-22, as a 'balanced', 'growth-oriented' and 'pro-businesses', asking the government to implement 'relief initiatives' with true letter and spirit to revive covid-19 hurt national economy, businesses and industries.
Addressing a news conference after presentation of federal budget for FY 2021-22 here, president of Sarhad Chamber of Commerce and Industry Sherbaz Bilour said that the government has presented a 'growth-oriented' and 'business-friendly' budget for the next fiscal year, which can give boost to businesses and industrialization, and create jobs in the country.
He welcomed the abolishment of Federal Excise Duty (FED) from erstwhile Federally Administered Tribal Areas (Fata) and Provincial Administrative Tribal Areas (Pata).
The SCCI chief expressed the hope that the government's step will bring economic prosperity and development in the newly merged tribal districts and Pata.
SCCI vice president, Junaid Altaf, former FPCCI president Ghazanfar Bilour, former presidents Malik Niaz Ahmad, Faiz Muhammad Faizi, Riaz Arshad, executive members Muhammad Aurangzeb, Abdul Jalil Jan, Abidullah Yousafzai, Faiz Rasool, Saddar Gul, industrialists Association Hayatabad Peshawar president Malik Imran Ishaq, traders and industrialists were present during the presser.
Sherbaz Bilour hailed the reduction in excise duties, including on raw material, which is a welcoming step through the fiscal budget. He added the initiatives to boost up hydel power generation, abolishment of tax on online businesses, increase in loans for cottage industries from Rs3 Million to Rs 10 Million, are the good one to accelerate pace of economic development and address the key attached with relevant sectors.
The chamber president also appreciated abolishment of different 12 withholding taxes (WHTs). Similarly, he added the abolishment of the condition for up-gradation of tax profile is also a good step.
While responding to a question of reporters, Sherbaz Bilour said the unjust was being carried out with Khyber Pakhtunkhwa by the federal government in past years regarding payment of amounts Net Hydel Profit (NHP) along with arrears.
Copyright Business Recorder, 2021
ISLAMABAD: The sales of goods through an online marketplace have been subjected to 17 percent sales tax by incorporating the same under the Sales Tax Act, 1990.
Through the Finance Bill (2021), the scope of sales tax is expanded to online sales using third-party platform.
Sharing sales tax revenue measures, sales tax expert Arshad Shehzad informed, presently, there was no specific provision of collecting sales tax on sales made from the online marketplace using third-party platform by tier-1 retailer. In recent years, the sales tax online platform has been increased remarkably.
The sales tax act; however, does not provide specific law and modus operandi for reporting and collection of sales tax through such channel.
In this budget, the amendment has been brought under Section 3 of the Act to expand the scope of sales tax on the supply of goods through the online marketplace.
Similarly, the definition of tier-1 retailer is also expanded to include a retailer operating an online marketplace supplying goods through the e-commerce platform, whether or not the goods are owned by him, Shehzad explained.
Explaining another measure, he informed sugar is included under the third schedule. By virtue of this amendment sales tax on sugar is now required to be paid at retail price. Additionally, this retail price is also required to be printed on packaging or sugar bags.
The supplies of sugar to pharmaceutical, beverage, and confectionery industries will remain excluded from the purview of the third schedule.
Commenting on this amendment, Shehzad pointed out an exclusion from the retail price on supplies to industries is a correct decision. However, the government has overlooked providing a mechanism for the application of this exclusion on imported sugar.
Shehzad informed that the imported fine sugar is generally used by the industries.
The commercial importers, importing crystallite fine sugar for such industry might need to pay sales tax on the retail price at the import stage irrespective of the fact they supply this sugar to the notified industrial sector or not.
The government; therefore, needs to either exclude extra-fine imported sugar from the ambit of the third schedule or worked out any other reasonable way out to sort out this problem arising out of the proposed amendment.
The time limit for assessment and recovery of sales tax under Section 11(5) is extended through a proposed amendment in this budget. According to the board's explanation, audits are being undertakenon a full six-year basis where the time limit of five years under sales tax is calculated on a month-to-month basis resultantly, some of the periods get lapsed if the audit proceeding is not completed by such time.
It was therefore proposed to increase the time limit of five years up till the end of the financial year in which the relevant date falls. Shehzad has strongly criticised this amendment and said instead of reducing the time period of six years to five years, the amendment has been proposed to increase the time limit.
He said if the tax machinery having all the resources, electronic means and computerised record could not able to complete audit within five years, they should not be given the luxury to enjoy the further extension of time.
He said the government in media articulates to control audit-related issues and harassment, however, these sorts of amendments suggest a step towards altogether an opposite direction.
Copyright Business Recorder, 2021
