A successor government blaming its predecessor government for all the ills is nothing new. Therefore, Pakistan Muslim League(N) government blaming Pakistan Tehreek-e-Insaf (PTI) government for causing immense harm to economy is not unusual. Both parties are trying to get the best out of it while the public, with no interest in either of the narratives, is suffering.

The nation is looking for solutions and not excuses or narratives.

To ascertain facts, one tends to read or hear the opinion of independent experts. In this case we have one. Truth can be explored in Pakistan Economic Survey 2021-22 prepared by a team of 20 economists. It was issued on 9 June 2022 under the signature of the Economic Adviser to Government of Pakistan with a foreword by the incumbent Federal Finance Minister, Miftah Ismail.

The salient figures extracted from the survey of FY 2021-22 are:

– Real GDP Growth: 5.97%

– GDP Volume: Rs 66,950 billion (vs Rs 55,796 billion in 2021)

– Gross Fixed Capital Formation: Rs 8,992 billion (vs Rs 7,217 billion in 2021)

– Industrial Growth: 7.19%

– Large-Scale Manufacturing (LSM) and mining growth: 10.4% (vs 4.2% in 2021)

– Services: 6.19%

– Agriculture growth 4.4% (vs 3.48% in 2021)

– Per capita income: $ 1798 (vs $ 1676 in 2021)

– Inflation 11.3% (vs 8.8% in 2021)

– Total revenue increase: 17.7% (vs 6.5% in 2021)

– Exports growth: 27. 6%: ($ 26.8bn)

Most encouraging is the growth in LSM, Services and Agriculture. These sectors are employment providers, revenue generation vehicles and food security guarantors. The reasons cited for a good agricultural year are high yield, attractive output prices, supportive government policies, better availability of seeds and pesticides and accessible agri credits. Whereas, the growth in LSM is attributed to rising global demand, easy access to credit and subsidised energy supplies.

Overall, the key performance indicators point towards a trend of growth and improvement over the past years.

On the other hand, however, the state economy is facing serious challenges of which fiscal deficit and mounting debt are red flags. Despite a significant rise in tax contribution, the higher current and development expenditure widened the fiscal deficit to 3.8 % of GDP in FY 2022 (July to March 2022) as against 3% in 2021. The debt position is equally disturbing with:

Public Debt: Rs 44,366bn

Domestic Debt: Rs 28,076bn

External Debt: US $ 88.8bn.

Energy subsidies provided by the PTI government pose significant risks to fiscal sustainability in an already constrained fiscal environment. The weakness in the economy carried forward from the past government escalated on account of the Russia-Ukraine war.

The shocks of the Russian-Ukraine conflict began to hurt the economies of the world in March 2022. The main shock was on account of oil, gas and commodity availability and price, with Russia being one of the key suppliers of the three. Economies around the globe scrambled to safeguard their supplies from alternate sources at a premium.

The newly installed government in Pakistan was caught in the crossfire and it took them too long to comprehend and react to the situation. The oil prices increased and the LNG deliveries committed to Pakistan were diverted to elite countries who have deep pockets to pay whatever it may cost. An opportunity to procure oil and gas from Russia at a discounted price was not explored by the government for reasons not made public owing to whatever reasons. India, Sri Lanka and many others cashed in on this opportunity.

The entire world is in economic turmoil: it is hit by energy shortage, inflation, disruption in commodities and logistics. After many decades, rising inflation is biting the people of the US as well.

The incumbent government needs to move out of the shadow of what the past government did and start working on solutions which so far are non-existent. The government appears to be expending all of its energies only on efforts aimed at working out a deal with the IMF, which is one of the key issues but there are many more serious issues that need to be equally addressed. The market is depressed and confused, the rupee is losing its value, the transactions and cash flows in the market are minimal and even the remittances from overseas Pakistanis have taken a dip.

The national budget rolled out by the government is more of a political and election-oriented national outlay rather than a solution-oriented document to move the country out of its current economic impasse. The IMF has raised objections and the economic team knew that they would do so. Tax incentives have been provided to retailers and importers alike while a tax has been imposed on IT exports which had just begun to pick up. The government employees have been given a 15% increase in salaries while the salaries of employees in the private sector are being curtailed on account of growing business stagnation.

To move the nation out of the present political and economic crises a more serious and meaningful approach has to be adopted by all stakeholders – that is elusive so far.

(The writer is former President, Overseas Investors Chamber of Commerce and Industry)

Copyright Business Recorder, 2022

KARACHI: Saqib Naseem, Chairman Pakistan Yarn Merchants Association (PYMA), and Muhammad Junaid Teli, Vice Chairman, Sindh & Balochistan region, have drawn attention of Minister for Finance & Revenue, Miftah Ismail over anomalies in federal budget 2022-23.

They elaborated that polyester filament yarn (HS Code 5402.3300, 5402.4600, 5402.4700 and 5402.5200), also known as man-made yarn, is the basic raw material for Pakistan’s textile industry. The share of cotton in global fiber consumption has fallen from nearly 70 percent back in 1960, to only 27 percent by end-2020. Its place has now been captured by synthetic or man-made yarns.

“A very large SME sector of Pakistan’s textile industry (more than 500,000 looms and knitting machines) consumes polyester filament yarn. The commercial importers of polyester filament yarn act as financiers to this SME sector and entertain the requirements of this SME sector using their own capital and resources”, they said.

Saqib Naseem, Junaid Teli added that we have seen in the past that whenever the difference in WHT is more than one percent on commercial imports v/s industrial import, majority imports of polyester filament yarn shift towards industrial imports which leads to corruption and misuse of this facility and to the exchequer.

They further said that polyester filament yarn falls under the category of raw materials (SRO 1125) and in the previous budget FY 2021-22, the government imposed WHT at import stage one percent for industrial importers and two percent on commercial. However, in the federal budget 2022-23, the government has kept WHT at one percent for industrial imports falling under SRO 1125 whereas commercial importers shall be charged WHT at 3.5 percent with MTR and at 4 percent with FTR. Polyester filament yarn tariff already exists in the cascading system of polyester value chain and it is already on the higher side.

Saqib Naseem, Junaid Teli urged Minister for Finance & Revenue, Miftah Ismail to kindly continue with two percent WHT with FTR on commercial imports on items falling under SRO 1125. Furthermore, in view of information from reliable sources, it has been learned that the government may impose ACD & RD on polyester filament yarn (HS Code: 5402.3300, 5402.4600, 5402.4700 & 5402.5200).

Since these are basic raw materials of the textile industry, therefore we are requesting you not to impose any ACD and RD on these HS Codes. We would also request you to rationalize Customs duty tariff of Poy (5402.4600) & Polyester Filament Drawn Yarn (PFDY) at seven percent instead of present 11 percent.

Copyright Business Recorder, 2022

EDITORIAL: Minister for Water Resources Syed Khurshid Shah of Pakistan People’s Party (PPP) was spot on when he lamented the absence of ministers as well as the prime minister during the budget session. In a house already without a real opposition because of all the drama about en masse resignations of PTI (Pakistan Tehreek-e-Insaf) members, for ruling coalition legislators to also not show up, including all ministers, during an extraordinarily important budget session is a crying shame.

He also very rightly pointed out that politicians go through all sorts of troubles to get elected to parliament, yet treat it with utter contempt once they make it there; which goes to show where their interests really lie.

PPP has now threatened to boycott the remainder of the session if proper attendance is not assured, and rightly so. These are times when the public is being made to pay for the excesses and failures of the country’s rulers all over again, after all, and everything that concerns the lives of ordinary citizens and businesses is collected in the budget document. Word is that the unusual austerity owes to the compulsion of falling in line with the IMF (International Monetary Fund) $6 billion EFF (Extended Fund Facility). But that ought to require even more detailed debate than usual.

The behaviour of the country’s political elite, pretty much as a whole, has left a lot to be desired lately. If the confusion at the centre is not bad enough, the unprecedented pandemonium in Punjab is set to go down in history as one of the darkest days of the so-called most important province of the federation. It’s been literally paralysed only and only because one alliance of political parties cannot accept that it has lost its grip on power and will go to any extent, no matter how disgraceful or even unconstitutional, to spoil the show for all the others and then also play the victim.

All this is a very far thing from the kind of mature behaviour that is going to be needed to come out of the crises that confront the country at the moment. But what to do, and where to look for it, when it is simply not found in the political lot? This brings us right back to the crisis of democracy that we seem doomed to go through after every few years of representative government. Every time politicians have only themselves to blame for spoiling the whole show, and then they complain to no end if outside forces should intervene. That the so-called establishment is now neutral is well established. Yet the best that politicians can do, even when there is no outside interference, is fall all over themselves.

If political leaders cannot conduct themselves as responsible professionals, can they really be expected to find solutions to problems of monumental complexity? Right now, all of them know very well just how fragile the economic situation is. Yet they don’t agree to work together to mend the economy and latch on to any opportunity to bring harm to the other, even at the cost of harming the country and the people in the process.

No wonder, then, that the whole system seems ready to implode. For the good of everything in the country, including themselves, Pakistan’s leaders must immediately put their differences aside and help each other to bear the burden of structural adjustment that can no longer be delayed. It will be a painful process, but there is light at the end of this tunnel. But first we would have to get going, and take the hit together. Otherwise, there will still be a lot of economic trauma, but there will be nothing to show for it. Politicians need to stop playing their usual games and start working for the country for a change.

Copyright Business Recorder, 2022

LAHORE: With interest payment of Rs 18 billion and principal repayment of Rs 64.4 billion, Punjab debt service estimates for FY 2022-23 was Rs 82.4 billion.

As per budget document made available to the Business Recorder, Punjab’s ratio of debt service to average revenue is 4.6% for FY 2022-23 which is not high and indicates low risk. A number of indicators are used to monitor and control risks associated with the government’s debt risk indicators act as a guideline to devise future borrowing strategies.

Highlighting the risk indicators, financial experts told this scribe that refinancing/rollover risk refers to the risk of being either unable to raise new debt to repay the portion of existing debt that is maturing, or to raise such debt at a much higher cost. Debt maturing in a year and average time to maturity (ATM) are two indicators used to measure this risk. ATM means the average time to retirement of the entire debt stock, they said.

They added that the interest rate risk refers to the exposure of debt portfolio to changes in the interest rate. Proportion of fixed rate debt, ATR and share of debt stock exposed to interest rate re-fixing in one year are the key indicators. Fixed rate debt is considered less risky as it is not exposed to interest rate fluctuations during its life.

On the other hand, external debt outstanding on 30 June, 2022, has an average borrowing cost of 1.57% and average maturity of 8.4 years. External debt of the government is denominated mainly in US dollar (72%), followed by special drawing rights (18%), Japanese Yen (6%) and other currencies (4%).

External debt of the government comprises mainly of concessional, long-term, foreign currency-denominated loans obtained from multilateral creditors such as World Bank and Asian Development Bank. These loans are borrowed by the federal government and on-lent to the Punjab government. These loans can be broadly classified as project loans and programme loans. Project loans are long-term loans meant for public investments in infrastructure whereas programme loans are medium-term loans meant for budgetary support and are typically linked with certain legal or policy reforms.

It may be noted that the redemption profile refers to the projections of annual principal repayments according to the repayment schedules of underlying loans. It helps identify periods in which large principal repayments will be due so that appropriate measures can be taken to address with such challenges. The redemption profile of Punjab’s debt is quite smooth and is spread over a period of 36 years.

Copyright Business Recorder, 2022

“He who wishes to serve his country must have not only the power to think but the will to act” – Plato

The coalition government of Pakistan Democratic Movement (PDM), led by Prime Minister, Shehbaz Sharif, assumed power in April 2022 after constitutionally removing Imran Khan as premier.

The PDM government in the last 60 days has failed to provide clarity of thoughts and actions to the public and businessmen in dealing with pressing problems of inflation and high interest rates.

They have been transmitting confusing signals about their tenure and their financial plans to address mammoth economic challenges. There is no doubt that when they took charge, the country was facing severe financial, political, and legal challenges like draining of foreign exchange reserves, dishonouring of commitment with the global lenders and straining of relations with friendly countries, especially those offering help to meet the pressing fiscal needs. However, the PDM government cannot use these as an excuse for not performing as per their own promises.

Notwithstanding the economic challenges, the political allies were expected to have some plan for economic revival and provision of relief to the common man. However, the journey so far has been evolving around the appeasement of the International Monetary Fund (IMF). Clarity of purpose and direction is one of the most crucial elements of the governance. However, these are apparently missing and the latest federal budget proves it. It shows the incompetence and lack of planning and direction on the part of the economic team of the PDM government, led by the Finance Minister, Miftah Ismail.

The new government was under the responsibility to introduce its action plan to implement the IMF reforms agenda so that the delay on the part of the securing next tranche should be minimized. However, the economic team of the government appears to be visionless and following in the footsteps of their predecessors. In the last two months, the US dollar has crossed the psychological mark of Rs. 200 twice.

Similarly, the actions of the government so far like import ban, increase in fuel and electricity prices, austerity drive within the government offices are merely cosmetic in nature. The Prime Minister and all the key ministers of the federal and provincial government are still escorted with huge convoys and enjoying their protocols and VIP culture. In these circumstances, the early closing of markets will not achieve much, but may affect GDP growth, employment rate, revenue mobilisation, etc.

The government has been making efforts for the resumption of IMF programme by withdrawing subsidies. However, the Finance Bill 2022 violated the terms agreed with the IMF related to personal income tax to achieve extra 0.25% revenue collection. It extended relief of Rs 47 billion to the privileged classes.

Prime Minister Shehbaz Sharif and his cabinet should keep in their mind the words of Thomas Jefferson: “The purpose of government is to enable the people of a nation to live in safety and happiness. Government exists for the interests of the governed, not for the governors”.

The incumbent government is caught between rock and a hard place for the revival of the IMF’s 39-month Extended Fund Facility (EEF) programme of US$ 6 billion signed by the previous government in July 2019. Till today, the government has failed to set its priority to address the issues that pertain to fiscal challenges. The Finance Minister has no other thing to share except to criticise the previous government for his agreement with the IMF.

He does not have anything in his bucket but to tell the nation about his unpopular decisions like the withdrawal of subsidies for energy and petroleum, which have attracted public criticism and backlash. The public who was already finding it difficult to make their ends meet is now taken aback by this new tsunami of inflation. In the parallel, the foreign reserves are constantly falling, and the Pak rupee is in a constant fall.

In a very short period, the prices of petroleum products have been massively increased. The rates of electricity bills have also been significantly increased and Consumers Price Index (CPI) is touching a new high of 13.8%. Though the stock markets at the global level are witnessing a tough spell, the Pakistan stock exchange is in red primarily due to local political turmoil.

The market session following the budget shed 1,100 points, mainly since the overall budget does not provide for any policy/strategic measures that can pave the way for economic revival. Like previous budgets, this budget is also mismatched in terms of revenue and expenditure and relies on financial lending as a balancing factor.

Further, the estimates of a provincial surplus of Rs 800 billion seem overambitious and most probably this will also be bridged by leveraging costly funds from lenders. With the current levels of fiscal and current account balances, we cannot continue this ad hoc approach of borrowing expensive funds to bridge the gaps.

The debt balloon is getting bigger with every passing day and currently 41% of budgeted expenditures are represented by interest payments. Rather than taking concrete steps to formalise the economy, the government has further widened the gulf between corporate and non-corporate/informal business sectors. The current budget offers simplified and nominal tax for retailers through electricity bills as compared to a 29% tax on profit for corporate retailers. Extending a fixed tax regime rather than profit-based taxation can wrongly promote informal sectors and cash-based dealings which will discourage documentation of the economy.

The power outage is another challenge for the current government. The country is facing power outages and the shortfall is reported to be above 7,000 megawatts. The main reason reported is the closure of several plants on account of a shortage of oil, gas, and coal. This significant shortfall has resulted in severe load-shedding of 8 to 10 hours in several parts of the country. The government is shifting the blame to the incompetence and indecisiveness of the previous government as they did not make any agreement related to liquefied natural gas (LNG) and other supplies. Now, they are forced to buy LNG at expensive rates, making the situation more difficult for the already cash-strapped economy.

On the administrative front, the government needs to get its acts together and must ensure that roles and responsibilities within ministries and divisions are communicated and followed up through a robust accountability system. People in key roles must possess the desired skill set rather than based on political affiliations. This help in introducing progressive policies which help the overall economy and business environment of the country.

Another important factor is stability and continuation of policies, especially those which are already under successful execution. For example, the Auto Industry Development and Export Policy for 2021-26 were designed to boost the development of Pakistan’s automotive industry and provide significant support to the Government of Pakistan to help in addressing economic issues, ensuring import substitution, export enhancement and job creation for the local workforce. These can help make our facilities par for competitive manufacturing of auto parts and vehicles which can fulfill local market and offshore demands.

The governments, irrespective of political connotations and differences, must continue to facilitate investors who are inclined to employ funds in different sectors. The prime focus should be on providing an enabling environment with a stable economic outlook. With a fast-deteriorating economy, we cannot afford ad hocism and short-term approach.

The government in general and finance minister in particular must be cognizant of the fact that the current energy challenges, weak currency, double-digit inflation, high cost of funds, and political turmoil are antidote to growth. There is, therefore, the need for initiating and implementing fiscal reforms without any further loss of time.

(Huzaima Bukhari & Dr. Ikramul Haq, lawyers and partners of Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS), members Advisory Board and Visiting Senior Fellows of Pakistan Institute of Development Economics (PIDE). Abdul Rauf Shakoori is a corporate lawyer based in the USA and an expert in ‘White Collar Crimes and Sanctions Compliance’)

Copyright Business Recorder, 2022

ISLAMABAD: The MPs belonging to the ruling coalition government – who made it to the power corridors by ousting former prime minister Imran Khan under the pretext of rising prices and skyrocketing inflation – did not say a single word on Thursday in the National Assembly despite, the massive increase in the prices of petroleum products.

However, Mir Khan Muhammad Jamali, a Pakistan Tehreek-e-Insaf (PTI) dissident, lambasted the government for the unprecedented hike in petroleum prices, saying it should focus on reducing the prices of essential items to provide relief to the poor.

In a somewhat emotional speech, he also raised “Imran Khan, Zindabad!” slogans, and questioned: what has the incumbent regime did to control prices and lower the prices of the POL products despite, making tall claims before coming into power.

He rejected media reports of his resignation from his National Assembly seat, saying he would continue as a member of the house.

“I haven’t resigned from my NA seat…I’m still with the PTI and Imran Khan is still my leader,” he declared.

Taking part in the budget debate for 2022-23, the MPs proposed the government to announce more incentives in the budget 23 for the agriculture sector to make the country self-sufficient in agrarian products.

Aslam Bhootani, an independent MNA, was all praise for the budget, saying at a time when the country is going through economic challenges, there could have been no better budget.

He said that the subsidies on electricity should not be withdrawn as it would affect the farmers, adding the farmers should be given more incentives in order to boost the agriculture sector.

Javed Hussain of Pakistan Muslim League-Nawaz (PML-N) said that the coalition government in the proposed fiscal plan preferred to work for the betterment of the state instead of doing politics on national issues.

He asked the government to provide maximum relief to the farmers in order to produce better results. He also proposed the formation of a parliamentary committee on the agriculture sector for devising a more prudent policy to increase agri production.

Jamaluddin of JUI-F said that suggestions by MPs should be incorporated into the budget 2022-23.

He was of the view that sufficient funds had not been allocated for the development of merged districts of erstwhile Federally Administered Tribal Areas (Fata).

He asked the government to release funds for people affected by operations in districts of previous Fata besides providing facilities to local people for developing the mining sector.

He also asked the government for allocating special funds for establishing educational institutes.

Maulana Abdul Akbar Chitrali of Jamaat-e-Islami criticized the recent hike in the prices of petroleum products, saying it would multiply the miseries of the common people.

He was of the view that the government was taking directions from the International Monetary Fund (IMF) for imposing an unnecessary burden on the people.

Afzal Khan Dhandla said that the recent increase in petroleum prices is unbearable for the common people and the government should immediately withdraw it.

He said every ruler makes tall claims and builds castles in the air to befool the people and does nothing to provide respite to the people.

He said a special focus should be given to the agriculture sector and the agro-based industry, adding agri-loans should be waived off to save farmers from selling their lands to pay back their debt.

Regarding the suggestion of waiving off agri-loans, Minister for Economic Affairs Ayaz Sadiq proposed a committee comprising members of the house from both sides of the aisle to look into the matter.

He said the government will arrange a meeting of the committee with the president of the Zarai Taraqiati Bank in this regard.

Nawabzada Iftikhar Ahmed Khan said that more funds should be diverted toward the education, health, power, and agriculture sectors.

Rao Ajmal Khan appreciated the government for withdrawing 17 percent general sales tax on farm machinery and agri-inputs as well as allocating 21 billion rupees for the livestock sector.

He proposed a subsidy of at least, Rs2,500 on DAP fertilizer, enhancing support price for wheat and other crops, shifting of agri-tube wells on solar from expensive electricity to save power, and ban on establishing new housing colonies to conserve agri lands.

Hussain Tariq called for long-term and sustained policies to attract foreign and local investors for a stable economy, adding modern technology should be introduced to the agriculture sector to increase our per acre yield.

Ramesh Kumar, a PTI dissident, lauded the passage of a resolution by the house, recommending constituting a task force for compiling recommendations for the welfare of minorities in the country.

Copyright Business Recorder, 2022

EDITORIAL: The Punjab 2022-23 budget envisages a 125 billion rupee surplus which, if delivered by the end of next fiscal year when elections would be looming large on the horizon subject to parliament being allowed to complete its tenure, would still imply a shortfall of 675 billion rupees in the federal budgeted revenue of 800 billion rupees under the head of provincial surplus.

It is relevant to note that the envisaged contribution of Punjab in the federal provincial surplus would have been considerably higher than the 16 percent that the province’s budget surplus indicates and, disturbingly, further highlights the fact that while setting the federal provincial surplus the finance ministry in general and the Federal Finance Minister Miftah Ismail in particular may not have engaged in meaningful consultative discussions with provincial finance ministers including in Punjab where the Prime Minister’s son and his unconditional supporter is the chief minister.

The total budgeted outlay for next year is 3,226.4 billion rupees and in a marked deviation from earlier PML-N budgets the allocation for infrastructure development takes a distant second place at 216.68 billion rupees (8 percent of total) to social sector development budgeted at 1.083 trillion rupees (34 percent of total outlay), perhaps indicative of the changes wrought in the political narrative by the Khan administration. Production sector is budgeted at 127.32 billion rupees or 4 percent of total outlay.

Punjab has budgeted current expenditure at 1,711.9 billion rupees out of which 190.58 billion rupees has been earmarked for subsidies (11 percent of total current expenditure) with 100 billion rupees alone defined as a flagship initiative for social protection initiative (Utility support programme), followed by free medicines of 39.9 billion rupees, transport 17.89 billion rupees, agriculture 17.32 billion rupees, environment challenges 6 billion rupees and subsidy on ghee 5 billion rupees.

One would not be remiss in assuming that the International Monetary Fund would have serious reservations at the high priority accorded to subsidies, especially as these appear to be largely untargeted. However, true to form the PML(N)-led Punjab government allocated the highest-ever to Annual Development Programme (ADP) — 685 billion rupees — a tradition that is as evident in federal budgets as in provincial budgets though lack of fiscal space due to a reduced divisible pool collection by the Federal Board of Revenue (FBR) that, in turn, is distributed as per each province’s share under the National Finance Commission award leads to slashing the ADP.

Flagship initiatives in the Punjab budget also include: (i) 31.5 billion rupees for sustainable development of southern Punjab, an allocation that reflects the growing political relevance of this largely underdeveloped region, with 58.5 billion rupees earmarked for sustainable development programme for the entire province though it is unclear whether the allocation for southern Punjab is subsumed in this total; (ii) correctional facilities have been budgeted 5 billion rupees, perhaps after the sorry state of our facilities became apparent to PML-N leadership which spent considerable time in jail during the Khan administration; (iii) laptops 1.5 billion rupees (a continuation of Shehbaz Sharif’s initiative as chief minister Punjab); and (iv) 9 billion rupees for road rehabilitation programme with, one hopes, priority given to those roads that urgently require maintenance rather than those that are used by the elite.

In addition, salaries have been raised by 15 percent, above the Consumer Price Index of 13.8 percent year-on-year in May 2022, while pensions have been raised by 5 percent, well below the CPI — a discrepancy that is inexplicable given that utility and food prices, the major budget item of a pensioner, have risen by over 20 percent.

The Punjab government envisages raising tax collections by Punjab Revenue Authority from 155.9 billion rupees in the outgoing year to 190 billion rupees next fiscal year — a 22 percent rise in spite of the continuation of reduced sales tax on services for 30 plus sectors and a 44 percent raise in revenue collected by the Board of Revenue, the controlling authority in all matters pertaining to property, that includes enhancement of rates of luxury houses from 1 July, enhancement of stamp duty from 1 to 2 percent in urban areas, and harmonization of PRA procedures with FBR and other revenue authorities (a long pending demand of domestic business community as well as multilaterals).

Austerity measures include a ban on purchase of new cars, a ban on purchase of air-conditioners exceeding 5 million rupees next year, ban on medical treatment abroad, ban on air travel through government funding, ban on workshops/seminars and ban on upgradation of posts — good optics but one wonders how much of the budgeted current expenditure would be contained by these measures.

It is evident that the Punjab budget, like the Sindh budget, does not support the federal budget’s economic priorities, particularly in terms of creating fiscal space, a factor that would have negative economic implications on the people of the country.

Copyright Business Recorder, 2022

ISLAMABAD: Chairperson National Tariff Commission (NTC) Robina Ather on Thursday informed the Senate Standing Committee on Finance that the government has not suffered any major revenue loss on account of tariff rationalisation done in the federal budget (2022-23) to facilitate domestic industries and sectors.

Responding to a question of Chairman of the Committee Senator Saleem Mandviwala, the chairperson NTC informed the committee that the FBR and the NTC have no differences on customs tariff lines of the Pakistan Customs Tariff (PCT) during the budget finalisation exercise.

The FBR has no objections to the NTC’s tariff rationalisation done for the new fiscal year.

Ather further stated that there is no significant revenue impact on the government as a result of tariff rationalisation. In some areas, the government has imposed regulatory duties, but the amount has been compensated through other relief measures. The NTC has followed the policy to reduce the average rate of tariff on raw materials and inputs to facilitate the domestic manufacturers and downstream industries.

She said that the anomalies in the customs tariff have been referred to the FBR’s Anomaly Committee.

The chairperson NTC added that the customs duties have been decreased on the import of packaging materials, dyes and combined harvesters.

Secretary Finance Hamed Yaqoob Sheikh said that there is no change in the rates of customs duty due to the updated Harmonised Commodity Description and Coding System (HS).

The FBR Member Customs (Policy) informed that the World Customs Organisation (WCO) updates its Harmonised Commodity Description and Coding System (HS) after every five years to accommodate modern developments and changing trade patterns. The last HS version was updated in 2017. The current amendments to the HS nomenclature have entered into force since 1st January 2022.

Pakistan being a signatory to the HS Convention has obligation to adopt the HS 2022 version. Since, these amendments are required to be incorporated in the First Schedule to the Customs Act, 1969 (Pakistan Customs Tariff), therefore, Pakistan adopted the same by incorporating all of its latest amendments introduced in earlier nomenclature/HS codes in Pakistan Customs Tariff by the process of addition/ deletion and creation of local PCT codes, accordingly.

It will be effective from 1st of July 2022.

Copyright Business Recorder, 2022

ISLAMABAD: Minister for Planning and Development Ahsan Iqbal on Thursday said that the government had no option but to increase the oil prices due to the unprecedented increase in international prices of crude oil while adding that the government had also withdrawn all the taxes and levies on the petroleum products.

Addressing a press conference here, he said the country’s current economic situation was due to the mismanagement of the previous government.

The minister explained that the economy of any country grows with the development activities, but unfortunately for the last four years, the country’s development budget kept on decreasing instead of increasing.

“In 2018, when we left the government, Rs1,000 billion was allocated to both the defence and the PSDP.”

“Today when after four years, I take over the charge, the allocation was Rs900 billion, but only Rs550 billion could be spent during the outgoing year due to fiscal constraints,” he added.

He said the Finance Division categorically declined to issue further releases to the PSDP since the end of the third quarter of the outgoing fiscal year.

The minister informed that Imran Khan Government had agreed with the International Monetary Fund (IMF) that all subsidies on the petroleum products would be withdrawn and further taxes would be charged on the products.

He also blamed the previous government for rapidly depleting the country’s foreign exchange reserves.

He said the coalition government was well aware of the worse situation, but “we had no choice but to take the charge of the government only to save the country’s future.”

He said Pakistan needed stability and the coalition government could easily go for the next general election but the country could have collapsed during the interim government.

Therefore, he said the coalition government took the toughest decision to save the country’s future.

He said for the next fiscal year, the Federal Board of Revenue (FBR) revenue target had been set at around Rs7,000 billion and after paying the provinces’ share, only Rs3,000 billion would be left with the federal government.

The federal government had liabilities of over Rs6,000 to 7,000 billion so in order to meet all these expenditures, the federal government would have to take further loans.

In four years, he said the annual debt service was Rs1,500 billion but now it had increased to Rs4,000 billion.

He said as per the vision of Prime Minister Shehbaz Sharif, the country badly needed the charter of economy to put the country on the path of stability and growth.

He said under the charter of economy, all political parties should sit together and agree to continue the policies for at least 10 years irrespective of whichever political party is in the government.

Former Prime Minister Imran Khan was “destabilizing the country by targeting Pakistan’s key institutions”.

He alleged Imran Khan had used social media and indulged his team in campaigns against the state institutions as planned and aimed at destabilizing the country.

He alleged Imran Khan was deliberately spreading anarchy against the country’s key institutions.

The minister said, “We will not let Imran Khan target the nation and the country’s institutions through his negative politics.”

Copyright Business Recorder, 2022

ISLAMABAD: Minister of State for Finance and Revenue Dr Aisha Ghaus Pasha has said that the government would very soon resolve all issues with the International Monetary Fund (IMF) including personal income tax reforms agreed upon by the previous PIT regime.

At the conclusion of the Senate Standing Committee on Finance meeting on Thursday, Dr Pasha informed that the discussions with the IMF will conclude very soon for reaching staff level agreement. The government is negotiating with the IMF on a daily basis. The discussions are daily held on budget numbers and projections. The IMF is analyzing each and every number of budgetary targets. “We are trying to give them clarity on all issues raised by them. We are very confident that all issues will be resolved very early”, she said.

The main concern of the IMF is the non-fulfilment of the condition of the personal income tax reforms. Once the tax-base is broadened and the number of filers increases, the government would be able to effectively deal with the withholding tax regime, she said.

The Minister of State for Finance stated that the real problem is that the previous government did not enforce measures required as per conditions and timelines agreed upon by them with the IMF. Contrary to this, the PTI government went totally 180 degrees against what it actually agreed with the fund.

“Now the government is facing problems of credibility and the IMF is checking each and every number again and again. There are not only the issues of credibility, but the present government is facing the consequences of things done by the PTI government”, she said.

Miftah says IMF lending critical to averting default

The government is patiently responding to every query of the IMF and satisfying them on each question raised by them, she maintained.

Dr Pasha categorically said that the IMF is not demanding any additional taxation measures in 2022-23 except the fulfilment of the conditions and benchmarks agreed with the previous government under the IMF program. “I want to categorically clarify that the changes proposed in the personal income tax rates and raise in the petroleum levy were already agreed by the previous government with the IMF. If we talk about the increase in electricity prices, it was also agreed by the previous government. Thus, the IMF is not seeking new measures but the implementation of the conditions already agreed with the past regime”, she said.

The Minister of State for Finance further stated that the real issue is that the non-fulfilment of conditions and missing the timelines has created a backlog for the present government. We are also convincing the IMF that we are clearing the backlog, but it is difficult for the government to move ahead expeditiously with the implementation of measures in future. But we want to implement measures up to the level of adjustment which the economy can tolerate. When asked about China’s loans to Pakistan, Dr Pasha confirmed that the processing of the agreement is nearly completed.

About the inflationary impact of the increase in the petroleum prices, she said that the inflationary impact is not only faced by Pakistan but it is a global phenomenon. The excessive import of commodities like sugar and wheat by the previous government was also an issue. With the help of provincial governments we are coming towards a better price management of essential food commodities, she added.

She added the government has done very hard work and the conditionalities and requirements of the FATF have been met. We are confident that Pakistan would soon be excluded from the Financial Action Task Force’s (FATF) grey list, she added.

During the meeting of the Senate Standing Committee on Finance, while reviewing the Finance Bill 2022, Dr Pasha stated that we strongly discourage indirect taxes measures that result in inflation. The government is moving towards resource mobilization through direct progressive measures in budget (2022-23).

The change in the holding period and tax rate on capital gains of the immovable properties has been proposed to control speculative buying and selling of open plots. The government is trying to discourage the uneven gains and charging a part of the unearned gains. The purpose is to divert the non-productive investment to productive investment like industry and agriculture, she maintained.

She stated that the government wants to give the message to shift your investment to the productive areas. In this regard, the government has given a number of tax incentives in the budget including admissibility of 100 per cent depreciation. To incentivize agriculture sector and farmers, customs duty exemption is extended further to Farm Mechanization and Logistics including agricultural machinery pertaining to irrigation, drainage, harvesting/ post-harvest handling and processing, plant protection equipment, as well as, machinery, equipment and other capital goods for miscellaneous agro-based setups.

Dr Pasha added that the government had the choice to rely on indirect taxes but it focused on direct taxes on a progressive basis. The government has not imposed any indirect tax in the budget (2022-23), she added.

Copyright Business Recorder, 2022

ISLAMABAD: Federal Minister for Planning and Development Ahsan Iqbal Thursday said that to meet national financial requirements, the government has to take additional local and international loans.

He said this while briefing a meeting of the Senate Standing Committee on Planning and Development held under the chairmanship of Senator Ataur Rehman.

The committee members raised the issues related to budgetary recommendations sent by the committee to the ministry of planning and development on February 11, 2022, related to developmental schemes on water, power, health and education projects under the Public Sector Development Program (PSDP) for the financial year 2022-23.

The planning minister and federal secretary Ministry of Planning, while briefing the committee on the agenda item said that the ministry has a certain share in the budget regarding countrywide development projects. They further said that PC-1 of any scheme is not planned by the ministry but is prepared by the concerned departments and agencies which forward the schemes to the planning ministry for funding.

The minister said that the department prepares as many schemes as the budget quota of the Ministry of Planning and gives them to us. We do not have the authority to add or reject recommendations.

Rs800bn PSDP proposed for FY23, says planning minister

The secretary planning said that the ministry after receiving the recommendations of the parliamentarians was thoroughly reviewing them and are sent to the relevant federal department for implementation. The Standing Committee was informed that the recommendations of the members of the Senate were sent on February 11, 2022, after which they were reviewed and handed over to the concerned departments and provinces on March 14.

The committee was informed that the members of the Senate forwarded a total of 216 schemes to the ministry of which 174 were related to provincial governments and 42 were of the federal government. The meeting was further informed that out of 174 recommendations related to provinces 33 were related to Punjab, 50 to Sindh, 73 to Khyber-Pakhtunkhwa (KPK), and 18 to Balochistan.

Of 42 developmental projects recommendations 6 were related to Power Division, 20 to Petroleum Division, 8 to Interior Ministry related and eight were related to other ministries.

The National Economic Council (NEC), headed by the prime minister and comprising 12 members, including the provinces, decided in June 2021 to set March 31 as the date for new schemes. The panel was informed that Rs900 billion had been allocated for PSDP schemes for the financial year 2021-22 which was later reduced to Rs550 billion. For 2022-23 financial year the government has earmarked Rs800 billion for PSDP schemes across the country.

The panel was further informed that the ministry received a total Rs1.3 trillion developmental schemes by the federal and provincial departments but the concerned departments have been directed to send the schemes as per the stipulated budget. No new scheme will be added after 31st March and the existing schemes will be completed by spending resources for the next nine years. Funds for the last quarter of the last financial year were also not released.

Responding to a question raised by Senator Attaur Rehman, the ministry officials said that the Planning Ministry is playing a role of a regulator which receives schemes and sends them to the concerned departments for implementation. The panel was informed that the highest share has been allocated in the budget for the province of Balochistan and the provincial and federal departments have been informed about the ceiling so that PSDP schemes can be formulated accordingly.

Senator Sardar Muhammad Shafiq Tareen said that Pakhtun areas are being ignored once again like the previous government. None of the national food security schemes are in the Pakhtun area, adding that only nine percent of the total water projects related schemes of Balochistan province are for Pakhtun areas and out of 30 special area schemes, only four schemes are for Pakhtun areas. The government should pay more attention to the Pakhtun areas.

The committee was also informed that 80 percent of the budget was allocated for old schemes and 20 percent for new schemes but the ratio of 60 to 40 has been fixed in the NEC with collective consultation.

The panel was informed that the government has allocated Rs30 billion for the uplift of the 20 most backward districts of the country with special focusing on education, health, water supply, and other human development-related projects. The federal government and respective provincial governments will share 50 percent costs. About 250 vocational schools will be opened for vocational education in the country and 250 new stadiums will be constructed for the promotion of sports in the country.

Ahsan Iqbal said that the government was taking tough decisions to put the country’s economy on the right track. He added that owing to lack of funds, Gwadar port is as yet not fully developed with only 11 meters depth which cannot handle large ships. The government has allocated funds for cleaning streets and drainage. The minister further said that the government will provide funding for 5,000 scholarships in various subjects related to higher education. The development projects of Balochistan province are double that of Punjab province.

He said that the government was paying special focus on the completion of China-Pakistan Economic Corridor-related projects and steps are being taken to ensure timely completion of industrial zones which were to be completed in 2020.

While lamenting the reduction of developmental budget, the minister said that it was very unfortunate that in 2018 when Pakistan Muslim League (PML-N) left the government, the total PSDP allocation was Rs1,000 billion which Imran Khan-led government kept on reducing and in 2021-22 the previous government allocated a total Rs900 billion for the developmental schemes which later was reduced to Rs550 billion. He said that the defense and development budget should have been equal for the smooth running of the economy but now the defense budget is Rs1,500 billion while the developmental budget is Rs550 billion. He said that the present government has increased the developmental budget to Rs800 billion for the financial year 2022-23. He further said that for a strong national defense, the development budget should be more than the defense budget.

The committee was also informed that 80 percent of the budget was allocated for old schemes and 20 percent for new schemes but the ratio of 60 to 40 has been fixed in the NEC with collective consultation. There is a plan of Rs30 billion for this. 50 per cent will be provided by the provincial governments. About 250 vocational schools will be opened for vocational education in the country and 250 new stadiums will be constructed for the promotion of sports in the country.

Copyright Business Recorder, 2022

KARACHI: Shabbir Hassan Mansha, the acting president of Federation of Pakistan Chambers of Commerce and Industry (FPCCI), has said that the business community was expecting an industrial package to propel the country into the much-needed industrialisation and import substitution mode.

He said the business community is concerned at the imposition of wealth tax on tax-paid assets as well. Mr Mansha was of the opinion that the federal budget for 2022-23 is devoid of categorical explanations about various budgetary and fiscal initiatives.

He welcomed the emphasis on setting up of special economic zones (SEZs) under the China-Pakistan Economic Corridor (CPEC) and also commended the imposition of fixed tax on small retailers, as this will make it viable for them to register into taxation system.

He expressed dismay that FPCCI, being an apex body, had proposed to the government to announce a comprehensive industrial package, as there is no other way to control the unsustainable trade deficit that contributes to current account deficit, which will be $47-48 billion this year, gradually reduce debt servicing of Rs 3.95 trillion, protect the ever-depreciating rupee that results in massive fuel and power inflation, save dwindling foreign exchange reserves, increase growth rate which is grossly insufficient to match the population explosion, deal with increasing unemployment and curtail the budgetary deficit through generating more taxes through productive activities, and not through squeezing the existing taxpayers even further.

Addressing the other area of concern, he said that remittances recorded a significant decline of 25 percent in May 2022 on a Month-on-Month (MoM) basis, and FPCCI had categorically suggested that incentives be provided to facilitate remittances.

The acting head of the FPCCI said selected commercial bank branches should be open 24/7 in all major cities and towns of Pakistan to facilitate remittances, taking care of time lapse in emergency circumstances and varied time zones.

He noted with a sigh of relief that zero tax has been levied on agricultural machinery and inputs, which was a major demand of the FPCCI given the food security situation in the country. “Exempting tractors and seeds was critically needed and the government listened to us on the issue,” he added.

However, fertilisers should also have been exempted as it is one of the major inputs for higher yields.

Mr Mansha appreciated the relief extended to the middle class by raising taxable salaried income threshold to Rs 100,000 per month from the current Rs 50,000, and also providing relief to micro and small businesses by raising the minimum tax bracket from Rs 0.4 million to Rs 0.6 million.

He maintained that property tax of 1 percent on properties worth over Rs 25 million should be reconsidered, as in times of crises all segments and sectors of the economy should be supported. It is pertinent to note that real estate and construction sectors directly or indirectly accelerate growth in 40 industries, he added.

Copyright Business Recorder, 2022

KARACHI: The proposed exemption restoration in Sixth Schedule may lead to serious financial shock to the pharma manufacturers because input tax on supplies to charitable hospitals would not be refunded.

Ejaz Bhutta executive director, Moore Shekha Mufti contended that Finance Bill 2022 includes a proposal to exempt the supply of goods to charitable hospitals. If the proposal is carried out in the Act, the pharma industry will not be eligible for a refund of input tax on such supplies. Therefore, charitable hospitals may face trouble in securing medicine supplies directly from manufacturers. Ejaz was of the view that effectively, the cost of medicine for charitable hospitals will increase under this amendment.

He pointed out that the export of medicines to Afghanistan is already excluded from the facility of zero-rating. Furthermore, no proper mechanism for smooth issuance of a refund to the pharma sector has been devised yet. Therefore, the pharma industry may face liquidity crises ultimately affecting the supply chain of life-saving drugs in the country.

Copyright Business Recorder, 2022

KARACHI: Chief Minister Sindh Syed Murad Ali Shah on Wednesday said that the provincial fiscal budget 2022-23 proposes “no new taxes”, vowing to achieve a record development in the province.

“A budget of Rs1.71 trillion proposed with no new taxes,” he told a post-budget news conference at the Sindh Assembly auditorium, saying that the fiscal plan rather extends a relief in taxes on cotton fee, professional and entertainment duties.

Tax on IT sector was dropped to 3 percent from 13 percent, he said that the move is aimed to encourage the freelancing in the filed. He told reporters that his government is going to announce a five-year IT policy.

About the non-development schemes, he said that they will not exceed 60 percent, though the budget projects their 70 percent share for next fiscal year.

The non-development schemes also include grants, which he said, remain as a development measure. The grants go to the Sindh Local Government Department stand at Rs85 billion, hospitals at Rs75 billion, education at Rs30 billion and social sector at Rs18 billion.

In addition: 14.5 percent or Rs 174.229 billion employees Retirement Benefits, 12.3 percent or Rs147.449 billion operating expenses and 42.5 percent or 509.732 billion employees related expenses.

“The current revenue expenditures of Rs1.199 trillion could not be termed as non-development expenditures but it has 2.9 percent or Rs35.360 billion repair and maintenance budget which itself is part of development budget,” he said.

Thus, he said, the non-development schemes remain for not more than 60 percent in the budget.

The budget proposes Rs15 billion for social relief, which he said, is aimed to make registry database to make it easy for the government to reach out to the most needy during emergencies.

He said that the Sindh government is seeking investments for the city’s development from the gulf nations mainly Kuwait and Saudi Arabia. An investment conference, he said, has been under consideration to hold for Sindh in Kuwait to attract investors for the metropolis uplift.

The Sindh government is not looking for loans for the province from the Kuwait Investment Authority, he said, rather seeking investments. The city’s development requires about Rs600 billion, which the government cannot spare from its uplift budget that meant for the entire province.

The total development outlay for Karachi in 2022-23 was Rs125 billion, Murad said that Rs80.077 billion has been allocated for 750 Karachi specific projects of which Rs60.686 billion for 483 ongoing schemes and Rs19.390 billion for 267 new schemes.

He said that Rs5 billion was earmarked from District ADP and Rs40.715 billion for seven projects through Foreign Project Assistance including Competitive and Livable City of Karachi Project (Click), Karachi Neighbourhood Improvement Project (KNIP), Kara chi Water & Sewerage Services Improvement Project (KWSSIP) Phase-I and Phase-II for Environmental, Social Safeguards and Design Studies, Solid Waste Emergency and Efficiency Program (SWEEP), Construction of BRT Red Line Karachi and Karachi Urban Mobility Project – BRT Yellow Line.

For around 32 mega projects, he said, Rs5 billion reserved for Safe City for [its pilot part will be completed next year], Rs12.19 billion for dual carriageway Manghopir Road to Shahrah-e-Qaddafi, Rs1.6 billion for renovation of Karachi Fish Harbour as Rs309.6 million has already been allocated, Rs1 billion for rehabilitation of storm water drains Phase-II.

Murad acknowledged that the burden of Rs174.229 billion of employees’ retirement benefits is “huge” on the provincial exchequer that should be arrested, saying that the government is evolving a new plan in this regard.

To a question, he replied that his government was preparing a policy to offer registration of electric vehicles free of charges.

He announced that Gambat, a small town of Khairpur District, will be developed as Medical City to begin a medical tourism in the province.

He said that Rs219.787 billion was allocated for the health sector, which includes Rs196.453 billion non-development and Rs23.334 billion development budget.

Nabisar-Vajihar water infrastructure project will be developed for Rs35 billion, he said: “This project has been launched under public private partnership with a Kuwait-state company.”

He said that his government was planning to convene an investment conference in Kuwait to attract more investment.

Earlier, Murad condemned the PTI lawmakers for their noisy protest hampering his budget speech during the Sindh Assembly session. He alleged that the protesting legislators used an unparliamentarily language against the PPP leadership.

Copyright Business Recorder, 2022

KARACHI: Delays in important decisions are fuelling inflation which could increase from the current 13 percent to 23 percent, Chairman of the National Business Group Pakistan and President of Pakistan Businessmen and Intellectuals Forum (PBIF) Mian Zahid Hussain has warned.

He further said that Pakistan needs $ 41 billion in the current financial year while presently foreign exchange reserves are barely enough for 45 days of imports. It is impossible to stabilise the situation in the presence of existing policies.

So far the government has failed to convince the International Monetary Fund (IMF) to provide $ 900 million and the friendly countries are in no mood to finance our deficits.

Regarding the conflicting statements, he said that the government claims to keep inflation at 11 percent but at the same time it will be raising the price of oil and gas. It has also hinted at imposing heavy taxes on oil, gas and other commodities which will increase inflation further.

It has been claimed that the growth rate will be kept at 5 percent but at the same time reduction of imports has also been announced. If imports are low, the growth rate will also be affected as most of the revenue comes from imports.

An increase in tax revenue has also been claimed but if imports are less then tax collection will also be reduced. The government has allocated Rs 800 billion for PSDP in which a lot of deductions will have to be made to balance the budget.

Zahid Hussain said it does not benefit a country with a sinking economy to violate the agreement with IMF in the budget. Continued violation of the agreement with the lender is an irresponsible act which should be addressed as soon as possible.

He said that the ambiguities and contradictions in the budget should be removed immediately so that it could become a workable document.

Talking to members of the business community, the veteran business leader said that the country was on the brink of disaster but important economic decisions were still being taken on political grounds, which was astonishing.

Many issues, including those pertaining to revenues and expenditures, remain unclear in the budget, while the IMF has reservations about oil subsidies, current account deficits and direct taxes, he added.

It is impossible to get a loan from the IMF unless the government responds to the reservations of the lender.

Zahid Hussain said that Finance Minister Miftah Ismail has admitted that IMF is not happy with some budget proposals but still no adjustment is being made, which is worrisome as it is affecting the economy and the value of the rupee.

Copyright Business Recorder, 2022

LAHORE: No new tax has been imposed by the Punjab government under the sales tax on services for the fiscal year 2022-23. However, the ratio of stamp duty has been increased to two percent from earlier one percent in urban areas in order to increase revenue of the province throughout its resources.

According to the Finance Act 2022 presented at Aiwan-e-Iqbal, where the Punjab government had presented the budget instead of the provincial assembly, tax relief has also been extended to small businesses besides no increase in the existing tax slabs in the province.

Meanwhile, an amendment proposed in the Punjab Motor Vehicles Taxation Act, 1958, includes provisions for imposition of tax in the Schedule to the Act ibid on the electric vehicles proportionate to their power in kilowatts. In this regard, an equation for conversion of kilowatts into engine power in cubic centimeters (cc) has also been devised for determination of power of those electric vehicles that are not specifically included in the said provisions of the Schedule. Despite making proposal for imposition of the said tax, it has been proposed on the analogy of the financial year 2021-22 that 95 percent exemption on such tax shall be given till 30 June 2023. This proposal, among other targets, will facilitate and promote registration of electric vehicles, in turn, leading to a considerable improvement in environment.

The legislative proposal contains provisions for ending the exemption given to student internet package as such exemption has become redundant since no telecommunication service provider is providing student packages anymore while this exemption is no more beneficial for anyone; rather such exemption may help in tax evasion resulting in loss of revenue. Further, it has been clarified that the services of real estate aggregators are included in information technology-based services while the services provided by cab aggregators are included in ride-hailing services.

For ease of doing business, the limit of input tax adjustment is proposed to be increased from 80 percent to 90 of the output tax. A number of provisions regarding limit of input tax adjustment, penalties and time limitation are also part of the legislative proposal seeking amendments in the Act XLII of 2012.

In order to achieve a more progressive taxation, enhanced rates for tax on luxury houses have been introduced for houses above a certain size with the completion of construction date from 01.07.2022.

For purposes of promoting e-payment of urban immovable property tax and motor vehicles tax, a discounted rate of five percent has been proposed as introduced previously. Besides, surcharge and penalty for property tax and motor vehicles tax have also been rationalized by shifting them to the payments made during the last two quarters of the financial year. Provincial Minister Sardar Awais Khan Leghari, who presented the provincial budget, said the government has decided to continue with its policy of reduction in tax burden on poor segments while shifting it to the affluent classes of the society.

He said the fundamental theme behind the tax scheme of the province is to bring rich segment of the society to the tax net while exempting the deserving and low income sections of society. Similarly, a revised e-auction policy has also been introduced in the bill for the auction of attractive numbers of vehicles during the upcoming fiscal year.

Copyright Business Recorder, 2022

LAHORE: The Punjab government has proposed an amount of Rs 470 billion for health sector in its budget 2022-23, which is 27% higher than the current year (2021-22) budgetary allocation of Rs 369.3 billion.

As per budget document made available to Business Recorder, Rs 296 billion has been set aside for non-development expenditures while Rs 174.5 billion has been reserved for development expenditures. An amount of Rs 125.34 billion has been allocated for Universal Health Insurance Program (Health Card) as against Rs 60 billion allocated in the year 2021-22.

In the next financial year, Rs 5 billion have been allocated for PKLI while from July 2022, provision of free medicines in the hospitals is being started. An amount of Rs 5.80 billion has been set aside for provision of missing facilities in public sector hospitals while Rs 3.87 billion has been reserved for National Health Support Programme (NHSP). An amount of Rs 1 billion has been reserved in the budget for CT scan facility at THQs while MRI facility will be provided in DHQs with allocation of Rs 2 billion.

Under the development portfolio for healthcare, Rs 1.8 billion has been allocated for revamping of THQ Hospitals, Rs 1.16 billion for population welfare, Rs 1.6 billion for establishment of nursing and tertiary care hospitals, Rs 1.3 billion for revamping of DHQ Hospitals, Rs 1.6 billion for integrated reproductive, maternal new born & child health.

In the budget 2022-23, Rs 2 billion have been allocated for communicable disease programme and infection control programme. An amount of Rs 4 billion has been set aside in the budget for provision of family planning services.

In the development budget of Primary & Secondary Healthcare Department, Rs 21 billion has been proposed. An amount of Rs 3.10 billion will be spent for ongoing projects of provision of facilities like equipment and missing facilities. An amount of Rs 2.70 billion has been reserved for new projects.

For specialized healthcare & medical education department, Rs 151.50 billion have been proposed which is 93-percent high from current year’s allocation. An amount of Rs 2 billion will be spent on upgradation of medical colleges’ hostels while Rs 900 million will be spent on provision of ventilators in hospitals. A trauma centre comprising 70 beds will be established in Multan with a cost of Rs 500 million.

Moreover, a meeting on ‘Universal Health Insurance’ was held at Punjab Health Initiative Company with provincial minister Khawaja Salman Rafique in the chair, to review steps for health insurance. State Life Insurance Company officials briefed the provincial minister on the details of M-paneling and treatment facilities in more hospitals of the province.

Salman Rafique said, “We are trying to provide maximum free medical treatment to the people of Punjab through Universal Health Insurance. Health insurance is the brain child of Prime Minister Shahbaz Sharif. Both the PM and CM want to provide the best healthcare facilities to the people. We also want to provide bone marrow transplantation facility to the patients through this scheme.”

He said the State Life staff in selected public and private hospitals in Punjab must ensure better treatment of patients. Treatment of patients will be monitored through Universal Health Insurance by visiting selected hospitals of Punjab.

Copyright Business Recorder, 2022

ISLAMABAD: Three major revenue measures (direct taxes) of the Finance Bill, 2022, having accumulated revenue impact of Rs76 billion may be challenged in a court of law.

Former Chairman Federal Board of Revenue (FBR) Shabbar Zaidi told Business Recorder that the proposed tax on deemed income of non-productive immovable property to generate Rs30 billion and two percent Poverty Alleviation Tax on high earnings of all persons to raise revenue of Rs38 billion are expected to be challenged in courts.

Similarly, one percent Capital Value Tax on foreign immovable properties of Pakistani residents having revenue impact of Rs8 billion may also be challenged in courts.

He stated that a special tax for tax year 2022, other than income tax has been levied on all persons including companies and AOP’s where the income exceeds Rs300 million at the rate of two per cent of such income taxable under the Income Tax Ordinance, 2001.

The income for the purposes of this tax will be determined on taxable income other than brought forward depreciation, brought forward amortisation and brought forward losses. This provision will also be applicable for income determined under the Fourth, Fifth and Seventh Schedules for insurance, oil exploration and banking companies.

Tax in the similar nature was levied for the rehabilitation of displaced persons which was challenged before the Sindh and Lahore High Courts. Both the High Courts upheld the validity of this levy, and the matter is pending before the Supreme Court for decision.

According to him, the Capital Value Tax 2022 has been levied on the capital value of domestic and foreign assets under the Finance Bill, 2022. In case any immovable property falls within the purview of this CVT then is clearly invalid as the same has been devolved under the 18th Amendment to the Constitution. 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. Therefore, the Capital Value Tax 2022 on domestic and foreign assets can only be levied on moveable properties.

Zaidi raised questions 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 areas of any provinces. The citizens of Pakistan cannot be taxed on the capital value of immovable properties outside Pakistan by the Federal Government.

Moreover, Capital Value Tax was levied by the federal government in 1989 on transactions relating to the acquisition of immovable properties. This tax which was effectively a tax on immovable property was devolved by the 18th Amendment and then adopted by the provincial governments.

Talking about the taxation of non-productive immovable property, the former chairman FBR added that for the tax year 2022 wealth tax in an indirect method on immovable property situated in Pakistan has been reintroduced. Under the proposed system all immovable property valuing above Rs25 million (other than a house for own residence) will be subject to a deemed tax. The income for such deemed tax will be five per cent of the fair value of such property. The tax rate will be 20 per cent of such income. This means that under the new section a wealth tax at the rate of one per cent has been levied under this provision. Under Entry 50 of the Federal Legislative List of the Constitution the Federal Government is not entitled to tax capital value of immovable property.

Therefore, this tax is not constitutionally valid and will be struck down in courts keeping in view Entry 50 of the Federal Legislative List, Zaidi added.

Copyright Business Recorder, 2022

LAHORE: The Punjab government in its Annual Development Programme (ADP) for 2022-23 has earmarked a total sum of Rs480.13 billion for the education sector out of which only Rs52.5 billion was set aside for developmental projects.

According to the budget document, the provincial government has allocated Rs 421.06 billion for the school education sector out of which Rs 382.06 billion were set aside for current expenditures. Similarly, the government has allocated Rs 59.07 billion for the higher education sector. Of them, only Rs 13.50 billion were proposed for uplift projects.

For the school education sector, the biggest allocation of Rs 21.5 billion was proposed under the head of “imparting education through private participation” (PEF) which aimed at improving enrolment of children in schools amid lack of government infrastructure.

Similarly, the second largest allocation of Rs 4.8 was proposed for imparting education through outsourcing of public schools, followed by allocation of 3.84 billion for afternoon schools programmes.

As per the budget document, the government would spend Rs 500 million on the re-construction/revamping of dilapidated school buildings, Rs 1 billion on the construction of additional classrooms, Rs 500 million on provision of missing facilities, Rs 500 million on construction of shelter-less schools in Punjab and Rs 1.5 billion for Daanish Schools and Centres of Excellence Authority.

On the other hand, the government has allocated a total of Rs 59.07 billion in the ADP for the higher education sector. Of them, only Rs 13.50 billion were earmarked for uplift projects while the remaining Rs 45.57 billion were set aside for current expenditures.

The budget document says that the government will spent Rs2 billion on the establishment of Waris Shah University in Sheikhupura, Rs2bn on the establishment of Chunian University in district Kasur, Rs2bn on provision of classrooms along with furniture to graduate and associate colleges, Rs1.5bn on provision of missing facilities, Rs1.5bn on provision of laptops, Rs1bn on the establishment of Punjab University campus in Daska, Rs800 million on the establishment of Chemical Block at Khawaja Fareed University of Engineering & Information Technology Rahim Yar Khan and Rs700 million for Punjab Education Endowment Fund (PEEF).

Copyright Business Recorder, 2022

LAHORE: The Punjab government has proposed allocation of a total budget of Rs13.76 billion for forestry, wildlife and fisheries collectively for the year 2022-23 out of which Rs7.17 billion are proposed for the non-development and Rs6.59 billion for the development sector.

As per the budget documents, Rs1100 million development budget has been proposed for the fisheries sector to be spent on 14 ongoing and new schemes. Out of this Rs1,006 million has been proposed for 11 ongoing schemes and Rs93.321 million for three new schemes.

Similarly, Rs990 million has been proposed for 14 ongoing and new schemes in the wildlife sector with allocation of Rs740 million for seven ongoing and Rs249 million for seven new schemes.

A sum of Rs4.5 billion have been earmarked for 27 schemes of the forestry sector in the budget 2022-23 out of which 3.787 billion will be spent on ongoing schemes and Rs712 million have been earmarked for 10 new schemes.

Prominent schemes in these sectors are establishment of Dargai Gill forest Park at a proposed cost of Rs459.69 million, establishment of Biodiversity Hotspot for conservation of Rare Cholistan Desert Ecosystem at a cost of Rs370 million and strengthening of Protection Regime in Changa Manga Irrigated Plantation at a cost of Rs396.5 million. Besides, work will be carried on project of livelihood improvement and Green Job creation through ecosystem restoration in Punjab at a cost of Rs2 billion, revival of wildlife resources in Punjab under Green Pakistan Programme at a cost of Rs2.94 billion, cage culture cluster development project at Rs1.47 million, pilot shrimp farming cluster development project at a cost of Rs2.64 billion while the budget document shows that work will also continue on Ten Billion Tree Tsunami Programme during the year 2022-23.

Copyright Business Recorder, 2022