The federal government unveiled its fiscal budget for the year 2015-16 with a total outlay of Rs 4.3 trillion. With eyeing 5.5 percent growth, 7.5 percent raise in pays & pensions, a 25 percent increase in medical allowance, rise in minimum wage from Rs 12,000 to 13,000 and a slash in income tax on salaried class from 5 to 2 percent can be described as major factors that would have a direct positive impact especially on middle and lower middle classes that constitute over 80 percent of society. "No new tax" feature of this finance bill can make commoners heave a sigh of relief. However, it is the rich class that has been targeted this time as revised tax percentage has been introduced in the budget, with an approach to meet the tax collection targets for the next fiscal. This approach is dominant in almost all sectors. Even the corporate companies are not spared this time as 20 percent increase has been made in tax credit for the companies enlisting in any registered stock exchange. Similarly, the capital limit for small companies has been enhanced to Rs 50 million in the budget.
On the power sector, the threshold for tax on domestic electricity bills has been decreased from Rs 0.1 million to Rs 75,000. This would not only contribute towards rationalizing the usage of electricity by domestic consumers but also generate additional revenue.
If a fair review of this finance bill is made, it establishes the fact that the main focus of relief is the general masses. But at the same time, attracting more investments in diverse business sector areas are, of course, is the core of the fiscal budget. Driven under the approach of introducing investment-friendly policies, this time the incumbent government has launched both long-term and mid-term initiatives.
Under the mid-term policies, that would continue till 2018, exemption of profit has been proposed for electricity transmission projects for a period of 10 years, but the condition is that these projects are established before June 30, 2018. Increase in limit of tax credit to Rs 1.5 million for new investment in shares of companies is another incentive to fetch more investors. Similarly, a 20 percent increase in tax credit for companies enlisting in any registered stock exchange has been proposed in the fiscal budget.
According to the Economic Survey of Pakistan 2014-15, inflation has reached the lowest level of the current decade with a remarkable upward trend in foreign exchange reserves. This has led to the central bank to slash discount rate to 7 percent, the lowest in last four decades.
In order to promote and popularise the usage of alternative energy resources, a five-year exemption has been proposed to companies manufacturing equipment, plant and items related to solar and wind energy. This could be termed a positive initiative in the right direction, which must continue in coming years. Realizing the fact that the salaried class has been regular taxpayer, the government, as a recognition, has slashed 2 percent from the existing five percent income tax on salaried class earning Rs 400,000 to 500,000; while for non-salaried with same income, the tax rate has been reduced to 7 percent.
In the mobile phone sector, again the focus was the poor class as the sales tax on cheap imported mobile phones has been slightly revised upward as compared to costly smart phones. Similarly, the mark-up on housing loans for construction or buying a house has been allowed in the budget as deduction against income up to 50 percent of taxable income.
Minimum tax on builders for business of construction and sale of residential and other buildings has been exempted till June 30, 2018, besides, giving tax exemption to supply of bricks and crushed stone for three years. The Halal food has emerged as a potential source of earning foreign exchange. The government is aggressively taking initiatives to promote Halal foods industry in the country and grasp export market share in the world. As a step forward, four-year tax exemption for 'halal' meat companies has been offered if they obtain 'halal' certification by end of 2016.
As part of its policy of reconciliation and removing the sense of deprivation especially among the smaller provinces, the federal government has offered a major incentive in shape of five-year Income Tax holiday and turnover tax on all new manufacturing units set up in Khyber Pakhtunkhwa for next three fiscals.
As an initiative to further benefit the people of Gilgit-Baltistan, the government has not withdrawn wheat subsidy for the area as Rs 6.05 billion would remain intact for the fiscal year 2015-16. No new tax has been proposed on cooking oil, vegetable ghee, fertiliser industry, local production of cement and milk, however, tax has been raised only on packed yogurt and cheese which are not the poor consumers' food items. Similarly, minimum wage of labour class (not pensioners) has gone up from Rs 12,000 to Rs 13,000; allocation for Benazir Income Support Programme (BISP) has been increased to Rs 102 billion, that would positively impact the poor class in more and more areas.
As far as the government initiatives are concerned, the budget is going to give relief to the middle class of society. Since no new tax has been proposed in the federal budget, the opposition forces have little to criticise about the government initiatives. But even then they fear that prices especially of food items would spiral high with the announcement of federal budget. This apprehension does not carry weight as the month of Ramazan has started. As per routine, prices of food items, vegetables and fruits skyrocket. After the 18th constitutional amendment, the federal government has very little role in controlling food prices as the provinces have established their own price control mechanism. The federal government can give guidance in this regard, but the provincial governments are bound to control prices, launch operations against hoarders and black-marketeers.
This is a point of high regret that on the occasions of Christmas and new year the prices of food items, dresses and many other articles are slashed with the intention to facilitate even the middle and lower middle classes. While in our Muslim society hoarders and black marketeers flex their muscles to rob consumers during Ramazan through raising prices without any fear of legal action from the relevant authorities.
Amid these negative market trends, the provincial governments need to get tough against those involved in creating food shortages and hike prices, etc. This is the only option available otherwise the federal government's initiatives to benefit the general masses won't deliver.
(The views expressed in this article are necessarily those of the newspaper)
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