The government Wednesday unveiled an economic package to increase investment and growth of industrial sector in particular, and reversed some tax reforms introduced to broaden the tax base by its predecessors.
Finance Minister Asad Umar amid a noisy protest by the opposition in the National Assembly also criticised the policies of his predecessors and stated that their policies have left an economic morass for the successors ahead of unveiling the Finance Supplementary (Second Amendment) Bill 2019. The minister said that most daunting challenge for the new government was to deal with the balance of payment and budget deficit. The present government has taken structural reforms, and sought help from friendly countries to deal with the balance of payment crisis. He added that structural measures undertaken have started yielding results in the form of growth in exports and contraction in trade deficit contributing to considerable reduction in current account deficit.
The finance minister said that proposed measures would increase investment, revive growth of industrial and agriculture sector and propel the country on path to self-sufficiency.
The government, he said, has decided that tax on banks income for loans to specific sectors, small and medium enterprises, agriculture, and housing scheme is being reduced from existing 39 percent to 20 percent. There would also be allocation of Rs 5 billion for 'Qarz-e-Hasna' for low-cost housing. The government has also decided to abolish withholding tax on banking transactions for filers while non-filers have been allowed to purchase up to 1300cc vehicles by paying higher tax.
The minister said that there is improvement in external account with contraction in current account deficit, saying this is not sufficient and the present government will take difficult decision to fix the economy even if it has take an IMF programme for this purpose but would make sure that it is for once. "The economy can be improved only if there is a balance between income and expenditure," said the minister.
There is need to eliminate difference between the rich and the poor and for achieving real GDP growth, investment would have to be increased in the country, he added. The finance minister also announced to abolish advance tax on cash withdrawal from accounts of foreign remittances.
The finance minister said as part of ease of doing business, filing of withholding statement for private businesses is proposed to be reduced to twice a year from monthly basis and duty on diesel engine is proposed to be reduced from 17 percent to 5 percent. He said that minimum withholding tax on marriage halls is proposed to be reduced from Rs 20,000 charged on each function to Rs 5,000. The government, he stated, has decided to abolish import duty on news print industry.
Asad Umar said the government with the objective to increase the exports and industrial growth has decided to review some categories of customs and regulatory duties. He further stated that import duty on raw material for various sectors, auto vendors, engineering and other sectors is being reduced while investment in Special Economic Zones (SEZs) is being made easy by doing away anomalies.
The green field projects would be fully exempted from taxes and duties for five years period and similarly investment in units manufacturing renewable energy equipments would also be exempted from customs duty and sales tax, and exemption in tax is also for companies participating in national and international sports leagues.
The finance minister said that Super Tax on non-banking companies would be abolished from fiscal tax year 2020 and reduction of 1 percent in corporate income tax would continue while there is a proposal that tax on undistributed profit be done away from July 1.
The finance minister said that stock exchange can play a role to mobilise investment and stated the government has decided to abolish 0.02 percent withholding tax on trading. Additionally, he said, that capital losses carry forward has been allowed for three years. There is also a proposal of merging different slabs of taxes and duties on mobile phones while advisor to prime minister on commerce and textile will reveal measures to boost exports in a press conference, added the finance minister.
Umar said that the government has also decided to clear refunds of sales tax and income tax through promissory notes from the next month that would ease the liquidity problem of exporters. The minister said that the government and business community are standing against each other in the court on Gas Infrastructure Development Surcharge (GIDC) issue which is not good and the matter is being taken to the cabinet today (Thursday). Umar said that decrease in GIDC rate would contribute to slash urea price by Rs 200 per bag.
Earlier, Umar flayed the policies of previous governments and stated those who have ruled the country for last ten years and especially those in last five years, have left the economy in a very poor shape for winning the votes. The budget deficit was around 6.6 percent due to over spending in election year, knowing that the amount would be collected from the people to finance the slippage in deficit. With over Rs 500 billion deficit in power sector and over Rs 150 billion in the gas sector, the previous government left the deficit at around Rs 3 trillion for the successor to deal with. The finance minister said that previous Punjab government closed fiscal year with Rs 40 billion deficit while former KPK government ended fiscal year with a budget surplus of Rs 35 billion.