ISLAMABAD, May 31: Finance Minister Abdul Hafeez Shaikh presents on Friday his third and the PPP-led coalition government’s fifth budget in the National Assembly with additional taxation measures of about Rs150 billion, about Rs40 billion reduction in subsidies and an overall fiscal deficit of slightly over Rs1.130 trillion or 4.9 per cent of the GDP.

With elections in mind, the budget will offer a sweetener for government employees in the shape of 20-25 per cent increase in salaries and pensions and medical allowance depending on the final decision of the cabinet. It will enhance the federal excise duty on foreign air travel expenses, double the general sales tax on sugar from the existing 8 per cent and increase gas development cess to industrial, fertiliser and power sectors.

Informed sources said that a major part of the additional revenue would come in the shape of administrative measures that were anticipated to generate about Rs85 billion. About Rs10 billion would come as a result of increase in tax rates on sale of sugar, about Rs50 billion from gas cess and about Rs5 billion through other minor adjustments.

The government is expected to increase the annual income tax exemption to Rs400,000 and reduction in the number of slabs to 5 from the existing 17. The real additional yield in tax would, however, take place in the readjustment of income tax slabs as higher-end income earners would be subjected to increased tax rates and they would end up paying more than the current absolute tax amounts.

With an economic growth rate target of 4.3 per cent, the tax revenue for the next year has been estimated at about Rs2.338 trillion against the current year’s target of Rs1.952 billion. The revenue target for the current year is likely to be missed by a margin of about Rs30 billion.

As a result of postponement of expected inflows from coalition support fund and proceeds of the third generation telecom licences, the non-tax revenue for next year has been increased to about Rs737 billion from previous estimate of about Rs552 billion. About Rs185 billion is expected to come from these two heads. The total revenue is, therefore, estimated at about Rs3.165 trillion.

The overall size of the federal budget is likely to exceed Rs3.025 trillion, owing to about Rs161 billion additional demand generated by the prime minister and the president to offer benefits to agriculturists and development schemes for lawmakers in the wake of forthcoming elections. Special schemes are also being launched for the youth, details of which would be unveiled in the budget speech.