• Tax rates on tobacco sector raised to collect additional Rs18bn
• Passenger, goods transport vehicles made capital value tax-exempt
• Sales tax exemption on natural gas subsidy restored
ISLAMABAD: While withdrawing the budgetary fixed tax scheme for traders, the government on Monday increased tax rates to collect additional Rs18 billion from tobacco sector to meet lateral demand of the International Monetary Fund (IMF) before it clears Pakistan’s bailout package on August 29.
Through the Tax Laws (second amendment) Ordinance 2022, issued on Monday, the government has also reversed several revenue measures announced in the last budget in a bid to facilitate different sectors and taxpayers and comply with some international obligations.
In the budget 2022, the government had introduced the fixed tax scheme for retailers (other than tier-I retailers) on commercial electricity connection with an aim to collect Rs42bn alone from these documentation measures. However, the FBR has now withdrawn fixed tax scheme retrospectively from July 1 this year.
The previous tax regime for retailers, which was prevailing prior to the Finance Act, 2022, has now been restored.
Through the ordinance, federal government has been empowered to make any future scheme and determine its modalities, including tax rate or amount and the date when it will be implemented for retailers to collect tax on commercial connections.
Till the new scheme is announced by the federal government, the previous regime prior to the Finance Act will remain in force. The ECC in its next meeting will approve the new scheme with new rates to charge variable taxes to traders to collect Rs27bn from the retail sector as committed with the IMF.
To compensate the revenue loss from the scheme from traders, the government has increased federal excise duty (FED) on un-manufactured tobacco to Rs390 per kg from Rs10. This will hit the poor farmers of tobacco.
At the same time, government raised FED on Tier-1 cigarettes to Rs6,500 from Rs5,900 per 1,000 sticks and that on Tier-2 to Rs2050 from Rs1850.
Through the ordinance, the government did take measures to remove difficulties of taxpayers and corrective measures were also taken to rationalise certain taxes and rates. As per the ordinance, advance tax rates on passenger transport vehicles have been rationalised. The government exempted vehicles of passenger and goods transport and of foreign diplomats and missions from capital value tax (CVT).
In the budget, the government had introduced CVT on all types of motor vehicles either having engine capacity exceeding 1,300cc or 50kWh in case of electric vehicles. The government restored exemption, retrospective from July 1, on allowance and perquisite paid or allowed outside Pakistan by the government to its citizens for services rendered outside the country. This was withdrawn through the Finance Act 2022.
At the same time, the government restored exemption from July 1 on the income derived by Kuwait Foreign Trading Contracting and Investment Company or Kuwait Investment Authority being dividend of Pak-Kuwait Investment Company in Pakistan as per sovereign agreement.
The government restored sales tax exemption on subsidy provided by the federal or a provincial government on natural gas to consumers, including RLNG under the Sales Tax Act 1990. The government also restored sales tax exemption from July 1 on local supply of single cylinder agriculture diesel engines of three to 36 HP. This exemption was withdrawn vide Finance Supplementary Act 2022.
Pakistan has completed all conditions and prior actions required by the IMF under the 7th and 8th reviews for the disbursement of $1.18bn and complied with an additional funding arrangement of $4bn from Qatar, Saudi Arabia and the United Arab Emirates and re-rolling of payable debt by China.
Published in Dawn, August 23rd, 2022
THE recently announced rollback of a measly fixed monthly tax on traders shows how the political interests of ruling parties compromise tax reforms and trump decisions that are crucial to fix a broken economy.
Days after Finance Minister Miftah Ismail withdrew a new fixed tax on retailers consuming up to 150 units of electricity a month, he was forced by PML-N vice president Maryam Nawaz to do away with the new regime for the entire retail sector to protect the interests of the party’s core constituency in Punjab.
Wholesalers and retailers constitute 19pc of the economy but pay a paltry Rs6bn in taxes.
The fixed tax regime was introduced in the 2022-23 budget on traders’ electricity consumption to raise their contribution to Rs42bn and document the economy.
It isn’t the first time that a government has succumbed to pressure from the retailers. In fact, this unfair move has drawn valid criticism as it coincides with the drastic increase in income tax on salaried people and corporates as the government endeavours to meet IMF-mandated revenue targets.
The fixed tax regime in itself was a major concession to traders since it represented the ‘full and final settlement’ of their income tax and GST liability.
Read: Putting the squeeze on everyone’s income, in every sector
Mr Ismail says its withdrawal will cause a revenue loss of ‘just’ Rs7bn as he plans to increase traders’ contribution to Rs34bn by revising up their income tax and sales tax rates under the old tax regime. Yet, many believe, correctly, that those already paying their share of taxes will end up paying even more to make up for the revenue loss.
The unfairness built into our tax system is the main factor holding our tax-to-GDP ratio at 9.2pc, one of the lowest globally, causing successive governments to accumulate huge fiscal deficits and massive debt, besides creating distortions in the economy.
Despite pledges made by various administrations, no government has been able to expand the tax net and boost the country’s tax-to-GDP ratio due to the political clout wielded by untaxed and undertaxed sectors like retailers. Instead, the share of indirect taxes has drastically been increased while spiking the tax burden for existing taxpayers to meet the state’s ever-increasing revenue requirements.
It is time for a government grappling with an unprecedented economic crisis to realise that business as usual will not fix its fiscal problems; whether it likes it or not, milking those who are already paying taxes will no longer help.
Published in Dawn, August 8th, 2022
KARACHI: Finance Minister Miftah Ismail has announced a plan to reduce the fixed tax rate to Rs3,000 for non-filers from Rs6,000 on electricity bills, besides exempting consumers whose bills were up to 150 units.
A press release in this regard was issued by the Karachi Chamber of Commerce and Industry (KCCI) while referring to a zoom meeting held between the Finance Minister, Chairman Businessmen Group (BMG) Zubair Motiwala, President KCCI Muhammad Idrees and small traders on Monday night.
Several trade bodies have been holding protests against the Rs6,000 tax introduced in the Finance Act 2022.
The Finance Minister promised to remove all the other taxes from the electricity bills once the fixed tax regime is activated to avoid double taxation. Only GST on electricity consumption will be applicable and at the year-end, they will be required to submit a document to intimate the tax authorities about the payment of taxes during the year. He also agreed to consider the demand of small traders when increasing the threshold.
During the session, KCCI leadership expressed concerns over the high rate of taxes being charged on electricity bills. They argued that commercial consumers are already paying multiple taxes on their monthly electricity bills, including fuel adjustment surcharge, electricity duty, income tax, general sales tax, extra GST, and further GST.
The KCCI leadership urged the government to accept the genuine demands of small businessmen who are already struggling to make both ends meet and increase the suggested threshold of 150 units of electricity consumption from the fixed tax regime and remove other taxes from electricity bills.
Published in Dawn, August 3rd, 2022
• Miftah says Fund going through ‘internal approval processes’
• Insists no more outstanding issues between both sides
ISLAMABAD: From Pakistan’s perspective, talks with the International Monetary Fund (IMF) are complete, and it is just the internal process of the crisis lender, which would come out with a formal announcement on the successful completion of the seventh and eighth quarterly reviews of a stalled loan programme.
“Our talks with the IMF are complete and they are now going through their internal approval process,” Finance Minister Miftah Ismail told Dawn, adding that the announcement should now come from the Fund.
He said the IMF had given the Memorandum of Economic and Fiscal Policies (MEFP) to Islamabad, which had been responded to. “The IMF accepted some of the changes we proposed and did not agree on many others. After discussions, finally, we have given our consent to an MEFP acceptable to the IMF,” he said, adding that there were no more outstanding issues between the two sides.
The IMF’s resident representative in Islamabad, Esther Perez Ruiz did not respond to requests for comment.
Pakistan entered the IMF programme in 2019, but only half the funds have been disbursed to date as Islamabad has struggled to keep targets on track.
The last disbursement was in February and the next tranche was to follow a review in March, but the government of ousted prime minister Imran Khan introduced costly fuel price caps, which threw fiscal targets and the programme off track.
The new coalition government has removed the price caps, with petrol and diesel prices going up by as much as 66pc and 92pc in over a month.
Sources said Pakistan had now accepted, completed or set in motion all conditionalities and prior actions set by the IMF, and some of them would remain under implementation as usual as per the schedule of structural benchmarks.
The authorities expect a formal announcement from the IMF about the staff-level agreement anytime to be followed by its approval by the executive board early next month along with the disbursement of funds.
Read: Up the IMF creek
The sources said the IMF dialogue this time had been tougher than usual and its staff repeatedly raised queries on settled issues. Apparently, Pakistan had become a rolling stone between the policies of the two biggest shareholders — the United States and China.
On June 21, Pakistan’s authorities and the IMF staff mission reached an understanding on the current fiscal year’s federal budget to revive the stalled loan programme after authorities committed to generating Rs436 billion more taxes and gradually increasing the petroleum levy to Rs50 per litre.
As a result, the IMF staff in a statement acknowledged that important progress had been made over the federal budget. Based on this, Pakistan provided written commitment from the provinces to provide Rs750bn in cash surplus to the Centre to contain fiscal deficit within 4.9pc of GDP and help generate a Rs152bn primary fiscal surplus.
Pakistan is now also required to increase the electricity tariff by Rs7.91 per unit besides direct pass-through of monthly fuel cost adjustments in a timely manner.
The revised MEFP is based on budgetary measures approved by the parliament envisaging over Rs1.716 trillion (2.2pc of GDP) of fiscal adjustment, mostly through taxation, including a 10pc super tax on 13 large industries and personal income tax covering monthly incomes above Rs50,000.
This is on top of a fixed tax regime for sectors like retailers, traders, jewellers, builders, restaurants, automobile and property dealers and so on.
This is the biggest fiscal adjustment in a single year that would help turn about Rs1.6tr primary deficit — the difference between revenues and expenditures excluding interest payments — during the current fiscal year into a Rs152bn surplus next year.
Under the structural benchmarks, the government started imposing the petroleum development levy from July 1 at the rate of Rs10 per litre on petrol and Rs5 per litre on high-speed diesel and other products. The levy will now keep going up at the rate of Rs5 per month to a maximum of Rs50.
The electricity rates would be notified to go up by Rs3.50 per unit in July and August each and about Re1 per unit in the September-October billing cycle.
Under the revised MEFP, the 39-month IMF loan programme will be extended by one year to September 2023 and enhanced in size to $7bn instead of the $6bn original size, of which $3bn has been disbursed so far.
Officials said the toughest part of the stabilisation measures had been completed. Pakistan was now out of the default threat but would have to tread a responsible taxation and expenditure path to ensure fiscal and monetary targets throughout the programme period. Any missteps could reverse the hard-earned gains, they said.
While the government had already introduced Rs1.25tr worth of fiscal adjustment in its original budget presented in the National Assembly on June 10, this was not acceptable to the IMF staff. The government then took additional taxation measures of about Rs466bn on June 24 to reach an understanding with the Fund for a bailout necessary in the face of a balance-of-payments crisis.
Published in Dawn, July 14th, 2022
The ‘International Monetary Fund-dictated’ budget 2022-23 has come into force after the parliament passed it without much ado and the president has signed the finance bill into law. The Rs9.579 trillion annual federal budget carried an unprecedented fiscal adjustment of more than Rs1.75tr or 2.2 per cent of GDP in a single year. It contained new taxation measures of almost Rs1.1tr or almost 1.4pc of GDP.
The single largest item on the non-tax revenue side stands out to be the Rs855bn — up from Rs750bn in the June 10 budget speech — petroleum development levy (PDL). This would be recovered, under a tight implementation schedule of the IMF, in a manner that it grows every month on each litre of every product of petroleum, to reach a maximum rate of Rs50. It has to be kept in mind that last year (2021-22), the total collection under PDL stood at Rs135bn against a target of Rs610bn as the then government reneged from its commitment to the IMF.
The result is a tight straight jacket from the IMF. Power base tariff should go up by almost Rs8 per unit (almost 50pc) to Rs24 per unit in three instalments between now and October. Finance Minister Miftah Ismail also has to produce before the IMF a memorandum of understanding from provinces for a cash surplus of Rs750bn. The four provinces have mostly presented their deficit budgets. Another IMF requirement is further policy tightening in its upcoming meeting.
The Federal Board of Revenue (FBR) would be required to collect about Rs7.47tr. The consolidated budget deficit would, with the help of the Rs750bn provincial surplus, then be limited to 4.9pc of GDP or Rs3.8tr. Interest payments alone would eat up more than Rs3.95tr or 40pc of the federal budget. But a more important benchmark to be delivered to the IMF would be the primary budget surplus (fiscal deficit excluding interest payments) of Rs153bn (0.2pc of GDP) during the year, against Rs1.6tr or 2.4pc of the primary deficit last fiscal year.
Therefore, the successful completion of IMF’s 7th and 8th reviews would then entail a price tag of almost $1.9bn in about two months. This is a sine qua non to unleash about $30bn worth of total external loans for budget support during the current year — almost a question of life and death for a nation that needs almost $40bn this year to service existing external debt and cover import bill with just over $10bn in hand at present.
With less than $8bn programme and project loans, about $20bn have to be arranged from ‘other loans’ for budget support. These include about $3bn from the IMF, about $3.8bn from Saudi Arabia including $3bn in safe deposit and $800 million in oil facility. Jeddah-based Islamic Development Bank would be chipping in with $1.2bn, China’s State Administration of Foreign Exchange (SAFE) Deposit is targeted at $4bn, almost $7.5bn from commercial banks and $2bn through Eurobond.
While all these projections are based in good faith there are a series of lurking risks on the horizon that could upset the budget and macroeconomic outlook in the medium terms. Finance Minister Miftah Ismail has identified some of them as political uncertainty, the Russia-Ukraine war, higher provincial deficits and significant losses and debts of state-owned enterprises (SOEs).
Unless the IMF terms and their implementation under a tight schedule are ensured possible slippages could occur in expenditures, because of higher subsidies, interest payments and revenue collection owing to import and demand contraction, posing substantial risks to economic growth and sustainability of fiscal and monetary projections.
The Ministry of Finance (MoF) has conceded before the parliament that the main reason behind the power sector losses includes the high cost of generation, attributable to costlier technologies and poorly designed contracts, resulting in exorbitant profits for private investors and front-loading of debt repayments during the first ten years of plant operations, above-average transmission and distribution losses and below-average recoveries of electricity bills. As a result, the power sector is the largest recipient of government subsidies at present.
Fuel imports — those of oil, gas and coal — constituted a large portion of Pakistan’s import bill and their prices affected the prices of various goods and services as they fed into the costs of production through multiple channels, including transportation costs and energy costs, etc.
“Volatility in prices of these fuels is a major reason behind the volatility in inflation rates which, in turn, contribute to volatility in interest rates and exchange rates,” according to the Ministry of Finance. Its adds that an increase in the cost of imported fuels — whether due to rising global prices or a falling rupee, or both — could affect the wider economy in the form of lower GDP and revenue growth besides higher current account deficit, inflation, interest rate, the interest cost, fiscal deficit and public debt.
The risks get more pronounced given the fact that there are little or no fiscal buffers or risk management framework for dealing with adverse shocks in the prices of imported fuels. Likewise, the “strict fiscal discipline” on the part of provinces and, resultantly, their cash surplus will be a crucial component in reducing the country’s overall consolidated fiscal deficit.
“In the absence of legally binding commitments from provinces, the risk remains high that the projected provincial budget surpluses may not materialise,” the MoF says and if the FBR fails to meet the revenue target the provinces would have a valid excuse not to give cash surpluses.
Losses and excessive debt of state-owned enterprises (SOEs) have necessitated costly government bailouts in the form of subsidies, grants, loans and guarantees. The fiscal cost of running the loss-making SOEs has been quite high and has worsened an already fragile financial position of the government. The conflict between Russia and Ukraine is also a risk factor to Pakistan’s positive economic outlook.
Domestic political uncertainty is another risk factor on the economic team’s radar as it could result in macroeconomic imbalances. Monetary tightening and fiscal consolidation measures to reduce the demand pressures would slow down economic growth this year. Pakistan’s fiscal stance is also vulnerable to commodity prices, especially those of oil, and fluctuations impact revenues on account of the petroleum development levy and the expenditure side through fuel subsidies.
Published in Dawn, The Business and Finance Weekly, July 4th, 2022
MUZAFFARABAD: The Azad Jammu and Kashmir (AJK) Legislative Assembly on Thursday approved Rs163.7 billion budget for the fiscal year 2022-23 without any disruption in the absence of the 20-member opposition.
AJK Finance Minister Abdul Majid Khan presented one after the other demands for grant of Rs135.2bn for recurring expenditures and Rs28.5bn for developmental activities in the house presided over by the ruling PTI’s Mohammad Rafique Nayyar as member of the panel of chairmen.
Since the opposition continued its boycott of the budget session, it was smooth sailing for Mr Khan as he did not face any cut motion.
The house also accorded approval to the revised budget for 2021-22 to the tune of Rs135.7bn, including Rs22.8bn for developmental activities.
PM Ilyas rebukes bureaucracy; monetary assistance given to Zakat recipients raised by Rs9,000
Demands for grant for additional expenditures beyond the approved budget for fiscal years 2019-20 to 2020-21 were also approved.
During the earlier part of the session, presided over by Deputy Speaker Chaudhry Riaz Gujjar, Prime Minister Sardar Tanveer Ilyas delivered an overlong speech, during which he made dozens of announcements about different sectors “with a view to ameliorating the living standards of the people of state”.
“I have no qualms about saying that Azad Kashmir will soon undergo a real change and people will see their dreams translated into reality,” he asserted.
He announced an increase of Rs1,500 per person in the monthly subsistence allowance of post-1989 Kashmiri refugees and added that 1,303 independent houses as well as a residential complex would be built for their rehabilitation with the assistance of the federal government. He said houses would also be built with the help of private sector and donors for the deserving families of martyrs from army and police.
The prime minister’s voice literally choked when he referred to the paltry sum of Rs3,000 given to Zakat recipients once a year and said it would be raised to Rs12,000. He also announced increasing the amount of dowry fund for poor girls to Rs75,000.
Announcing establishment of Quran academies in Muzaffarabad, Mirpur and Bhimber, PM Ilyas said vacant posts of muftis would be filled during next year. He also announced providing free electricity to mosques holding five prayers a day.
Vowing to improve the education sector on modern lines, the PM said that 86 primary, 56 middle and 61 high schools and 45 intermediate colleges would be upgraded.
The government would provide 1,000 scholarships to deserving students and impart vocational training to 1,200 people in the first phase in Punjab for promotion of cottage industry, he added.
While vowing to improve the condition and services in state-run hospitals, he took strong exception to frequent strikes by doctors and warned that “murder and terrorism charges would be framed against the doctors in the event of the death of any patient during their strike”.
Bureaucracy rebuked
When the prime minister arrived in the house, he was irritated to see the secretaries’ gallery almost empty. He retired to his chamber and returned after 15 minutes when almost all secretaries had dashed and seated in the gallery.
Without mincing words, the prime minister asked the bureaucracy to “mend its ways” instead of trying to let down the government.
“A government servant should not try to behave as Plato,” he said and warned: “Those daring to challenge the orders of the prime minister or ministers will repent at the end of the day.”
“We have shown a lot of tolerance and those who consider it as our weakness are mistaken… No one but this house is sacred and supreme and no one can challenge the authority of this house,” he said.
Published in Dawn, July 1st, 2022
GILGIT: The Gilgit-Baltistan (GB) Assembly on Thursday approved the budget for the fiscal year 2022-23 (FY23) with an outlay of Rs119.3 billion.
Meanwhile, taking to the social media platform Twitter, the Office of the GB Chief Secretary in a series of tweets said that the creation of a revenue authority in GB was unanimously supported in the session.
“Today during the concluding session of the budget for the year 2022-23, the assembly of Gilgit-Baltistan has taken a giant step towards self-sufficiency by unanimously supporting the creation of Gilgit-Baltistan Revenue Authority (GBRA). Gilgit-Baltistan has a huge potential for collection of sales tax on services because of its booming tourism industry and other affiliated service based industries like transport, food etc,” the official tweeted. However this potential wasn’t maturing due to absence of an effective revenue collection system.
“GBRA will perform this function and immediately after its creation, revenue collection of billions of rupees can be envisioned. For GB this revenue collection potential can be a game changer. Today all parliamentarians supported the creation of GBRA across party lines. GBRA will ensure that the incidence of taxes on local population is minimised and its primary focus will be to raise tax from tourism and its associated industries. Goal to make GB self-sufficient,” it added.
The GB annual budget was presented in the GB Assembly on Monday and was deliberated upon on Wednesday and Thursday. The sessions were chaired by Deputy Speaker Advocate Nazir Ahmed.
GB Assembly members from the opposition and treasury members debated the proposed budget on Wednesday and Thursday and got consensus to talk with the federal government on budget deficits and request the central government to increase funds for GB to overcome the Rs7bn deficit in the FY23 budget.
A total of 15 cut motions tabled by the opposition and Treasury members were approved.
Published in Dawn, July 1st, 2022
https://www.dawn.com/news/1697454/sales-tax-on-apis-reduced-to-1pc
KARACHI: In the absence of elected City Council, Karachi Administrator Barrister Murtaza Wahab passed the budget of the Karachi Metropolitan Corporation for the financial year 2022-23 with a total outlay of Rs32.195 billion.
The Rs16.12 million surplus budget was presented to the administrator by KMC’s Financial Adviser Ghulam Murtaza Bhutto through a council resolution. Later, the administrator presented the budget at a press briefing here at Khaliqdina Hall.
According to the budget book, total receipts were expected to be Rs32.212bn against total expenditures of Rs32.195bn.
The receipts including current receipts of Rs26.61bn, capital receipts of Rs594m and the district annual development programme (ADP) funds of Rs5bn.
No new taxes imposed; dues payable to KMC by KE estimated at Rs1.85bn
The grant from the Sindh government including Octroi Zila Tax (OZT) share would be Rs18.6bn and in terms of current and arrears from the provincial government in the head of Entertainment Tax, Rs200m was expected to be transferred to the KMC.
Liabilities of Rs1.85bn on the K-Electric were also expected to be given to the KMC during the next financial year.
Similarly, Rs1.477bn revenue is expected from land enforcement, estate, katchi abadi, project director Orangi and charged parking.
In terms of repair and maintenance, Rs271.38m was earmarked while development projects are estimated at Rs2.72bn.
In the budget for the next financial year, Rs8.677bn had been allocated for pension fund, miscellaneous expenses and bailout package.
Similarly Rs5.756bn was fixed for medical and health services; Rs 3.943bn for municipal services; and Rs2.079bn for engineering department.
In the budget of next fiscal year, an amount of Rs1.184bn was fixed for parks and horticulture department; Rs973.45m for culture, sports and recreation; Rs898.49m for finance and accounts (MUCT); Rs184.23m for law department; and Rs888.58m for the CLICK project.
An amount of Rs500m was allocated for development works including improvement of roads, sidewalks, sewerage line, bridges and intersections.
Similarly, Rs250m was earmarked for management of street lights on major roads and Rs172m for improvement of infrastructure.
An amount of Rs115.68m was set aside for purchase of ventilators and other medical devices in KMC hospitals; Rs100m for development of KMC parks; Rs85m for improvement of Karachi Zoo, Safari Park and purchase of new animals.
The KMC has also allocated Rs80m for plantation of trees on major thoroughfares.
No new tax imposed
Administrator Wahab said that no new tax was imposed in the budget. “The Pakistan Peoples Party is striving to serve the citizens as per the pragmatic vision of its chairman Bilawal Bhutto-Zardari,” he added.
Barrister Wahab said that a solar energy project at Kidney Hill Park would be operational by the end of July to deal with the energy crisis. He said the project would generate 365,000 units of electricity to illuminate street lights in the city.
He said that efforts were being made to improve KMC’s revenue system so that the next mayor would not have to face paucity of funds.
He said that renovation of 20 more parks in different areas will be completed in the next three months.
He said that the fire brigade had been connected with the Rescue 1122 emergency system, adding that in the next phase, 15 helpline will also be connected.
Meanwhile, Municipal Commissioner Afzal Zaidi while referring to the preparation of the budget said that this year the focus had been on further improving the recovery targets.
He said that in terms of development work, the target has been achieved 100 per cent.
Published in Dawn, June 30th, 2022
QUETTA: The Balochistan Assembly has passed a Rs598 billion budget for the next fiscal year without facing any objection from either side of the aisle.
The session, which started one hour and 45 minutes behind schedule, was presided over by Deputy Speaker Sardar Babar Khan Musakhail.
Balochistan Finance Minister Sardar Abdul Rehman Khetran presented 102 demands for the draft in the house one by one. Of all, 60 demands for the draft of over Rs351.2bn belonged to non-development expenditure, while 42 demands for the draft of over Rs246.9bn were for the development programme.
Opposition members belonging to BNP-Mengal, JUI-F and PkMAP were present in the house when Sardar Khetran moved the demands for the draft, but none of them submitted any cut motion, which enables assembly members to oppose a specific allocation in budget proposals.
No cut motions presented in house for only second time in province’s history
It was the second time in the Balochistan Assembly that no opposition member submitted a cut motion or opposed the demands for the draft after 1985, when military dictator Gen Ziaul Haq had conducted nationwide elections on a non-party basis and there was no opposition in the provincial assembly.
However, in yesterday’s session, opposition members — who are coalition partners in the nine-party alliance government at the Centre — walked out of the assembly on the issue of power outages but later returned to the house.
Opposition members expressed their satisfaction with the budget presented by Mir Abdul Qudoos Bizenjo-led coalition government in the province and described it as a “balanced document”. They acknowledged that uplift funds were allocated to all districts and no constituency was ignored in the Public Sector Development Programme (PSDP) for the next financial year.
The treasury benches also welcomed the development budget, which they said was based on the development of the entire province, whereas maximum development schemes identified by MPAs in their constituencies were included in the PSDP.
‘People-friendly’
Balochistan Chief Minister Bizenjo said the budget passed in the assembly was prepared with the vision to develop the entire province, as it belonged to the people of the province and not only the ruling party and its allies.
He said a parliamentary committee of the province would visit Islamabad to resolve power and gas crises and issues pertaining to the development affected by insurgency.
“We will ask Islamabad to bear our burden of the expenditure we are spending on law and order,” Mr Bizenjo said. He said the provincial government would make all efforts to prove the budget “people-friendly” by providing them with maximum relief.
Budget allocations
In the development budget, unanimously approved by the house, the government has made the highest allocation of Rs49.69bn for the communication and works sector to construct a road network in the province. Another large amount of Rs48.33bn has been allocated for pension payment.
The provincial government will spend Rs63.44bn on secondary education, while Rs39.64bn has been allocated for federal-funded projects. Another Rs14.9bn has been included in the PSDP for foreign-funded projects.
The provincial government will spend Rs23.99bn on police and Rs14.9bn on Levies Force. The government has allocated Rs18bn for capital investment and will also approve Rs6.81bn for internal trading.
Besides, Rs22.87bn will be spent on public health engineering. The house has also approved Rs23.54bn for improving health sector facilities. The government will also provide Rs18.46bn for the local government in 2022-23.
Published in Dawn, June 30th, 2022
The National Assembly (NA) on Wednesday approved the passage of the Finance Bill, 2022, commonly known as the federal budget, with a majority vote after taking it up clause by clause.
There was virtually no opposition to the passage of the bill — similar to last year.
The passage of the budget for the fiscal year 2022-2023 brings the government one step closer to the revival of the stalled International Monetary Fund (IMF) programme.
On June 10, Finance Minister Miftah Ismail had presented the budget with an outlay of Rs9.5 trillion, the government had avoided taking unpopular tax measures for fear of political backlash. However, the government slowly had to roll back several relief measures after the IMF asked Islamabad to take practical measures to stabilise the economy.
Minister of State for Finance and Revenue Dr Aisha Ghous Pasha presented the Finance Bill, 2022 during today's session which was chaired by NA Speaker Raja Pervez Ashraf.
The session, which commenced after more than a two-hour delay, began with Pasha asserting that the budget for the new fiscal year was not changed at the request of the International Monetary Fund (IMF).
She maintained that 80 per cent of the amendments were directly related to taxes. "Our aim is to tax the rich and to give relief to the poor," she said.
She went on to say that the coalition government was implementing the agreements the former PTI government had inked with the Fund.
After the state minister's remarks, the NA began the clause by clause approval of the finance bill.
During the process, the lower house of parliament approved the amendment to impose a Rs50 levy on petroleum products.
Commenting on this, Finance Minister Miftah Ismail said that currently no levy had been imposed on petroleum products.
“The government has received permission from the house to impose a petroleum levy of Rs50/litre on petroleum products. At the moment, there is no consideration and hope of immediately going up to this figure," he said.
The NA also approved amendments for collecting sales tax from traders through electricity bills and imposing a 5pc tax on the services of IT and software consultants.
An amendment to take back the relief provided to the salaried class was also approved. Under the new rates, no tax will be imposed on those earning less than Rs0.6m per year. Meanwhile, those earning between Rs0.6m to Rs1.2m will have to pay a fixed tax of 2.5pc of the amount exceeding Rs0.6m.
Those earning Rs1.2m to Rs2.4m will have to pay a fixed tax of Rs15,000 plus 12.5pc of the amount exceeding Rs1.2m. Where taxable income exceeds Rs2.4m but does not exceed Rs3.6m the tax rate is Rs136,000 plus 20pc of the amount exceeding Rs2.4m.
Those earning between Rs3.6m to Rs6m will have to pay Rs405,000 plus 25pc of the amount exceeding Rs3.6m. For income between Rs6m to 12m, the tax will be Rs1m plus 32.5pc of the amount exceeding Rs6m. Where taxable income exceeds Rs12m, the tax is Rs2.9m plus 35pc of the amount exceeding Rs12m.
Further, the NA approved an amendment for imposing a super tax between 1-4pc on the income of those earning between Rs150m to Rs300m. It also approved imposing a 10pc "super tax" on large-scale industries.
Under the bill, a levy between Rs100-Rs16,000 was imposed on the import of mobile phones depending on its value. For mobile phones having a cost-and-freight (C&F) up to $30, it will be Rs100. For phones more than $30 and less than $100, it will be Rs200.
In the same way, for phones costing up to $200, it will be Rs600. For phones up to $350, it will be Rs1,800. For phones costing up to $500, the rate of levy will be Rs4,000. Meanwhile, for phones worth up to $700 it will be Rs8,000, while for phones more than $701 it will be Rs16,000.
Duty on the import of equipment for the film industry, including projectors, loud speakers and 3D glasses, was also abolished.
The start of the session saw lawmakers from the Muttahida Qaumi Movement-Pakistan (MQM-P) — which is part of the PML-N-led coalition government — lambasting their allies.
Without naming anyone, MQM-P MNA Engineer Sabir Hussain Kaimkhani said he was in the assembly after being elected by his constituency, not to plead for something.
"We get these ministries, these seats so as to earn respect and serve. If we don't even get respect after getting these seats, then we [reject this]," he said.
Kaimkhani, who was elected from Hyderabad's NA-226 constituency, said there was "one person present here because of whom we don't have the necessities in our city".
"Our airport is shut, our PIA (Pakistan International Airline) office is closed, there are accidents on our railway tracks every day and blasts occur on our railway tracks. But no one is here to answer for the railway and PIA's downgrade," he complained.
The MNA pointed out that the relevant minister was present in the assembly to address his complaints.
"I am walking out against their behaviour and I am leaving after saying this: With them [being a part of the government], neither the government nor the assembly can run," Kaimkhani said.
He was joined by MQM-P MNA Salahuddin, who said his party had paid a political price and was bearing its consequences today.
In a response to a rebuttal that was inaudible, Salahuddin threatened that "we will not take a minute before moving from here to there" — an apparent reference to shifting from treasury to opposition benches.
A day earlier, the government had completed the process of approving all 131 demands for grants of various ministries and divisions worth over Rs5.53 trillion.
The NA also rejected 266 cut motions submitted by opposition members, demanding a symbolic cut on allocations of eight ministries, including communications, energy, foreign affairs, interior, narcotics control and railways.
The lower house of the parliament had already approved on Monday 83 demands for grants worth Rs4.57 trillion of those 30 ministries and divisions on which the opposition parties had not moved any cut motions.
In parliamentary democracy all over the world, voting on demands for grants and cut motions is considered a crucial phase of the budget session as opposition members get an opportunity to give a tough time to the government by moving cut motions on ministries and divisions.
But the present coalition government did not face any difficulty at this crucial stage of the budget session as there is no meaningful opposition in the house after the en masse resignation of PTI members following the ouster of the Imran Khan government.
Finance Minister Miftah Ismail had unveiled the budget for the coming fiscal year on June 10. In this initial version of the budget, having an outlay of Rs9.5 trillion, the government had avoided taking unpopular tax measures for fear of political backlash.
The government has budgeted the total current expenditure at Rs8,694bn for FY23, which is 15.5pc higher than last year's budgeted figure.
Interest payments, or debt servicing, account for 45.4 per cent of the total current expenditure, having been increased by a whopping 29.1pc from last year to Rs3,950bn. Meanwhile, defence expenditure has been budgeted at Rs1,523bn, which makes up 17.5pc of total current expenditure and is 11.16 per cent higher than last year.
In the initial version of the budget, the total revenue stood at Rs9,004bn. After subtracting provincial transfer of Rs4,100bn as part of the National Finance Commission (NFC) Award, net revenue came out at Rs4,904bn.
However, after the government announced new revenue measures and new taxes last week, the
net revenue measures announced in the 2022-23 budget now amount to Rs905bn.
Moreover, the government had initially set the tax collection target for the Federal Board of Revenue (FBR) at Rs7,004bn for FY23. Under last week's measures, it increased the FBR's tax collection target to Rs7.47tr. The target for non-tax revenues, on the other hand, has been revised down to Rs1.94tr from Rs2tr.
Total allocations for the Public Sector Development Programme (PDSP) have been budgeted at Rs2,158bn for FY23, up just one per cent from Rs2,135bn last year. The government has set a growth target of five per cent.
Last week, Prime Minister Shehbaz Sharif had also announced a 10 per cent “super tax” on 13 large industries to raise an additional Rs465 billion in revenue, in an attempt to trim the budget deficit.
The 13 industries to be taxed include cement, steel, sugar, oil and gas, fertilisers, LNG terminals, textile, banking, automobile, cigarettes, beverages, chemicals and airlines. High net worth individuals and companies will also be subject to a “poverty alleviation tax”.
Those whose annual income exceeds Rs150 million will be taxed at 1pc; for Rs200m at 2pc; Rs250m at 3pc; and Rs300m at 4pc of their income.
Finance Minister Miftah Ismail also announced these measures during his address to the NA the same day in a session convened to wind up the budget debate and elaborated that both these taxes were a "one-time tax" for the fiscal year 2022-23.
He further told the NA that a new fixed tax scheme on shops outside of the tax net to reduce the budget deficit.
There were around nine million retail shops in Pakistan and the government wanted to bring 2.5m to 3m of them into the tax net, he said, adding that for this, a new fixed scheme had been introduced under which a small shop owner will pay a fixed tax of Rs3,000 and big retailers Rs10,000 per month.
“After that, they will not be questioned on anything else,” the minister added.
The retailers dealing in gold and had shops of 300 square feet or less would have to pay a fixed income and sales tax of Rs40,000, which was reduced from Rs50,000. For bigger shops, the sales tax had been reduced from 17pc to 3pc, he added.
The withholding tax on gold sold by individuals to goldsmiths has been reduced from 4pc to 1pc. A similar scheme of fixed tax will be announced for realtors, builders and car dealers.
Moreover, the government also intends to apply a maximum petroleum levy of Rs50 per litre on all petroleum products, including petrol and diesel, besides a levy of Rs30,000 per tonne on liquefied petroleum gas.
At the same time, the Rs47bn tax relief announced by the government in the next year’s budget for salaried citizens was also reversed. The tax exemption limit has been reversed to Rs600,000 from Rs1.2 million, whereas the fixed tax of Rs100 has been replaced with a 2.5pc tax for individuals earning between Rs600,000 and Rs1.2m.
Likewise, those earning Rs1.2m to Rs2.4m will pay a 12.5pc tax instead of 7.5pc last year, and individuals earning Rs2.4m to Rs3.6m a year will be charged at Rs165,000 plus 20pc of the amount exceeding Rs2.4m.
Those earning Rs3.6m to Rs6m a year will be charged at Rs405,000 plus 25pc of the amount exceeding Rs3.6m.
People with an annual income of Rs6m to Rs12m will be charged at Rs1.005m plus 32.5pc of the amount exceeding Rs6m.
In the last slab, individuals earning more than Rs12m a year will be charged at Rs2.955m plus 35pc of the amount exceeding Rs12m.
More to follow
ISLAMABAD: The National Assembly on Tuesday completed the process of approving all 131 demands for grants of various ministries and divisions worth over Rs5.53 trillion after rejecting 266 cut motions of opposition members on eight selected ministries after a debate in a non-serious environment, paving the way for the passage of the finance bill, commonly known as the federal budget, on Wednesday.
The lower house of the parliament had already approved on Monday 83 demands for grants worth Rs4.57 trillion of those 30 ministries and divisions on which the opposition parties had not moved any cut motions.
The opposition members had submitted a total of 266 cut motions demanding a symbolic cut on allocations of eight ministries, including communications, energy, foreign affairs, interior, narcotics control and railways.
In parliamentary democracy all over the world, voting on demands for grants and cut motions is considered a crucial phase of the budget session as opposition members get an opportunity to give a tough time to the government by moving cut motions on ministries and divisions.
Hina says Pakistan no longer faces ‘international isolation’; assembly set to pass budget today
At this stage, opposition gets a chance to criticise the government’s performance while seeking a symbolic deduction of Re1, Rs10 or Rs100 from the demands for grants for each division and ministry.
Traditionally, opposition members submit cut motions on key ministries, with an understanding with the government.
During the voting on cut motions, both the government and the opposition make arrangements to ensure maximum participation of their members in the house as the speaker is required to put each and every demand for grant as well as the cut motion before the members for a voice vote and a defeat to the government on a cut motion can be seen as a failure of the government to retain its majority and can even become a cause for the government’s ouster.
However, the present coalition government did not face any difficulty at this crucial stage of the budget session as there is no meaningful opposition in the house.
While speaking in support of their cut motions, the opposition members delivered rhetoric speeches, criticising the performance of various departments and institutions working under these eight ministries and divisions.
Foreign affairs
Minister of State for Foreign Affairs Hina Rabbani Khar while winding up the debate on demands for grants of her ministry refuted the impression that Pakistan had been facing international isolation and stated that the country’s foreign policy was moving in the right direction.
Responding to reports that India had obstructed Pakistan’s participation in a conference hosted by China on the sidelines of BRICS summit, Ms Khar said there was absolutely no denying of the fact that China was the most effective strategic partner of Pakistan.
“China is part of BRICS which means Brazil, Russia, India, China, and South Africa, where all the member countries have to work to cooperate with each other,” she said.
“If a certain unfriendly country wanted to block Pakistan and succeeded in doing so, then how can we doubt China’s intention,” the minister was quoted by the official Associated Press of Pakistan (APP) as saying on the floor of the assembly.
According to her, the Chinese government’s statement also came the other day, which said China wanted Pakistan to be part of this and it also recognised Pakistan’s role in global development.
“We don’t have a role (in BRICS) but we still have core roles in many other international forums such as heart of Asia,” she added.
Responding to criticism by Maulana Abdul Akbar Chitrali over the government’s handling of Dr Afia Siddiqui case, the minister said Pakistan was contesting it at every level. But obviously, she said, every country had its own laws, rules and regulations besides its sovereign right.
“India today is not a secular state, it has become a rogue state,” said Ms Khar while talking about India’s role in occupied Jammu and Kashmir in the context of the conviction of Kashmiri leader Yaseen Malik.
Narcotics control
Minister for Narcotics Control Shah Zain Bugti in his winding up speech during the debate on the cut motions related to his ministry asked Prime Minister Shehbaz Sharif to allow recruitment of about 10,000 personnel from across the country to combat the menace of drugs. At present, he said, the total strength of the ministry was only 3,600 and they were performing duties at airports, ports and border areas.
He said the ministry was in contact with provinces for doing legislation to prevent use of drugs in educational institutions, proposing heavy fines on educational institutions where drugs were found to be sold.
Published in Dawn, June 29th, 2022
QUETTA: The Balochistan Assembly on Tuesday passed the supplementary budget of Rs10.52 billion for the fiscal year 2021-22 without any objection from the opposition parties.
Finance Minister Sardar Abdul Rehman Khetran moved 16 demands for the draft in the house. The session was presided over by Deputy Speaker Sardar Babar Khan Musakhail. The members of the opposition parties, including JUI-F, BNP-Mengal and PkMAP, were present in the house, but they did not submit any cut motion.
The highest amount of over Rs1.63bn would be spent on the expenditures of the home department. Another big allocation of Rs1.30bn is for the primary and secondary health sector. An amount of over Rs1.17bn has been approved for specialised healthcare and medical education. The house also approved an amount of Rs880.12 million for the Provincial Disaster Management Authority. The approved budget includes an amount of Rs630.14m for mineral resources.
The provincial government has set aside Rs350.6m for the planning and development department and Rs300.6m for the energy sector till June 30, 2022.
Published in Dawn, June 29th, 2022
PESHAWAR: The Khyber Pakhtunkhwa Assembly on Tuesday passed the supplementary budget worth Rs234 billion for the outgoing financial year, after the opposition members withdrew their cut motions.
Ironically, a lawmaker of the ruling Pakistan Tehreek-i-Insaf (PTI), Faheem Ahmad, also presented two cut motions that perturbed the treasury members. The lawmaker, who belongs to Peshawar district, claimed that the provincial government recently released over Rs200 million, before the by-elections in Swat district while Peshawar was being ignored.
Minister for Finance Taimur Saleem Jhagra promptly intervened and requested Deputy Speaker Mahmood Jan, who was presiding over the proceedings, to put cut motions for vote. Instead of further debate on the controversial cut motion, the chair put it for vote. The said cut motion was then defeated.
Earlier, the opposition members withdrew their cut motions after reaching an understanding with the government.
Cut motions by ruling lawmaker perturb members of treasury benches
The issue of the kidnapping of Afghan carpet dealers in Peshawar also echoed in the house. Awami National Party MPA Sardar Hussain Babak, while speaking on a point of order, said that a group of gunmen, dressed in the provincial police uniform, was involved in the kidnapping of Afghan carpet traders.
He said that the thugs, impersonating themselves as police officials, forced the businessmen into police vehicles and took them away to unknown locations. He said that around six Afghan traders had been kidnapped during the last eight months. They were released after their families paid millions of rupees as ransom.
Mr Babak said that an Afghan carpet dealer, Najeeb, was bundled into a police vehicle in the city’s Faqeerabad area last week. He said that the kidnappers had demanded $1 million ransom from the family of Najeeb. He said that Najeeb was still in the captivity of the kidnappers.
He asked the government to constitute a high level committee to look into the serious matter. He said that Afghans and Pakhtuns were being victimised on their own land. He said that ANP would continue to struggle for the rights and safety of Pakhtuns. He said it was the responsibility of the law enforcement and intelligence agencies to detect the network involved in the criminal activities.
Minister for Labour Shaukat Ali Yousafzai, while responding to the point of order, said that the inspector general of police would present his report in that particular case. He said that the security of people, including Afghan nationals, was the responsibility of the government. He claimed that there had been a big decrease in extortion and kidnapping for ransom cases in the province.
Later, the session was prorogued.
Published in Dawn, June 29th, 2022
GILGIT: The Gilgit-Baltistan government on Monday presented the budget for the fiscal year 2022-23 with a total outlay of Rs119.3 billion. The annual budget was presented in the Gilgit Baltistan Assembly.
Finance minister Javed Ali Manwa presented the budget during a special session chaired by Deputy Speaker Nazir Ahmed Advocate.
Presenting the budget, Mr Manwa said Rs61.4 billion had been proposed for ongoing expenditures while Rs47.8 billion had been set aside for new development schemes.
Interestingly, opposition parties’ members, including from Pakistan Peoples Party, Pakistan Muslim League-Nawaz and Jamiat Ulema-i-Islam-Fazl remained calm during the budget speech.
Deputy Speaker Nazir Ahmed Advocate in his remarks thanked all the parties for respecting the democratic values and patiently listening to the budget speech.
The finance minister announced 15 per cent increase in salaries of government employees and fixed Rs25,000 as minimum wage for contingent employees.
The minister said Rs10 billion had been proposed for wheat subsidy, Rs2.25 billion for education and Rs1.20 billion for health. He said Rs5.39 billion had been allocated for works department and Rs3.5 billion for power sector.
He added that Rs174.8 million had been allocated for forests and wildlife, Rs121.7 million for minerals, Rs49.8 million for food and Rs288.5 million for tourism development.
He said purchase of vehicles for government departments, creation of new jobs, foreign trips of government functionaries, and official functions in expensive hotels had been banned.
Finance minister Javed Manwa said the Gilgit-Baltistan government did not have its own revenue generation sources and depended on the funds provided by the federal government.
However, he said unfortunately the federal government didn’t increase grants for GB for next fiscal year. “If the central government did not increase the grants the GB government will face financial crisis,” he said, adding the regional government could not impose any direct tax.
However, the finance minister said the GB government had decided to increase non-tax revenues through increasing electricity tariff, legalising rents of government rest houses, increasing fees of route permits and their renewal, and taxing the non-custom paid vehicles.
He said it had also been proposed to increase fees on adventure tourism through making registration of hotels, restaurants and camping sites mandatory.
Javed Manwa said it was also proposed to impose ‘bed tax’ on foreign tourists. It was also proposed to increase fees of trophy hunting permits and trout fishing in rivers and lakes.
Published in Dawn, June 28th, 2022
KARACHI: The Sindh Assembly, in the early hours of Tuesday quickly passed the Rs1.713 trillion tax-free budget for financial year 2022-23 in the presence of MQM-P members and the absence of lawmakers belonging to the PTI, GDA and two other opposition parties, after adjourning and reconvening the house post-midnight.
Earlier in the day, the house had one of the lengthiest sittings lasting over 12 hours as Leader of the Opposition Halim Adil Sheikh spoke for over five hours, mainly criticising the provincial government and praising PTI chairman and former prime minister Imran Khan. Chief Minister Syed Murad Ali Shah also spoke for more than one hour.
The budget was passed in 10-minute proceedings after the house hurriedly approved all 78 demands for grants on supplementary expenditure for 2021-22 moved by the chief minister, who also holds the portfolio of finance.
No cut motions were moved by any of the opposition parties to discuss the supplementary expenditures of current and next financial years revised by the provincial government as none of the movers was present.
Only 10 MQM members were present in the house when the budget was passed unanimously.
Amid strong protest by the whistle-blowing opposition members, the chief minister had on June 14 presented the tax-free deficit budget with a development outlay of Rs459.6 billion. The allocation for FY23 is higher by Rs190bn than the revised ADP of Rs269.6bn for the ongoing year.
Published in Dawn, June 28th, 2022
KARACHI: While traders and industry have been quite unanimous in their resistance to the government’s plans to impose a 10 per cent Super Tax on 13 large industries and other harsh measures in the budget 2022-23, the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and the Karachi Chamber of Commerce and Industry (KCCI) have waded in on the government’s side, saying that unpopular decisions were being taken in the “larger national interest”.
Insiders in the business community said that the government has given some kind of solid assurances to the KCCI and FPCCI that the tough budgetary measures, especially the super tax that had sparked anger among the business community, are likely to be resolved very soon.
They said Finance Minister Miftah Ismail had already hinted at the KCCI regarding the removal of anti-business decisions which would be announced on Tuesday.
This positive signal from the government could be gauged from Monday’s statement of KCCI president Muhammad Idrees who reaffirmed his support for the government. He said there was no doubt that the prime minister and finance minister were taking unpopular decisions but these efforts need to continue in the larger interest of the economy.
Statements come days after Shabbir Mansha had categorically denounced levy of super tax
“The business and industrial community stand with the government and is ready to play its role in the face of tough times,” he said, urging the people to must recognise the need for unity in these trying times and work with the government.
KCCI chief hoped that the government’s efforts combined with the resilient nature of the people of the country would soon yield results.
FPCCI Senior Vice President Suleman Chawala on June 25 claimed that the apex chamber stood with the government so that by promoting business and industrial activities, Pakistan could be pulled out of the severe economic crisis and the country could be economically stable again.
He believed that tough decisions taken by the finance minister would make Pakistan strong again economically and as a nation.
“We support Miftah Ismail in cleaning the mess created by Dar-nomics and PTI policies. These hard decisions are the requirement of the hour. We as Pakistanis and the business community need to come out of our comfort zones to help Pakistan revive again,” he vowed.
“The corporate businesses and individuals need to come forward and support the government and back the tough decisions taken to ensure the revival of Pakistan. We all must contribute to this cause,” Mr Chawala said.
Contrary to the above, FPCCI’s Acting President Shabbir Mansha on June 24 categorically denounced the imposition of super tax saying the large industries have already been paying hefty corporate tax of 29pc besides generating millions of jobs as well. No country in the world can charge 39pc tax to corporations and still keep the economy afloat, he added. Additionally, new private-sector and foreign investments dry up completely in an uncompetitive market.
The acting FPCCI chief had also expressed his shock that the federal budget 2022-23 was announced just two weeks back and it mentioned no super tax on industries. It is a highly abrupt, unfortunate and anti-industry measure.
He urged the government not to squeeze the existing taxpayers further and look for other avenues to broaden the tax net.
He also pointed out several glaring anomalies in the budget relating to customs duty, regulatory duty, income tax and sales tax, urging the government to immediately rectify them.
On June 24, an Anomaly Committee constituted by the Ministry of Finance under the chairmanship of Zubair Motiwala held its meeting in Islamabad.
Mr Miftah, after discussing some important points, assured the business community of rectifying 95pc of the anomalies suggested by the committee.
Published in Dawn, June 28th, 2022
Balochistan’s next fiscal year’s budget evidently reflects the lack of capability of its political leadership to find consensus and make the right decisions for the citizens of the province. No wonder, the public’s trust in the leadership is consistently faltering owing to years of poor governance, lack of development, financial mismanagement and corruption.
It, therefore, is no surprise to see violent militants and separatist groups taking over the space being conceded by the opportunistic politicians or a significantly large drop in the voters’ turnout at the polling booths during the elections. What interest a lawmaker elected with a few hundred votes could have in the uplift of his constituents or the province at large?
And what interest a political party would have in financial discipline and public welfare when its rise and fall in power depends on the whims of the country’s powerful military establishment?
Thus, it was hardly surprising for most to see the eight-month-old Mir Abdul Qadoos Bizenjo government twice postpone its first budget to meet the demands of and ‘reward’ the lawmakers from his own Balochistan Awami Party (BAP) and the opposition parties, who had helped him topple his predecessor and avert a no-confidence motion, through massively inflated development allocations.
What interest a lawmaker elected with a few hundred votes could have in the uplift of his constituents or the province at large?
It is no wonder that the budget speech by finance minister Sardar Abdul Rehman Khetran drew ‘appreciation’ from both treasury and opposition benches.
Experience shows that much of the available funds for the development projects would end up in the pockets of the politicians and bureaucrats, leaving behind a trail of incomplete and on-paper schemes.
Initially, it appears, that a smaller development budget was proposed but when political pressure was brought upon Mr Bizenjo, he retreated and agreed to increase the allocation despite a massive resource gap of over Rs72 billion to please the legislators and keep their support.
The chief minister, who got himself elected as president of the BAP a few days ago at a party meeting that his opponents have termed as illegal, had called upon the federal government to increase resources for the province. For what? To bribe lawmakers into supporting him?
Coming back to the budget details, the proposed development allocations are almost a third of the total budget outlay of nearly Rs613bn and over 35 per cent of the estimated resources above Rs539bn. The mismatch between anticipated income and proposed development and non-development expenditure means it carries a hefty deficit of Rs72.8bn or almost 12pc of the total budget outlay.
Additional development funding of Rs39.6bn and foreign project assistance of Rs14bn will raise the development budget size to more than Rs265bn. In the budget for the outgoing fiscal year, the provincial government had indicated a gap of Rs84.7bn in its estimated resources and expenditure, which is projected to curtail the originally allocated provincial contribution to the development plan from Rs172.5bn to Rs91.8bn by the close of the year on June 30.
Thus, it is safe to assume that with the failure to rake in enough resources to fill the projected deficit, the province is likely to end up cutting its development stimulus by a huge margin next year as well.
The Bizenjo government contends that the budget focuses on the development of the entire province. That is basically a repetition of similar claims made by previous governments every year. Yet the fact that a large majority of its population still does not have access to basic public services and its impoverishing communities battered by decades of underinvestment, corruption, misgovernance, financial mismanagement and adverse impacts of climate change tells a different story.
The growing development throw-forward in the province that constitutes 45pc of the country’s total landmass indicates how the scanty financial resources available for the uplift of the province have either been squandered or stolen by politicians, bureaucrats and contractors.
A large number of schemes are left incomplete midway or are duplicated multiple times to swindle the taxpayers with governments held hostage by their members looking the other way. Thus, the rising political discontent and lawlessness in the province are not surprising.
The process involving the selection of schemes and allocation of funds for them remain opaque — dependent more on the political choices of the rulers rather than based on the needs of the people.
That the lawmakers were wrangling over development funds on a day when the rains killed several people in parts of the province, swept away roads, and damaged bridges and other infrastructure speaks volumes about the lack of empathy they have for the people the politicians have failed again and again.
Balochistan deserves a better deal from its ruling classes and it requires its politicians, and others remote-controlling them, to put the interest of the people before their own needs.
Published in Dawn, The Business and Finance Weekly, June 27th, 2022
The surprise government move to retrospectively impose an additional tax on the corporate earnings will significantly impact companies’ profits from 2021-22.
The government last Friday announced a 10 per cent additional super tax on companies earning profits of over Rs300 million a year to boost its tax revenues.
The higher tax rate will cover firms from 13 industries and sectors, including banking, steel, aviation, automobile, cement, chemical, fertiliser, oil and gas, textile, fertiliser, beverage, sugar and tobacco companies, and LNG terminal operators.
The rest of the corporate sector will be subject to 4pc super tax and also cover export-oriented companies under the turnover tax regime.
It is a short-term measure that does not address the needed fundamental reforms
The measure drew immediate reaction from the corporate sector, with Overseas Investors Chamber of Commerce & Industry Chairman, and Engro Corp President and CEO Ghias Khan taking to Twitter to vent his dismay over the measure. “Imposing a super tax on industries is regressive and will hamper industrialisation, curb manufacturing and not reduce the current account deficit. Pakistan needs a wider tax base through documentation, taxing unproductive sectors like real estate and long-term policy development.”
The Pakistan Business Council (PBC) said neither government nor the International Monetary Fund (IMF) has committed to fundamental reforms of the Federal Board of Revenue’s (FBR) capacity to tax. “Hence short-term, knee-jerk and front-ended revenue-seeking measures to tax the already taxed will compromise sustainable growth. No innovation. Pure expediency,” the PBC tweeted.
A Topline Securities note on the potential impact of the decision, which sent the stock market crashing downhill on Friday, says the one-time tax on large companies (under 10pc super tax) will have a 14pc impact (on their 2021-22 earnings).
Senior JS Global analyst Amreen Soorani wrote that the move to collect additional revenues to meet the enhanced tax target for the next fiscal year for securing the restoration of the IMF funding package will have a different financial impact on different sectors and companies.
The banks, already subject to a 35pc income tax compared to the rest of the corporate sector, will bear the brunt, with their earnings taking a hit of between 12.6pc and 15.4pc. The fertiliser companies will be affected equally by 9pc and cement manufacturers in the range of 7.6pc to 9pc. The oil and gas sector’s profit is estimated to be hit by 8.2pc to 8.7pc, steelmakers by 3.3pc to above 9pc and chemical firms by 10.4-11.5pc.
No wonder the share market tanked, with the benchmark KSE-100 index dropping by over 2,000 points or 4.8pc in the morning session immediately after the prime minister announced the tax. By then the smaller investors had already taken the hit to their savings as panic gripped them.
In addition to the super tax, all the corporate entities will be required to pay incremental poverty alleviation tax of 1pc to 4pc on earnings above Rs150m.
Read more: Super tax — what the state giveth, the state taketh away
The size of the tax will be determined by the earning slab in which a company falls. Nonetheless, more clarity is still awaited on this since a report quoted Finance Minister Miftah Ismail as saying the companies outside the 13 specified sectors will be required to pay either a 4pc super tax or a poverty alleviation levy. The report suggests that super tax will yield Rs80 billion and poverty alleviation levy Rs120bn in additional revenues for the government.
The excessive profits made by the 13 specified sectors in the last couple of years are believed to have egged on the authorities to impose an additional 10pc super tax on their profits from the current financial year. Their profit for the present fiscal year is estimated to be nearly Rs900bn.
Besides, most of these industries are said to have prospered over the decades on the back of hefty government handouts and protections.
Also, the action is populist in nature as the government will be seen as taxing the rich for the first time. Hence, the perfect target for extracting additional revenues. Further, the new additional taxation will not produce inflation or affect the pace of economic growth since it is being charged retrospectively on the companies’ incomes already raked in by them.
While the additional corporate tax will help the government overcome its immediate financial problems, the action at best represents another short-term measure that taxes the already taxed.
“Who (has) benefited from the budget? Commercial importers (have been) spared full tax accountability (and) retailers, non-filers holding real estate, big landlords in agriculture levied mild taxes... Whose vote bank are they? Who suffered? Those creating employment and exports,” the PBC asks.
Contrary to claims of alleviating poverty, the PBC rightly argues that super tax on industry is really to support a bloated bureaucracy, high public expenditure, handouts to commercial importers and the trader vote bank, given the FBR’s taxation capacity gaps and a weak political will to broaden the tax base.
“With the IMF deal as good as done and China rolling over its deposits, it is time for the government to improve investor confidence and perception. The heavily documented industry and banks can’t hide their income. Hence, they are an easy target for governments to tax,” one of the top 10 textile exporters says.
“It is the wrong policy to tax the heavily taxed industries. The government should rather tax unproductive areas like real estate and cut its wasteful expenditure such as on state-owned enterprises. It must free the economy. Regressive taxation will force people to leave the country. No one wants that,” he concludes.
Published in Dawn, The Business and Finance Weekly, June 27th, 2022
Over the years, Punjab has perfected one art: modernise and complicate jargon to narrate deteriorating realities that keep worsening because there is no political will and planning to arrest the process.
Its agriculture budget every year is an example of this fine artisanship. This year is no exception. The hard fact is that Punjab has slashed its budget for agriculture and related sectors, including food, irrigation and livestock, by a whopping drop of 26.85 per cent — from Rs64.80 billion to Rs47.40bn.
For agriculture alone, the budgetary allocation has come down from Rs31bn last year to Rs19.53bn this year — a staggering cut of 38.71pc. It happened against the department’s wishes, which was aiming at, and hoping for an allocation of Rs40bn — with a development component of Rs20bn.
Now, the jargon: “We are introducing Punjab Resilient and Inclusive Agriculture Transformation (PRIAT) plan to technologically modernise the sector and align it with the latest technological trends in the world,” as put by the minister for finance during his budget speech. What it actually means is left to the imagination of the reader.
Fancy words cannot cover up the gaps in financing essentials such as fertiliser and fuel whose prices have gone through the roof
“Punjab is also starting eight new programmes to develop the seeds of pulses, peanuts, blackberry and other high-value crops,” the minister continued. The province will also continue subsiding drip and sprinkle irrigation systems and carry out the zoning of crops according to soil potential. For meeting all these sectoral structural needs, the province has spared a paltry sum of Rs14.77bn — the development component earmarked for the year.
Now, the reality check: the PRIAT plan is a lender-driven programme that has been facing issues because of failure to meet loan conditionalities like restricting the official wheat procurement target. Financing for revamping individual crops like wheat, sugarcane and rice was stopped by this government for the last few months because of the budgetary squeeze.
Punjab’s penchant for short-term donor-driven programmes, like PRIAT, is phenomenal as they give a progressive look to the effort and the executioner. For this reason, Punjab has literally had hundreds of such lender-sponsored plans during the last few decades. Enhancing Vegetable Production, Management of Fruit Fly with Special Reference to Non-Conventional Methods, Promotion of Pulses Cultivation, Community-based Integrated Management of Pink Bollworm and Provision of Missing Facilities of Pest Warning Wing and Promotion of Agriculture Mechanisation and Uplifting of Extension Farms, to name a few.
They were launched, money was spent, some of them fizzled out mid-stream, others completed their lives and fresh ones were launched. Some of them (like improvement in watercourses) are being run for decades now.
Punjab’s penchant for short-term donor-driven programmes is phenomenal as they give a progressive look to the effort and the executioner, which is why it has had literally hundreds of lender-sponsored plans during the last few decades
No one can or should deny their importance. However, trouble starts when asked what they achieved. What is the lesson that was learnt? What role did they play in the development of the sector? Did we get the intended results? Did the implementation strategy work? If yes, how much did it work? If not, why not? Since no accountability takes place, they simply fizzle out and are replaced by fresh ones.
The fresh budget promises to restart some of them and continue with some others. It is time to launch a performance audit process as well so that one could assess the cost and benefit ratio — how much they added to loans and what was the sectoral and yield benefit.
Apart from these promised schemes, there would be other claimants on this meagre and slashed budget. For example, where would the money for the fertiliser subsidy come from? The urea prices went up during the last year and so would be the subsidy bill.
Punjab has been contributing 50pc (or Rs6bn) to the federal bill to subsidise urea. Would it suffice this year? Probably not! If not, where would extra money come from?
The Di-Ammonia Phosphate (DAP) price went through the roof last year — from Rs3,500 to Rs11,000 or an increase of 265pc. Punjab had been paying a Rs1,000 per bag subsidy, which has now lost its relevance for farmers.
Apart from the fertiliser crisis, there are two more (disastrous) factors that will be gripping the farms and farmers ie the highest ever diesel and electricity prices. Diesel prices have gone beyond Rs250 per litre. This would cripple the entire cropping cycle — land preparation to harvesting — and transportation. With water scarcity now ranging close to 50pc, pumping water out of the soil is the only option and it would be robbed by diesel prices.
The highest ever electricity prices would open another Pandora’s Box both for the farmers and the government. The farmers have been fighting for a flat rate of Rs5 per kilowatt. Now, the base price has been raised by Rs7 per kilowatt. Diesel and electricity prices would cause multi-pronged and multiplying shock waves through the sector.
Will Punjab be paying, and arranging, additional money to deal with the unfolding disaster? If yes, where would it come from? All these questions beg for answers, which the budget has not provided.
To be fair, the government also had multiple constraints this year. It has just assumed power and is not fully settled due to the continued constitutional crisis in the province by the time it presented the budget.
Most of the budgetary homework was completed by the previous government and the current set-up had little time to alter it. It hardly had fiscal space usually available to the government. On top of it all, governance issues have bedevilled the province like never before.
It is fact that policy and fiscal constraints limited the options of the new government badly. But still, it is also guilty of not trying to break the cycle and take fresh initiatives.
In final words, it is more of a usual budget, which will only ensure routine results in normal circumstances. This year, however, is of exceptional circumstances and it would only be served by extraordinary efforts, which seem to be a missing component of this budgetary document.
Published in Dawn, The Business and Finance Weekly, June 27th, 2022
MUZAFFARABAD: The share of social and productive sectors in Azad Jammu and Kashmir’s (AJK) Annual Development Programme (ADP) has been fixed at 19 per cent and 12pc, respectively, but the infrastructure sector would still get the lion’s share of 69pc, Finance Minister Abdul Majid Khan said on Saturday.
Giving details of the Rs28.5 billion ADP for 2022-23, the finance minister said communication and works (C&W) would get the highest share of Rs12bn followed by Rs3.3bn to physical planning and housing, Rs2.8bn to local government and rural development, Rs2.25bn to energy and water resources, Rs2.17bn to education and Rs1.8bn to health.
Among some other allocations, Rs600 million would go to tourism, Rs550m to industries and minerals, Rs500m to agriculture and livestock, Rs400m to forestry and watershed and Rs380m to information technology, he said.
The minister informed that 62pc of the ADP had been allocated for the 389 ongoing schemes and remaining 38pc for 263 new schemes. He informed that some 107 projects would be completed by June 30 while the government planned to accomplish another 177 in next fiscal year.
He said the government planned to establish a “skill development” university in the region and Rs20m had been earmarked for its feasibility study. In order to promote tourism, digital mapping of the territory was also being introduced in the next fiscal year, he said.
Of the major allocations in recurring budget, the finance minister informed that education would get the highest share of Rs32.3bn, followed by Rs26bn for pensions, Rs21.14bn for miscellaneous grants, Rs11.87bn for health, Rs9.42bn for electricity, Rs7.25bn for police, Rs5.8bn for general administration, Rs4.57bn for communication and works, Rs3.7bn for wheat flour subsidy, Rs2.12bn for judiciary, Rs1.43bn for forests, wildlife and fisheries, Rs1.14bn for relief and rehabilitation, and Rs1.18bn for board of revenue.
Published in Dawn, June 26th, 2022
• Scheme to be reflected in amended finance bill
• Real estate brokers, car dealers, restaurants, salons, doctors, engineers, lawyers, CAs to be charged fixed tax
• Imran says super tax to ruin his govt’s efforts for economy, increase inflation and unemployment
ISLAMABAD: The coalition government has decided to introduce another fixed income tax scheme for small builders and other service providers through an amended Finance Bill 2022.
The details of this scheme will be worked out later due to shortage of time for implementation, but it will be on the lines of the fixed scheme for small shopkeepers, a tax official told Dawn on Saturday.
The proposed plan for small builders will comprise three categories. The first category will cover Karachi, Islamabad and Lahore for which a higher rate of Rs1,000 per square foot has been proposed. The second tier consists of Peshawar, Rawalpindi, Abbottabad, Sahiwal, Multan, Gujranwala and Faisalabad that will be charged a lower rate of Rs300 per square foot, while the third category will have the remaining cities with a further lower rate of Rs150 per square foot. These rates would be finalised after consultation with the finance minister.
A small builder has been defined as someone with four residential plots and two commercial plots for building in a year. It was observed that builders constructed houses for sale but they did not come under the tax net. Six kinds of rates will be proposed in two groups for each category.
The Federal Board of Revenue will notify the payment method for the builders, according to a tax official.
Moreover, the government may introduce fixed tax rates ranging between Rs20,000 and Rs100,000 per annum depending on the nature of professional services and their potential. The sectors that could be brought under the fixed scheme are real estate brokers, car dealers, restaurants, salons and other professional services providers such as doctors, engineers, lawyers, chartered accountants. The scheme for both builders and service providers will be introduced in the Finance Bill 2022.
Meanwhile, former prime minister and Pakistan Tehreek-i-Insaf (PTI) chairman Imran Khan has slammed the coalition government for imposing the ‘super tax’, which he said will ruin all the efforts and gains made by his government to boost the economy.
However, the fixed tax regime will be implemented either in July or August, a senior tax official confirmed to Dawn. When asked about the revenue potential of the proposed scheme, he said it hadn’t been calculated yet, as the scheme was aimed at documenting the economy.
The previous PTI government had set Rs20,000 as fixed tax for small shopkeepers, which had now been reduced between Rs3,000 and Rs10,000. Similarly, a documentation mechanism proposed previously, making submission of a one-page return and registration with the board of revenue, had also been abolished.
Despite contributing 20 per cent to the gross domestic product, the retail sector’s contribution to the tax was just 0.25pc, and around 80-90pc of the retailers were not registered with the authorities.
Finance Minister Miftah Ismail also confirmed on Saturday that the government was working on a proposal to introduce a fixed tax regime for real estate brokers, builders, housing society developers, car dealers, restaurants and salons in the next few months. He further said small shopkeepers and jewellers had been brought into the tax net after consulting with their associations.
On June 10, the government had announced a new scheme under which a small shop owner would have to pay a fixed tax of Rs3,000 a month and big retailers Rs10,000. The retailers dealing in gold and having shops of 300 square feet or less would have to pay a fixed income and sales tax of Rs40,000. For bigger shops, the sales tax had been reduced from 17pc to 3pc.
There were around nine million retail shops in Pakistan and the government wanted to bring 2.5 to three million of them into the tax net.
‘Common people crushed financially’
Meanwhile, PTI chairman Khan on Saturday said the 10pc ‘super tax’, imposed by the government on 13 major large-scale industries, will ruin all the efforts and gains made by his government to boost the economy and unleash a flood of inflation and unemployment in Pakistan.
He also warned that owing to the amendments to the National Accountability Bureau (NAB) law, Pakistan could become a failed state.
“It has been proved that they (the coalition government) were not ready and had no plan. They only wanted to get an NRO (relief in corruption cases) for the second time,” he said while speaking at a news conference.
Mr Khan said a provisional budget was being announced for the first time in the country’s history, as it was never heard of before.
“Now, petroleum levy is being imposed due to which prices of petrol will increase further and the common man suffer more. Secondly, they are imposing a ‘super tax’ that will amplify the overall tax to 39pc and make our products incomparable with those from India and other countries,” he maintained.
The former premier remarked that industries will suffer due to the super tax and unemployment rise consequently.
“The stock market has already shown the effects of the super tax. The agriculture sector will also be affected as prices of diesel will increase. Earlier, the salaried class, earning up to Rs100,000 per month was exempted from income tax, but now that limit has been reduced to Rs50,000,” he claimed.
Mr Khan further said he had challenged the amendments to the NAB law in the Supreme Court. The rulers had buried accountability to save themselves.
Moreover, PTI Central Information Secretary Farrukh Habib, in a statement, said the “imported government” had proved disastrous for the country, taking the economy on the brink of a collapse in only 75 days.
He also hoped the Supreme Court would declare the NAB amendments null and void.
Published in Dawn, June 26th, 2022
ISLAMABAD: The IT minister has expressed dismay over “limited relief” given to the sector and “negligible tax support” to the telecom industry.
The industry has also issued unwelcoming statements over budgetary measures announced by the finance minister.
Responding to announcements made by Finance Minister Miftah Ismail in parliament on Friday, Minister for IT and Telecommunications Syed Aminul Haque said the finance division should immediately consider proposals sent by the IT ministry to boost the sector and maximise its potential.
“The decision to remove withholding tax and some other conditions on the IT industry as well as the removal of capital gains tax from those who invest in the IT sector may be beneficial, but these measures are insufficient,” Mr Haque said in a statement after Mr Ismail’s speech in parliament.
Telecom sector says no business case for further investment unless average revenue per user rises to at least $2
“It’s important to understand that the telecom sector was the backbone of the IT sector, as the majority of the IT businesses were based on the telecom and data services,” he said. “Without communication facilities, how can we achieve targets set for the IT sector, which depends entirely on global connectivity?”
‘Highly taxed market’
Similarly, the telecom industry has also expressed concerns over high tax rates and other charges and has informed the finance ministry about the “stringent conditions” imposed by policymakers and regulators.
“Our consumers are taxed at one of the highest rates in the world,” Telenor CEO Irfan Wahab Khan told Dawn and lamented that high taxes had also raised spectrum and license renewal costs.
He said the industry was working in an uncertain and unpredictable business environment, especially concerning taxes, spectrum road map, no-objection certificate (NoC) fees and right-of-way issues.
The telecom industry has highlighted that the cost of doing business has gone significantly higher under various heads, including spectrum fees that have gone up from $291 million to $486m, whereas taxes have jumped to 34.5 per cent over the years, “making Pakistan one of the highly taxed telecom markets”.
The GSMA — an organisation that represents the interests of mobile network operators across the world — has also reported that Pakistan is ranked 235 out of 238 countries in terms of lowest average revenue per user (ARPU) per month, which has dropped from $9 in 2003 to around $1 by June this year. The ARPU is a key tool for measuring the financial health of cellular mobile operators (CMOs).
Meanwhile, Jazz CEO Aamir Ibrahim said the government had to lower taxes for the industry to make telecom services affordable for consumers. By doing this, the government would also gain from the overall economic growth due to the contribution of telecom and internet in growth, he said.
“The relevant policymakers need to ensure that the sector stays sustainable through assured return on investment, and if the ARPU is not at least $2 by next year, there will be no business case to further invest in enhancing quality or coverage,” Mr Ibrahim said.
Amir Allahwala, president of the Pakistan Mobile Phone Manufacturers Association, said that while it was essential to support tough decisions taken in the budget, mobile manufacturing was a hi-tech industry with the help of foreign direct investment from Chinese mobile phone brands.
Therefore, it was imperative to ensure continuity in leadership and consistency in policy to ensure the success of mobile manufacturing in the country.
Published in Dawn, June 26th, 2022
MUZAFFARABAD: The Azad Jammu and Kashmir (AJK) government has unveiled a Rs163.7 billion budget for the next fiscal year in the legislative assembly on Saturday amid a boycott by the combined opposition.
The budget outlay comprises Rs28.5bn for development and Rs135.2bn for recurring expenses.
The session, presided over by Deputy Speaker Chaudhry Riaz Gujjar, started more than three hours behind schedule, as a ministerial team kept on trying to pacify the opposition.
In the previous session, the opposition announced a boycott of proceedings over “unlawful amendments” to the assembly’s rules of procedure as well as the “denial of an equal share of development funds” to them by the government despite an apex court judgement.
Even though the ministerial team, according to its claim, had conceded to almost all demands of the opposition, the latter did not show flexibility and, instead of turning up in the house, staged a sit-in at the main entrance of the building.
Rs28.5bn fixed for development; pay scales revised; 15pc increase in pensions from July 1
In his budget speech, AJK Finance Minister Abdul Majid Khan maintained that the government was committed to implementing the apex court judgement and giving the opposition its due share, but some opposition members wanted to derail the system.
He said the PTI government was presenting its first budget in an atmosphere when Pakistan was grappling with an acute financial crisis.
He lamented that an unusual cut in the AJK’s 3.64 per cent share in the federal taxes pool (variable grant), under a 2018 financial agreement, was an inappropriate move that had made it difficult for the region to smoothly run its affairs.
He said exhaustive consultations were held with all departments under the guidance of Prime Minister Sardar Tanveer Ilyas for budget preparation and they were being given funds as per their expected needs.
The government had also given them challenging revenue targets and those failing to meet them would be held accountable, he added.
Giving a break-up of the income in the next fiscal year, Mr Khan said the government estimated to generate Rs36.5bn from the inland revenue department, Rs74.32bn as 3.64pc share in the variable grant, Rs25.13bn from internal resources, Rs700 million each from water use charges and capital receipts (loans and advances).
An amount of Rs2.15bn of the income had been spared for overdraft adjustment, while the rest for the recurring expense, he added.
He informed the house that the AJK government had demanded Rs40bn from the Centre for its Annual Development Programme (ADP). However, to its dismay, Islamabad announced an allocation of Rs26.5bn, though it later raised it to Rs28.5bn, including a foreign aid component of Rs500m.
Apparently, the volume of 2022-23 ADP was equivalent to that of the current year’s, but, in effect, it was half of it when viewed against the backdrop of skyrocketing inflation and cuts in the current year’s development budget, he said.
The minister said the PTI government would make the best possible and the most transparent use of available resources to put its share in Azad Kashmir’s development and progress.
Keeping in view the fiscal deficit, he said the government had also decided to fully engage the private sector in the development process and in this regard, a donor coordination committee comprising cabinet members was being constituted.
Towards the end of his speech, the minister announced that the AJK government would also implement the federal government’s decision to provide a 15pc disparity reduction allowance (DRA) and revised pay scales with an increase for its employees and 15pc increase in pensions from July 1.
Earlier, the minister also presented the supplementary budget for the current year. The house was adjourned to meet again on Monday.
Published in Dawn, June 26th, 2022
IT is good optics, and the new tax measures imposed on the incomes of corporates and rich individuals will bring some consolation to the common man. In fact, the PML-N-led government has no choice but to drastically raise its tax income to finance its expenditure in the next financial year and to secure the revival of the suspended IMF funding if it is to avert a default on its foreign payments.
But just how effective will Prime Minister Shehbaz Sharif’s decision to increase taxes on the incomes of the already heavily taxed corporate sector be? And where does it stand in the overall picture of revenue generation?
The decision, announced yesterday, conveniently spares the PML-N’s core constituency — the traders — and stops far short of netting other untaxed or undertaxed segments of the economy, such as agriculture. Likewise, it also frees the PML-N and its coalition partners from the need to slash the wasteful expenditure on SOEs that have been haemorrhaging taxpayers’ money for years now. The disinvestment or closures of some loss-making public-sector entities actually might have saved more cash than the imposition of a one-time super tax on the FY22 profits of the documented sectors.
The new tax measures indicate that large companies in 13 specified sectors — covering banks, sugar, cement, LNG terminals, textiles, airlines, automobiles, steel, beverages, oil and gas, fertilisers, chemicals and tobacco — showing annual profits of above Rs300m during the outgoing fiscal, will be subject to an additional 10pc tax, and firms from other sectors to 4pc, over and above their regular corporate rates of 29pc (35pc for banks).
Read: ‘IMF-dictated’ budgetary measures — putting the squeeze on everyone’s income, in every sector
This will be in addition to the 1pc to 4pc poverty alleviation fund being levied on them and on high-net-worth individuals having a yearly income of above Rs150m.
No wonder, the stock market was rattled and plummeted by 4.8pc in the morning session before recovering somewhat in the afternoon.
It may not be possible for the government to broaden the tax net overnight, but it is disturbing to see it shy away from making a move in that direction. The implementation of a negligible fixed tax on retailers’ incomes or ‘rentals’ from real estate holdings of the rich aren’t enough.
The new measures will not produce much inflation even if some of the ‘affected’ sectors try to pass on the impact to consumers. Nor will it impact the pace of economic growth. However, it will significantly squeeze the profits of companies coming under the super tax and many of them are likely to hold their future investment plans and discourage documentation.
The steps taken by the government are reflective of the extremely sorry state of our economic affairs. We have reached a point where nobody is ready to trust us or hold our hand in difficult times. Short-term measures may help us avert immediate risks. But long-term survival will entail taking politically tough policy decisions.
Published in Dawn, June 25th, 2022
