Miftah unveils maiden budget with Rs9.5tr outlay

Finance Minister Miftah Ismail says budget focuses on “sustainable and inclusive growth”; Govt sets growth target of 5%

ISLAMABAD: Finance Minister Miftah Ismail on Friday unveiled the coalition government’s maiden budget with an outlay of Rs9.5 trillion for the fiscal year 2021-22 in the National Assembly.

While presenting the budget proposals in the lower house, Finance Minister Miftah Ismail blamed the past government and its “inexperienced team” for bringing the country to the verge of economic disaster.

The finance czar of the country said that the current budget focuses on “sustainable and inclusive growth.”

The minister said the government had to move towards “sustainable growth”, adding that the growth target for next year was set at 5%.

“The problem of our economy is that growth is 3-4%, but when it moves up to 5-6%, our current account deficit goes out of control, because we prioritise the elite and increase our imports to facilitate them. We need to adopt a new outlook focused on alleviating the lower-income sections of society to increase domestic production,” the minister said.

Addressing the Speaker of the National Assembly Raja Pervez Ashraf, Miftah assured the lower house that the new coalition government will pull Pakistan out of the economic crisis: “We have done it before, we can do it, we will do it.”

The finance minister further added that in the next fiscal year, the country has to improve the economic conditions of the poor by providing them with facilities.

“When the income of the poor increases, they purchase consumer goods which are produced locally. And this, in turn, reduces the exports and initiates the development process. We can achieve inclusive growth by taking the above-mentioned steps,” he said.

The finance minister further highlighted that Pakistan has become the third-most-expensive country due to the incompetency of the PTI-led government.

Important budget proposals

The minimal taxable income limit will be raised from Rs0.6 million to Rs1.2 million for the salaried class

Salaries of government increased by 15%

Rs24 billion has been allocated to the health sector

Rs65 billion proposed for HEC

Advance tax to be increased on cars above 1600cc

Exemption of complete custom duty on more than 30 pharmaceutical ingredients

The banking sector will now face a taxation rate of 42%, up from the current 39%

Rs1,523 billion allocated for defence expenditure

Withholding tax abolished on film distributors

A family with a household income of less than Rs40,000 will be given a transfer of Rs2,000

Shedding light on the budget philosophy of the coalition government, the finance minister said: “We will increase the agricultural production to increase arable produce and increase per acre yield while also focussing on the development of industries which can help increase the exports of the country.”

“Prime Minister Shehbaz Sharif wants to provide maximum relief to the people of the country, particularly those who are unable to bear the burden of rising inflation,” he said, revealing that for this purpose, the government has taken several decisions to provide subsidies.

Miftah, while sharing the details of the federal budget for the next fiscal year 2022-23, revealed that the Federal Board of Revenue’s (FBR) target for the next fiscal year was 9% — Rs7,400 billion — while the provinces will be asked to collect Rs4,100 billion.

The federal government’s net revenue is projected to be Rs4,904 billion, non-tax revenue will be Rs2,000 billion, and the expenditure is expected to be around Rs9,502 billion for the next fiscal year, Miftah said.

Pakistan will also spend Rs3,950 for debt servicing, the finance minister told the house, adding that the tax imposed on non-filers has been proposed to be hiked from 100% to 200%.

The total expenditure for interest payments during the current fiscal year has been estimated at Rs3,144 billion — including Rs2,770 domestic and Rs373 international — while for the next year, it will climb to Rs3,950.

The finance minister added that the public debt of the outgoing fiscal would stand at 72.5% of the GDP as it reached Rs44,365 billion in March 2022.

The FBR’s tax revenue for the ongoing fiscal year is projected to clock in at Rs6,000 billion, and the contribution of the provinces will stand at Rs3,512, he said, adding that the centre’s net revenue is estimated to be Rs3,803 and non-tax revenue Rs1,315.

The total expenditure of the federal government for the current fiscal year is expected to clock in at Rs9,118 billion, the Public Sector Development Programme (PSDP) at Rs550 billion, while Pakistan will spend Rs3,144 billion on debt servicing, Miftah said.

He proposed increasing the rate of advance tax on purchase and sale for filers from 1% to 2%, while for non-filers, the tax rate for purchasing property will be at 5%.

The finance minister said if a person has an immovable property of Rs25 million or more, then 5% of its rate will be considered as an individual’s additional income.

He said that on this income, the government would charge a 1% tax. In case a person holds an immovable property for more than a year, then they will be charged with 15% capital gain tax, which will become 0% after six years, he said.

Benazir Income Support Programme (BISP)

For the next fiscal year, the total amount allocated for the Benazir Income Support Programme (BISP) has been proposed to be increased from Rs250 billion to Rs364 billion. To that end, Miftah said that nine million families would receive money through the Benazir Kafalat Cash Transfer Programme, and Rs266 billion have been proposed to be allocated for it.

The finance minister added it had been proposed to increase the subsidy for the Utility Stores Corporation to Rs12 billion.

He added that the Benazir Taleemi Wazaif Programme will be extended to 10 million children, while more than Rs35 billion will be earmarked for the programme. More than 10,000 students will be given undergraduate scholarships and over Rs9 billion have been allocated for it, he said.

On the other hand, the Benazir Nashonuma Programme will be extended to all the provinces and the fund allocation for it will be increased to Rs21.5 billion, while the Bait-ul-Maal will allocate Rs6 billion for the medical treatment of needy people.

Rs65b allocated for HEC

Miftah said that despite several hurdles in the country, Rs65 billion has been earmarked for the Higher Education Commission (HEC). Other than that, Rs44 billion has been earmarked for the development projects of HEC, which is 67% higher in line with the government’s commitment towards the youngsters of the country.

“We are trying to convince the provinces to further focus on the development of the higher education in their provinces,” he added.

Energy sector

Moving forward, Miftah said Rs71 billion have been allocated for the payment of arrears of the petroleum sector, and the gas rate for the industrial sector will be announced soon.

Imposition of taxes

Miftah also shared that the government has suggested increasing the tax on banking companies to 39%, including 42% super tax, while the foreign nationals doing business in Pakistan will have to pay taxes.

The finance minister also proposed to increase the tax rate on non-filers from 100% to 200% for vehicles having horsepower greater than 1,600cc.

The government has also proposed an advance tax on 1,600 cars and a 2% additional tax on electronic engine cars, he said.

The government has also suggested revising the tax slab for salaried people and increased the cap to Rs100,000.

Miftah said the tax imposed on Behbood Saving Certificate and Pensioners Benefit Account has been proposed to be dropped to 5% from 10%.

The tax on small-scale retailers has been proposed to be fixed, which will range from Rs3,000-10,000 and will be collected through their electricity bills, said Miftah.

It has also been suggested that the filers who send money abroad through credit, debit, or prepaid cards will have to pay 1% withholding tax, while for a similar transaction, non-filers will be charged 2% tax, he said.

However, the withholding tax on credit, debit and prepaid cards can be adjusted later on, he said.

The finance minister proposed that families using less than 200 units of electricity will be given loans in easy instalments for purchasing solar panels, while the government is also considering abolishing sales tax on agricultural machinery and seeds.