Daily Times

The federal government on Friday presented largely tax-free budget for fiscal year 2020-21 with a total outlay of Rs 7.137 trillion amid protest by opposition members in the National Assembly.

Despite unprecedented financial constraints and economic slowdown caused by the coronavirus pandemic, the federal government unveiled a growth- and relief-oriented budget for the fiscal year 2020-21. “No new taxes have been introduced in the budget for the upcoming fiscal year to provide relief to the common people and boost economic activities across the country,” Federal Minister for Industries and Production Hammad Azhar said while presenting the federal budget in the National Assembly. He said the federal budget focuses on striking a balance between corona expenditure and fiscal deficit, keeping primary balance at sustainable level and protection of social spending under the Ehsaas Programme to support the vulnerable segments of the society.

In addition, he said, resource mobilization without unnecessary changes in tax structure, successful continuation of International Monetary Fund (IMF) programme, carrying forward of stimulus package, keeping development budget at adequate level to inject economic growth, and according importance to defence and internal security of the country were the main features of the budget.

The minister said the budget also provided funds for housing initiatives, including the Naya Pakistan Housing Project and special areas i.e erstwhile FATA (Federally Administered Tribal Areas), Azad Jammu and Kashmir and Gilgit Baltistan while special initiatives launched by Prime Minister Imran Khan like Kamyab Jawan, Sehat Card, Billion Tree Tsunami have also been protected

The minister said during the fiscal year 2020-21, the government had set the revenue collection target of Rs 6,573 billion, including Rs 4,963 billion tax revenues and Rs 1,610 non-tax revenues. He said against the total Rs 7.137 trillion federal expenditures, the budget deficit will be recorded at Rs 3.437 trillion during the fiscal year 2020-21, which was 7% of the gross domestic product (GDP) while the primary balance would remain at 0.5 percent. He said funds for Ehsaas Programme have been increased from Rs 187 billion last year to Rs 208 billion for the current year. Likewise, he said, the government set aside Rs 179 billion for provision of subsidies on energy, food and others to ensure relief to the low income people. The targeted subsidy would be provided to the deserving segments of the society, he added.

Hammad Azhar said the government also intended to review the National Finance Commission and fulfill its commitment that were made at the merger of erstwhile FATA in the Khyber Pakhtunkhwa province. He said effective measures have also been taken to enhance remittances, improve railway infrastructure, promote e-governance, and provide funds for the welfare of artists.

The minister said the allocations for Higher Education Commission had also been increased from Rs 59 billion to Rs 64 billion, while the government allocated Rs 55 billion for Azad Jammu and Kashmir, Rs 32 billion for Gilgit Baltistan, and Rs 56 billion for the merged districts of KP. In addition, the Sindh and Balochistan provinces would be given Rs 19 billion and Rs 10 billion respectively. He said the government would try to enhance revenue collection without any change in the existing taxes.

For providing relief to the construction industry, he said, the government would provide resources for the New Pakistan Housing Project. The minister said the GDP growth remained negative 0.4 percent during the current fiscal year and the government set its target for next year at 2.1 percent.

The current account deficit, he said, would be curtailed at 4.4. percent of the GDP and inflation to be brought down from 9.1 percent to 6.5 percent while the Foreign Direct Investment would be increased by 25 percent during the fiscal year 2020-21.

He said keeping in view the financial crisis owing to the coronavirus outbreak, the government had developed the PSDP in a way to do away with extra spending, providing 73 percent funds for the ongoing programmes and 27 percent for new schemes.

He said the current account deficit during the first nine months of the current fiscal year (before COVID-19 outbreak), he said, reduced by 73 percent from $10 billion to $3 billion. Likewise, the trade deficit decreased by 31 percent from $21 billion to $15 billion and the budget deficit from 5 percent to 3.8 percent with primary surplus of 0.4 percent. The revenue collection increased by 17 percent as the government was in a position to collect revenues of Rs 4,800 billion, he added. Similarly, he said, the non-tax revenues witnessed 134 percent increase to Rs 1,610 billion against the target of Rs 1,162 billion. He said during the same period, the government repaid $6 billion against $4 billion last year. It also paid interest of Rs 5,000 billion on the loans borrowed by the previous governments, which had adverse impacts on the national exchequer. He said the government took many initiatives, including austerity measures, restructuring of public institutions and introducing reforms to incentivize businesses, besides taking concrete steps against anti-money laundering and terror financing.

The minister said the coronavirus had badly damaged the industry and reduced the GDP by Rs 3,300 billion, pushing the growth rate to negative 0.4 percent while the budget deficit mounted to 9.1 percent from 7.1 percent and revenue collection reduced by Rs 900 billion, besides having negative impact on the exports and remittances.

The minister while announcing taxation proposals before the parliament, said Pakistan’s tax-to-GDP ratio is 11%, which was the lowest among the emerging countries and had been stagnant over the past 20 years. For improving the situation, he said, the government initiated a reforms process, comprising of a holistic strategy combining policy and administrative reforms to eliminate the distortions and boost quality revenue collection.

The efforts, he added, had so far produced encouraging results as the historical trend of Pakistan’s import-led growth had been replaced with high domestic-led growth, unprecedented refunds had been issued which were 119% higher than last year while the narrow tax base had been expanded by bringing retailers into the tax net, and successful installation of Point of Sales (POS) system at 6,616 retail outlets with the aim to increase the number to 15,000 by December this year.

The minister said as Covid-19 had affected the business of common man, it was proposed to decrease sales tax rate from 14% to 12 % for the business registered with POS. He said the hotel and restaurant industry had been badly affected due to Covid-19 and it was proposed to reduce minimum tax for the industry from 1.5% to 0.5 % for six months (April to September 2020).

Hammad Azhar said a tax return mobile app had been launched to facilitate individuals and salaried persons, which led to an increase of 37% in the number of income tax return filers. An automated system of payment of taxes through online platforms had been introduced, he added. In addition, the minister said, the government introduced amendment in the Twelfth Schedule to Sales Tax Act, 1990- Exclusion of Manufacturers and made insertion of the tax Laws Amendment Ordinance 2019 Relating to Tax Concessions and Exemptions to Gwadar Port and Gwadar Free Zone, in The Finance Bill 2020 and also enlarged the Scope of Seizure of Non-Duty Paid Items Subject to FED.

For encouraging foreign remittances, he said, the government proposed withdrawal of withholding tax on cash withdrawal or on issuance of banking instruments / transfers from a domestic bank account to the extent of remittance amount received from abroad in such account in a year may be exempted. The minister announced extension in the concession and exemptions available to the developers of special economic zones to co-developers, besides announcing tax reduction for toll manufacturing. He also announced several measures for broadening of tax base and relief in the sales tax on property income.