KARACHI: Pakistan’s Finance Minister Asad Umar presented the finance supplementary (amendment) bill on Tuesday for the remaining part of fiscal year 2018-19 in a move to protect the “poorest of the poor” and shift the tax burden on the shoulders of the country’s richest.
The fiscal budget was announced by the outgoing Pakistan Muslim League Nawaz Government in May 2018, before the end of its tenure.
Umar termed the budget presented by the previous government “illogical and contrary to reality.” Changes in the budget are “inevitable in the present times”, he told the parliament.
“The measures are being taken to get the country’s economy out of the Intensive Care Unit,” Umar said. “If measures are not taken now, the budget deficit and current account deficit would be enormous, at an alarming level.”
Asad Umar warned: “The most dangerous situation is that if we continue with the current trend the budget deficit will increase to PKR2.9 trillion, up by 7.2 percent, by the end of the current fiscal year.
“Public debt is PKR28.3 trillion at present, which was PKR16 trillion five years ago,” he added.
Pakistan external account position remains under pressure owing to insufficient inflows.
“Pakistan’s current account deficit last fiscal year was $18.1 billion, and for the current fiscal year it is estimated to remain between $18 billion and $21 billion, if we fail to take corrective measures,” Umar said.
The finance minister has announced the cutting of the allocation for public sector development program PSDP from PKR1.03 trillion to PKR725 billion.
“Last year the government had spent PKR661 billion but we will spend PKR725 billion this year,” Umar announced. “Under the public-private sector the federal government will spend PKR50 billion on the development of Karachi city.”
The finance minister said the government is expected to face a revenue shortfall of PKR 350billion which was overstated by the previous government and PKR250 billion more expenditure.
He announced the measures to raise PKR183 billion in additional revenue by “better administrative measures and technical innovations.”
“The previous government had announced it was increasing the petroleum development levy from PKR185 billion to PKR300 billion but this is highly unfair for customers. Therefore we have decided that the government will absorb its impact,” Umar announced.
The finance minister announced he was maintaining some of the previously announced measures for income tax on salaried and non-salaried categories. The tax rate on the income above PKR2.4 million would be taxed at rate of 29 percent.
Umar said: “The government also decided to withdraw certain tax exemptions from prime ministers and ministers.”
Pakistan announced it was increasing duty and tax rates on luxury vehicles, expensive cellphones, cigarettes, and maintaining regulatory duty on import of goods. “The government will absorb the impact of PKR5 billion by waiving 82 tariff lines on the import of essential raw material,” Umar said.
The finance minister also announced the release PKR4.5 billion immediately for the construction of more than 8,000 pending houses for the underprivileged class and another 10,000 houses to be constructed shortly after.
Dispelling all prevailing concerns about the future of the China Pakistan Economic Corridor CPEC, the finance minister categorically said that “the government will protect 100 percent all CPEC projects.”
Reactions:
Former Finance Minister Miftah Ismail, who presented the previous budget, tweeted: “Very disappointed that the PTI government has lifted the ban on non-taxpayers from buying new cars and expensive land. We were under intense pressure from auto companies and land developers but we didn’t budge. But today I am sorry to say automakers have won and Pakistani taxpayers lost.”
Dr. Ikram-ul-Haq, senior economist and expert on tax matters, said: “Additional revenue of about PKR189 is expected. This is not very significant. Innovative measure like ‘excess profit tax’ on cartels and super tax of 8 percent plus bridging tax gap of nearly 70 percent can yield over PKR500 billion.”
Dr. Ayub Mehar, research economist at Asian Development Bank Institute, said: “It is historically unfortunate that all the supplementary bills have curtailed the public sector development allocations.
“The finance minister has announced to increase duty on the import of 400 items but it will not be easy for the country because being a member of WTO we will have to give justification with solid reasons.”
Ali A. Rahim, senior tax expert, said: “The Finance Minister Asad Umar has tried to balanced the budget with more realistic figures.”
