KARACHI: Pakistan on Friday said it would impose no new taxes in the 2020-21 financial year as it presented a Rs7.14 trillion annual budget with a fiscal deficit estimate of Rs3.43, or seven percent of gross domestic product (GDP).
Pakistan is currently grappling with a fast-growing coronavirus crisis, with a total tally of 125,933 cases and 2,463 fatalities as of Friday evening.
“No new taxes have been proposed in the next budget in order to provide relief to the masses,” Industries Minister Hammad Azhar announced on the floor of the National Assembly as opposition politicians chanted anti-government slogans. “Proposed tax incentives would support economic activities,” he added.
Azhar said the total revenue for the next fiscal year was estimated at Rs6.6 trillion of which the country’s main tax collection body, the Federal Board of Revenue’s share would be Rs4.96 trillion while non-tax revenue would be Rs1.6 trillion.
“Federal expenditure has been estimated at Rs7.137 trillion. The budget deficit would be Rs3.44 trillion, that is 9 percent of GDP, while the primary balance would be 0.5 percent,” Azhar said. “The budget deficit declined from 5 percent to 3.8 percent. The IMF gave us an extended facility of Rs6 billion and remittances increased from 16 to 17 billion rupees,” the minister announced.
He said the government had allocated Rs70 billion to fight the coronavirus while Rs13 billion had been set aside for four federally administered hospitals in Lahore and Karachi.
The size of the Public Sector Development Programme (PSDP) for 2020-21 is Rs1.32 trillion. Out of this, Rs 676 billion has been allocated to the provinces while federal PSDP has been estimated at Rs650 billion. The allocation for defence was increased to around Rs1.3 trillion.
The net capital receipts for 2020-21 have been estimated at Rs1.5 trillion against budget estimates of Rs831.7 billion in 2019-20, reflecting an increase of 75.93 percent.
The government has also allocated Rs208 billion for its major poverty alleviation initiative, the Ehsaas Programme. The allocation for higher education is Rs64 billion while Rs180 billion has been allocated for the energy and food sectors.
To facilitate business activity, the government has reduced customs duty on 40 raw materials of various industries while under a tariff rationalization programme, customs duty would be reduced on 90 tariff lines from 11% to 3% and 0%.
Major economic experts described the budget as “unrealistic" and "ambitious."
“Irrational tax target shows no rational thinking,” Dr Ikram ul Haq, a Lahore-based economist and tax expert, told Arab News. “This budget admits that due to the failure of fundamental reforms we suffered before the Covid-19 pandemic and in the post-coronavirus period there is nothing to start public projects to revive the economy and generate employment.”
Experts also noted with concern that no relief was announced for the salaried class.
“They should have slashed sales tax and tax relief for the salaried class and fixed income groups,” Haq said. “Fiscal deficit has widened and debt servicing further swelled. So we have gone from bad to worse.”
“We think that the targets of growth can not be achieved in the current situation because the world is going through economic slowdown and we are also victims,” Agha Shahab Ahmed Khan, the president of the Karachi Chamber of Commerce and Industry, said in a video message. “The manufacturing sector that provides job opportunities has been ignored in this budget.”
Small businesses affected by lockdown restrictions have also expressed disappointment.  
“Small traders and cottage industries have been ignored in the budget,” said Mehmood Hamid, the president of the All-Pakistan Organization of Small Traders and Cottage Industries, said.