The coalition government headed by the Pakistan Muslim League-Nawaz (PML-N) on Friday presented its “growth and investment-oriented” budget for Financial Year 2022-23 in the National Assembly.
Miftah Ismail, while presenting the budget proposals, said that out of total Rs9.502 trillion budget, an amount of Rs3,950 billion had been allocated for debt servicing and Rs800 billion earmarked for the Public Sector Development Programme (PSDP 2022-23).
He said an amount of Rs1,523 billion had been earmarked for defence expenditures, Rs550 billion for civil administration and Rs530 billion for pensions. Similarly, Rs699 billion had been proposed for providing targeted subsidies to the poor segments of society.
Miftah said that owing to the high petroleum prices, people earning less than Rs40,000 will be given relief of Rs2,000 per month, which will continue in FY23 budget as well. He said that taxes will be imposed on goods that are mainly consumed by the rich to provide relief to the common man.
The finance minister said that the federal government has established pension fund and released Rs10 billion for it.
Miftah Ismail said that Prime Minister Shehbaz Sharif wanted to extend maximum relief to the people, especially the poor during these difficult times.
“For this purpose, the government has taken several steps to provide subsidy and assistance. However, the continuation of this (relief) will require more resources,” he added.
He emphasised on the need to impose special tax on higher income earnings in order to divert the resources to the poor people.
“Our budget philosophy is to enhance agriculture production, especially the edible oil in order to reduce agricultural imports. We need to promote industries to bolster exports and earn valuable foreign exchange,” he added. This, he said, will help address the issue of balance of payments on permanent basis.
The finance minister announced that owing to the high inflation in the country, the government has increased salaries for its employees by 15 per cent, adding that the pensions have also been raised by 5 per cent.
The minister said that FBR revenue has been estimated at Rs7,004 billion for the next fiscal year. “This includes Rs4,100 billion share of provinces. The net revenue with the federal government will be Rs4,904 billion. The non-tax revenue will be Rs2,000 billion.”
The finance minister said that austerity is the top priority of the present government. “Reducing government’s expenditure is part of this budget and we are taking concrete steps in this regard.”
He said that the petrol quota of cabinet members and government officials will be reduced by 40 per cent. “There will also be ban on foreign tours under government expense, except the important ones.”
Miftah said that the tax exemption slab for salaried class has also been increased from Rs600,000 to Rs1.2 million. “This step will benefit the salaried people and enhance business activities,” he added.
He said that tax on profit of Saving Certificates, Pensioners Benefit Accounts and martyrs family welfare accounts has been slashed from 10 to 5 per cent.
According to the vision of the premier, the finance minister said that a medium term macro economic framework has been prepared to put the economy on the path of development.
He expressed the confidence that the government will be able to put the economy in the right direction through the framework. “Our biggest challenge is to achieve growth without Current Account Deficit. Therefore, at least five per cent will be achieved without disturbing the balance,” he added.
The minister said that a new fixed income and sales tax system is being introduced for small retailers. “Under this system, tax ranging from Rs3,000 to Rs10,000 will be collected through electricity bills. This will be a final settlement and FBR will not be entitled to ask any questions about this tax,” he added.
Miftah said that there is a proposal to increase initial depreciation charges for industries and other businesses from 50 percent to 100 percent in the first year.
Besides, he said all the taxes from industrial units during import of raw material will be considered as adjustable to protect working capital of the business community.
The finance minister said that taxes on cigarettes have been increased. ”Targeting Rs200 billion from cigarettes in FY23 compared to Rs150 billion in FY22,” he added.
The finance minister announced formation of National Youth Commission in order to utilize the potential of the youth, adding that various schemes have been proposed for the youth.
He said that a coordinated system is being introduced to enhance the role of educated youth in the country’s development. “More than two million job opportunities will be provided to the youth through youth employment policy.”
Miftah said that a scheme will also be started to promote youth entrepreneurship under which interest free loans of up to Rs500,000 to Rs25 million will be provided on easy installments.
He said that 25 percent quota has been fixed for women in the scheme, adding that women will be given training on priority basis in hi-tech in order to ensure the economic empowerment.
He further said that youth development centres will be established across the country.
The finance minister said that a green youth movement will be started in order to engage the youth in activities aimed at environment protection.
“Funds will be set aside to provide laptops on merit and on installments besides 250 mini sports stadium will be constructed in the country,” he added.
He said that an innovation league will be introduced in order to enhance the capabilities of the youth, adding that a talent hunt and sports drive programme will be framed for the youth in the age bracket of 11 and 25 years.
Miftah Ismail said the GDP will be enhanced from Rs67 trillion to Rs78.3 trillion during the next financial year.
“We are trying to reduce inflation by better fiscal and monetary policies. The inflation will be reduced 11.5 per cent during the next fiscal year.”
He said that the tax to GDP ratio is estimated to the increase to 9.2 percent from the current 8.6 percent during the next financial year. “We had left this ratio at 11.1 per cent in the year 2017-18,” he recalled.
Miftah said that the overall deficit which currently stands at 8.6 percent will be gradually brought down. “This will be brought down to 4.9 percent in the next fiscal year. Similarly, the overall primary balance which is currently -2.4 percent of the GDP will be improved to 0.19 per cent.”
He said that the imports, which are expected to be 76 billion dollars during the current fiscal year, will be reduced to 70 billion dollars in the next financial year.
“At present, exports are 31.3 billion dollars, which will be enhanced to 35 billion dollars in the next fiscal year. The current account balance will be reduced to -2.2 percent of the GDP from the current -4.1 percent.”
Miftah said that the remittances, which will remain 31.1 billion dollars during the current fiscal year, are expected to rise to 33.2 billion dollars in the upcoming fiscal year.
According to the government, this budget would lay “the foundation for future growth budgets” with its focus on exports and agriculture.
The finance minister said that the energy sector has pivotal importance for the people as well as the industries and trade. “For these sectors and the people, we gave an additional subsidy of Rs214 billion,” he added.
He said that Rs573 have been earmarked in the next financial year so that the people could afford the electricity in the harsh weather of summer.
Miftah said that the government released Rs248 billion for the payment of outstanding amounts in the petroleum sector and Rs71 billion will be provided in the next fiscal year.
“We will soon announce the new gas tariffs which will be aimed at providing gas to the industries at competitive rates which will help in bolster exports.”
The finance minister said that the government has earmarked Rs65 billion in the current budget for Higher Education Commission. “In addition, Rs44 billion have been allocated for the development schemes of the HEC which is 67 percent higher than the previous year.”
He said that the federal government is encouraging the provinces to fulfil their responsibilities regarding promotion of higher education in the coming years.
“The HEC budget envisages 5,000 scholarships for the students of Balochistan and tribal districts, adding that a separate scholarship scheme has also been included for the coastal areas of the province.
He announced to provide 100,000 laptops on easy instalments to the students across the country. “Funds have also been allocated for provision of state of the art equipment to upgrade education of engineering and technology.”
The minister said that an industrial policy is being introduced in collaboration of Asian Development Bank (ADB) to strengthen industrial base of the country.
He said that the prime minister has directed to immediately clear all claims of exporters. “At present, an amount of Rs40.5 billion is payable to them and we will pay this amount forthwith. Despite financial difficulties, sales tax refunds are also being released immediately.”
He said that Industrial feeders have been exempted from load-shedding to ensure uninterrupted power supply to the industrial sector.
Miftah said that a new strategy is being evolved for the promotion of investment in the country aimed at providing an enabling environment to the investors by doing away with the complex procedure.
“Our government will bring reforms in dispute resolution mechanism to facilitate domestic and foreign investors,” he added.
The finance minister said that that it will be ensured that the mechanism is simple and effective. “For this purpose, best international practices will be adopted,” he added.
He said that these reforms will be introduced in consultation with judiciary so that these could be implemented immediately.
Miftah said that Rs21 billion have been earmarked to enhance production of crops and livestock, adding that the Ministry for Food Security has prepared a three-year growth strategy in collaboration with Planning Commission and provinces.
“This strategy is aimed at enhancing agri-production, making the farmers prosperous, promoting smart agriculture and self-reliance,” he added.
The finance minister said that the film sector has been given the status of an industry as per the film and culture policy 2018. He said that a binding film finance fund is being established to promote the industry, adding that a medical insurance policy is being started for the artists.
He said that a tax holiday is being given to filmmakers while tax rebate for the same period will be given to new cinema houses, production houses and film museums.
“Tax rebate of 10 years will also be given for the export of films and dramas while income of cinema and producers is being exempted from income tax,” he added.
He said that a National Film Institute and Post Film Production facility besides, National Film Studio are being established at a cost of one billion rupees.
He said that foreign filmmakers will be given rebate for entering into joint ventures of films and dramas at the domestic level.
Miftah said that eight percent withholding tax is being waived off on distributors and producers, adding that custom duty exemption of five years will be given for the import of machinery and equipment for films and dramas.
He said that entertainment duty is being abolished and sales tax is being brought to zero for the purchase of equipment related to films and dramas.
He hoped that these steps will help revive the film industry and encourage the new talent to join the field.
Presenting the development priorities, the finance minister said the government will focus on the on-going projects so that the money spent on them is not wasted.
He said that most of the funds are being spent for the development of Balochistan in order to bring at par with other regions.
Miftah said that the PSDP allocation for the provinces, Azad Jammu and Kashmir (AJK) and Gilgit-Baltistan (G-B) has been enhanced to Rs136 billion.
He said that water reservoirs were among the top priorities of the government. “Additional amounts have been earmarked for the early completion of Mohmand and Diamer Basha dams as per the direction of the PM Shehbaz.”
He said road infrastructure connecting Pakistani ports with the Chinese border will be completed, adding that emphasis will be given to the national development and promotion of exports by accelerating work on Special Economic Zones and infrastructure under the CPEC.
The finance minister said that infrastructure development has been government’s top priority keeping in view the requirements of the country. “For this purpose, Rs395 billion have been allocated.”
The minister said that a total amount of Rs183 billion has been set aside for various projects pertaining to energy and water resources. He said that Rs202 billion has been proposed for roads and ports.
He said that construction of the roads will be promoted in cooperation with the private sector.
The finance minister said that the government is working to achieve the targets set under the Sustainable Developments Goals. He said that Rs70 billion have been allocated to serve the under privileged segments of the society and bring ease in the life of common man.
He said that Rs40 billion will also be spent on other schemes aimed at uplifting the social sector.
Miftah said that Rs24 billion have been allocated to provide better health facilities to the people and improve the capacity of health related institutions.
The finance minister said that the government is focusing on the development of IT sector in order to boost its exports, adding that Rs17 billion have been allocated for the sector.
He said that Rs11 billion has been set aside for provision of quality seeds to the farmers and bringing innovation and promoting use of latest machinery in the agriculture sector.
The minister said that development of necessary infrastructure for the Special Economic Zones is part of budgetary proposals for the next fiscal year. “Our aim is to enhance market share in the international markets.”
He said that budget of Rs5 billion have been proposed for investment in value added exports, minerals and other sectors associated with the industries.
He said that one per cent tax will be levied on the income or rent of the immoveable property with a value of Rs25 million and above on the basis of fair market value formula. However, he added, one personal residence of an individual will be exempted from this tax.
He said that advance tax on sale and purchase of properties for filer is being increased from one per cent to two per cent while this ratio for non-filers will be five percent.
For higher income persons or companies, he said, two per cent tax has been proposed on annual income of Rs300 million or above.
Miftah said that advanced tax on luxurious vehicles of 1600cc and above will be enhanced. Furthermore, he added, two per cent advance tax will be imposed on electric vehicles.
Similarly, the finance minister said, the rate of tax for non-filers has been increased from 100 per cent to 200 per cent.