Govt unveils austerity budget with Rs1.12tn in additional taxes

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ISLAMABAD: The Pakistan Tehreek-e-Insaf (PTI) led federal government on Tuesday unveiled a Rs7,022 billion austerity budget for the fiscal year 2019-20, setting ambitious tax collection targets to stabilise a faltering economy.

The budget sets an ambitious Rs5,555bn target for the Federal Board of Revenue—a 25% increase or Rs1.12 trillion in additional taxes from the previous year.

The increased FBR revenue would be supported by a Rs346bn increase in direct and Rs773bn rise in indirect taxes from the previous budget, which would mean Rs407.7bn in additional sales tax revenue, Rs363bn increase in income tax collection, Rs265.5bn rise in customs duties, and a rise of Rs99bn in federal excise duties as compared to the previous year.

“A challenging target of Rs5,555bn FBR revenue collection will be combined with aggressive expenditure controls to reduce primary deficit to 0.6% of GDP,” said State Minister for Revenue Hammad Azhar presenting the budget in the National Assembly.

He said the ambitious increase in tax revenue would be combined with “unprecedented reduction in expenditure” by both the civil administration and the military to bridge the widening gap between the government’s revenue and expenses.

“We have slashed the civil budget by five percent while the military budget will remain the same,” he added as he announced the details of the plan.

“The financial year 2019-2020 will be a year for economic stability. We will make some tough decisions and will try to save the poor public from the effects of those tough decisions.”

The government says the budgetary proposals are focused on economic stability and sustainable growth, with an emphasis on austerity, revenue generation, and uplift of downtrodden segments of society.

The special budget session of the National Assembly was marred by protests from opposition parties, which accused the government of presenting a budget “dictated” by the International Monetary Fund.

The government has secured a provisional agreement for a $6bn bailout from the IMF, contingent on measures to cut a rising budget deficit.


Budget features

  • Total budget outlay Rs7,022bn—30% greater than previous year
  • Rs1,863 billion fixed for Public Sector Development Programme
  • Budget deficit to be Rs3,560 billion
  • Tax revenue target set at Rs5,822bn
  • FBR tax revenue target set at Rs5,555bn
  • Non-tax revenue target set at Rs894.5bn
  • Current expenditure set at Rs6,192bn
  • Development expenditure set at Rs843.4bn
  • Rs701bn earmarked for Federal PSDP
  • Rs1,152bn fixed for Defence Affairs and Services expenditures
  • Civil government expenditure to be Rs431bn
  • Higher education expenditure of Rs45bn
  • Government sets aside Rs271bn for subsidies
  • Inflation targets set at between 5 and 7 per cent
  • General sales tax on goods to remain at 17 percent
  • 3% value added tax on import of mobile phones eliminated
  • Rs5,200 FED proposed on every 10,000 cigarettes
  • Sales tax on sugar proposed to be be increased to 17 percent
  • Rs40 billion subsidy to be given for electricity, gas
  • Development expenditure for tribal districts fixed at Rs152 billion
  • Rs45.5 billion allocated for Karachi’s development programme
  • Stipend through BISP scheme increased from Rs5,000 to Rs5,500
  • Govt aims to eliminate circular debt in coming years
  • The government has formed a new ministry to eliminate poverty, which will introduce programs for social safety. People benefiting from the Ehsaas program include the poor, orphaned, homeless, and disabled sectors of the population.
  • Ration card scheme being introduced. 80,000 people to benefit from this scheme with interest-free loans.

Taxes: 

  • Minimum taxable income for salaried class to be Rs0.6mn per annum
  • 11 progressive tax slabs ranging from 5 to 35 percent proposed for salaried class
  • Minimum taxable income for salaried class to be Rs0.4mn p.a.
  • Eight progressive tax slabs ranging from 5 to 35 percent proposed for non-salaried class
  • Non-filers no more restricted from purchasing property
  • Non-filers to be allowed to purchase property of over Rs5mn
  • Corporate tax to remain at 29 percent for next two years

Wages:

  • 10 per cent increase in salaries for government employees from grade 1 to 16, including armed forces employees
  • 5 per cent ad hoc relief for government employees from grade 17 to 20
  • No increase in salaries for civilian government employees from grade 21 to 22
  • Minimum wage set at Rs17,500
  • Pensions increased by 10 per cent
  • Ministers agree to voluntary 10 per cent cut in salaries