ISLAMABAD: Finance Minister Senator Ishaq Dar on Saturday announced to increase the pension reform and tax collection from Rs 9200 billion to Rs 9415 billion while concluding the debate on the budget.
He said the growing pension budget had become unsustainable and announced several pension reforms, including the creation of a pension fund. He said rules and regulations for the fund were being drawn up, and several pensions for retirees in grade 17 and above would be abolished. He said that the retired officers will get only one pension now. After the death of the pensioner and his spouse, the dependents will get pension only for 10 years. In case of re-employment after retirement, the officer can opt for pension or salary. He asserted that tough decisions are inevitable to take the country in the right direction.
Experts believe that to please the IMF, the government increased tax rates on the salaried and non-salaried classes, higher income classes, property sales, fertilizers and sugary drinks to increase the national budget. An additional 215 billion rupees could be obtained. .
The government withdrew the tax amnesty scheme under Section 111(4) of the Income Tax Act, which allows the budget to be brought into line with IMF guidelines without questioning the limit of remittances received from abroad. increased to $100,000. The government always claimed that it was not a tax amnesty but finally had to bow to the demands of the IMF.
Ishaq Dar expressed confidence that the ninth review with the International Monetary Fund under the Expanded Fund facility would be completed soon as all the conditions of the fund have already been met. The minister recalled that the country had demonstrated full compliance with all prior actions but could not be fulfilled due to gap in external financing. However, he said that Prime Minister Shehbaz Sharif recently held two meetings with the IMF managing director in Paris, during which it was agreed that both sides would make a final effort to complete the pending review.
Although, the minister announced the fiscal measures on the floor of the National Assembly, the preparation of the amended Finance Bill 2023-24 was still underway and was expected to be approved on Sunday (today).
The finance minister said that the two sides held consultations in the last three days. He said he had agreed to take additional tax measures worth Rs 215 billion, making it clear that it would not burden the poor people.
Similarly, he said that he has agreed to reduce current government expenditure by Rs 85 billion. He clarified that this shortfall will not affect the annual development plan as well as the salaries and pensions of government employees. The FBR had proposed additional taxes of Rs 223 billion, so overall additional tax measures would raise Rs 438 billion to the national exchequer. Dar said that the IMF has agreed with Pakistan’s approach.
The finance minister said that we believe in complete transparency and that is why the details of the meetings with the IMF are being shared with the public. He said that after the agreement with the IMF, it will also be uploaded on the website of the Ministry of Finance. Ishaq Dar said that as a result of the agreement reached with the IMF, the annual tax collection target of FBR is being increased from Rs.9200 billion to Rs.9415 billion. The total size of the budget will now be Rs 14,480 billion. He believed that these measures will also help in reducing the fiscal deficit by 300 billion rupees.
The Finance Minister added that the government will continue to supply essential commodities to the people at reduced rates through the Utility Stores Corporation. 35 billion rupees were allocated for this purpose, including 5 billion rupees for the Ramadan package and 30 billion rupees for the Prime Minister’s relief package. He said that the amount allocated for the Benazir Income Support Program is also being changed to 466 billion rupees.
Appreciating the services and sacrifices of the armed forces in the defense of the country, Ishaq Dar promised that adequate funds would be released for them in the budget on time. He said that 30 billion rupees have been allocated to deal with the problem of climate change and food security. He said that 30 billion rupees have been earmarked for solarization of agricultural tubewells and 31 billion rupees for youth. Dar announced that the investment limit on benefit accounts of pensioners under the National Savings Scheme is also being increased from Rs 50 lakh to Rs 75 lakh.
Highlighting the contribution of overseas Pakistanis, the minister said that Rs 80 billion has been earmarked to facilitate their remittances and this will also include a reward scheme. He said that super tax was introduced last year and it will be maintained till the next financial year. He said that they have made it progressive by removing discrimination and adding more slabs. Regarding the 0.6 percent tax on cash withdrawals for non-filers, he said it was important to document the economy and increase the tax-to-GDP ratio.
For salaried and non-salaried high income posts, the FBR has proposed a rate hike of 2.5 percent. Where the taxable income exceeds Rs 1,200,000 but does not exceed Rs 2,400,000, there will be a proposed rate of 20 per cent as against the existing rate of 17.5 per cent. Where taxable income exceeds Rs 2,400,000 but does not exceed Rs 3,000,000, 25 per cent will be proposed as against the existing rate of 22.5 per cent.
Where the taxable income exceeds Rs 3,000,000 but does not exceed Rs 4,000,000, the proposed rate will be 30pc as against 27.5pc. Where the taxable income exceeds Rs 4,000,000 but does not exceed Rs 6,000,000, the proposed rate will be 35 per cent as against the existing rate of 32.5 per cent. Where taxable income exceeds Rs 6,000,000, the proposed rate will be 37.5 per cent as against the existing rate of 35 per cent.
The petroleum levy on petrol and diesel was proposed to Rs 60 per liter from the existing limit of Rs 50 per litre. However, the non-tax revenue target for the next fiscal year remained unchanged at Rs 2.9 trillion.
The finance minister clarified that tax on bonus shares and cash dividends will be paid by shareholders and not companies. He said that the tax on dividend is 15 percent and on bonus shares is 10 percent. He said that windfall gain tax was not levied against any company or individual. This tax will be implemented from 2021. This tax was applicable in many countries and was intended to add value to the system.
Regarding the tax on inefficient fan manufacturers, the finance minister said they are being given six months to upgrade their technology to make energy-efficient fans. He said that the tax of Rs 2000 will be implemented from next January. The minister pointed out that 62,000 tax cases worth Rs 3.2 trillion are pending in the courts. He said that alternative dispute resolution system is being strengthened to deal with this problem. A three-member committee headed by a retired judge of the High Court or Supreme Court is being formed to resolve tax-related issues. He said that the decisions of the committee will not be binding on the individual taxpayers but on the FBR.
Ishaq Dar said that the government will continue to implement austerity measures during the next financial year. The Finance Minister announced that import restrictions have been withdrawn to address the concerns of the business community. These sanctions were imposed last year to ensure payment of external liabilities. He said that the government’s focus will now be on increasing the country’s foreign exchange reserves.
The National Assembly also approved the demands for grants for various ministries and departments. Finance Minister Ishaq Dar presented the demand for grants. The House rejected the cut motion presented by the opposition on the Cabinet Division and the Ministry of Communications, Energy, Information and Broadcasting, Interior and Narcotics Control.
Regarding the cut motion against the Information and Broadcasting Division, Dar rejected the impression that Radio Pakistan employees had not been paid their salaries for the past several months. He said that the Economic Coordination Committee had recently approved a supplementary grant for payment of salaries.
The government proposed to levy 5% Federal Excise Duty (FED) on fertilizers and diammonium phosphate (DAP) to generate additional revenue of Rs 35 billion. The government increased the FED on sugary drinks from 10 to 20 percent.
Through amendments in the Finance Bill 2023, the rate of Withholding Tax (WT) on sale and purchase of property has been increased from 1 to 2 percent. This initiative is expected to raise an additional amount of Rs 45 billion. In the Budget (2023-24), final withholding tax of 2 per cent on purchase of immovable property by non-resident POC/NICOP holders was waived if they were purchased with foreign remittances.
Continuation of Rs 170 billion taxation measures in February 2023 will impact revenue of Rs 680 billion in 2023-24. FBR has taken additional measures of Rs 215 billion through the amended Finance Bill 2023. Therefore, the cumulative revenue impact of all initiatives including the mini budget will be over Rs 1,115 billion in 2023-24.
In the 2023-24 budget, total taxation measures were Rs 223 billion with relief of Rs 23 billion, so the net impact of tax measures is Rs 200 billion.
Income tax measures were 185 billion rupees while relief measures were 10 billion rupees. The net effect comes to Rs 175 billion.
The amount of sales tax measures was Rs 22 billion, while the cumulative effect of zero relief measures and sales tax measures was Rs 22 billion.
Customs duty measures totaling Rs 12 billion and relief measures of Rs 13 billion resulted in a net relief of Rs 1 billion. In the Budget (2023-24), federal excise duty measures of Rs 4 billion were introduced with no relief.
