Islamabad:
The Federal Government shared approximately RS17.5 billion on a new budgetary framework with its key ally, the Popular Party of Pakistan, which supported a 18% increase in defense spending due to tensions with India, but described the insufficient development allocation.
Like this year, the Government plans to present a fiscal stabilization budget, which is being built around a very high primary surplus goal, according to an informative session given to the PPP delegation, led by Bilawal Bhutto Zarari.
The PPP, which provides crucial support to the government in the National Assembly, met with Prime Minister Shehbaz Sharif and his economic team to discuss budgetary issues.
The budget size is less than RS18 billion, which is lower than this year’s budget due to the strong reduction in interest expenses of an 11% cut in the policy rate by the Central Bank.
However, there was a consensus between the PML-N and the PPP to increase the defense budget due to the recent wave of tensions with India, the sources said. They said the PPP supported the proposal to increase the defense budget by 18% to more than RS2.5 billion in the light of prevailing security threats.
Both parties had divergent opinions about the public sector development program of the next fiscal year. The Government has proposed RS1 Billions of PSDP; However, the PPP requested a larger assignment.
For this fiscal year, RS1.1 billion had been assigned, but the expense remained far behind the allocation. One of the participants suggested establishing the PSDP at the real expense level of this year, which will be significantly lower than the assignment proposed by RS1 billion.
The planning minister, Ahsan IQBAL, declined to comment on the PPP reservation on the allocation of low development budget.
The Government plans to maintain fiscal discipline and create a surplus of primary budget at twice that this fiscal year as part of its understanding with the IMF to reduce debt load.
Prime Minister Shehbaz Sharif constituted a committee under the presidency of the Vice Primer Minister Ishaq Dar to build a consensus between the PPP and the PML-N in the next budget. The budget will be presented at the National Assembly before EID holidays.
Pensions could be increased by 7% and it is proposed that wages at this stage are collected only 6% aimed at satisfying the IMF demand to maintain expenses related to frozen employees at the level of this year in terms of the size of the economy.
However, both proposed increases can increase from 6% and 7% levels, sources said. Average inflation is expected to remain around 5% and the government has linked the increase in wages with the inflation rate.
Some members of the PPP delegation also described the tax objective proposed by RS14.3 billion RS14.3 billion rapias unrealistic due to a decelerating economy, which faces business and negative growth in large -scale manufacturing, the sources said.
The PPP also asked the government to prioritize sectors that need to be protected and promoted to obtain economic growth. He advised the government not to take adverse measures that can damage the agricultural sector, the sources said.
The PPP also sought fiscal relief for the salaried class, which was negatively affected by strong taxes in the last budget.
The sources told The Express PAkGazette that the Government can impose income tax on high -end pensioners, but is considering providing some relief to marginalized salaried people by improving their tax exemption threshold and also reducing fees against several slabs.
There are proposals to introduce income tax in pensioners and, at the same time, reduce rates for the salaried class, subject to the authorization of the IMF at the end of this month, according to a senior official of the Federal Income Board.
According to these discussions, the current tax monthly salary limit can be improved from RS50,000 to just over RS83,000. Due to the progressivity in the slabs, their benefit will also be available for people who obtain higher income. The discussions are also being carried out to reduce the income tax rate of 2.5% compared to all existing slab rates. This will effectively reduce the General Effective Income Tax rate by 3%, officials said.
It is also recommended to increase income levels against each slab rate to increase the load, sources said.
The salaried class had been more affected in the last budget for the government of Prime Minister Shehbaz Sharif. The Government has slapped a 35% tax on monthly income of more than RS333,000, which could be reduced by 2.5% in addition to increasing tax free threshold.
The 5% tax rate had been imposed on a monthly income of RS100,000, which could also be adjusted down. With a monthly income of RS183,000, the government had slapped the income tax of 15%, which could be reduced to 12.5%.
In the monthly income of more than RS267,000, the Government charges 25% of the Income Tax, which could be reduced to 22.5%. There is also a recommendation to introduce a new slab at a rate of 20%, but this may not go through the IMF scrutiny that is not in favor of having more than four slabs.
In monthly income of up to RS333,000, the tax rate is 30%, which could be reduced to 27.5%.
The government should relieve the salaried class and go after merchants, said PML-N senator, Anusha Rehman on Monday.
According to the Express PAkGazette Report, the wage class paid RS391 billion income taxes in just nine months, which was equal to 10% of the total income tax paid throughout the Pakistan. The merchants paid only RS26 billion, only 0.6% of the total collection of income taxes.
The senior FBR official said the pension was a source of income, which must be taxed. The proposal to tax pensions had also been floated last year, but subsequently archived. The consideration is that, compared to normal salaried income, pension tax level must be at least four times less.
Compared to the current level of monthly income -free income of RS50,000, the authorities wish to tax the pensions of more than RS200,000 per month. If approved, this would only hit high-end pensioners, mostly retired judges, three-star general and retired bureaucrats 21-22.
For next fiscal year, the Government plans to establish a fiscal objective of RS14.3 billion. This is RS2 billion or 16% higher than the target reviewed this year. The Government expects RS1.5 billion or additional collection of 12% to occur due to the nominal increase in the size of the economy.
However, the IMF is asking the FBR to end the proposals to raise the additional 4% or more than 500 billion taxes, according to the sources.
The sources said that the application of the FBR has strengthened, which is evident from the 26% annual growth in collection despite 7% nominal economic growth. They believed that the government did not need any measure, but the fund was asking for measures.
Meanwhile, the Senate’s Permanent Finance Committee heard on Monday the demands related to the budget of several businesses.
The Poulry association revealed that the FBR was charging taxes from RS5,190 to a haven father, who was abnormally high. The president of FBR, rashid langial, said he reviewed the issue before the budget.
The Pakistan Dairy Association has demanded again to reduce the 5% packaged milk sales tax from the highest rate in the world 18%, since the tax imposed last year has negatively affected sales. Rashid Langial told the committee that three proposals were discussed to reduce the rate to 5%, 10%or 15%, but a decision has not been made.
FBB Fiscal Policy (Member) Dr. Najeb Memon said that the reduction of 5% sales tax rate would bow to revenues at RS20 billion to RS30 billion. The association was of the opinion that with sales lowering, the FBR was no longer achieving the desired results.
The representative of the Council of Jues de Fruites, Atika Mir, recommended to reduce federal special tax rates to 15% of the current 20%, since the strong taxes have cumulatively reduced the sales of the companies by 45% in the last two years. She said the highest taxes also affected farmers due to a 66% reduction in the demand for mangoes to make juices.
The Government, which faces a great deficit, on Saturday took an extraordinary measure and promulgated a presidential ordinance to immediately recover the taxes of the taxpayers’ bank accounts after the decisions of the higher courts and the Supreme Court of Pakistan.
Prime Minister Shehbaz Sharif ordered the Ministry of Information on Monday to inform the public about the true perspective of bringing the ordinance.
