• Tuesday, June 18, 2019

PTI govt set to present toughest-ever ‘austerity budget’

Discussion in 'Pakistan Economy' started by farhan_9909, May 26, 2019.

  1. farhan_9909

    farhan_9909 PROFESSIONAL

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    ISLAMABAD: The government has announced to give the toughest ever austerity budget, having backing of military and civilian leadership, but its ultimate success will hinge upon achieving Rs5.55 trillion tax target that will require an unprecedented annual growth rate of 36%.

    While addressing a press conference on Saturday, Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh also hinted at increasing prices of electricity, gas, petroleum products and further hike in interest rates to contain inflation due to rise in utility prices.

    He said the government will no more be primary source of giving jobs and this responsibility should have to be taken over by the private sector – an indication towards imposing a ban on the government jobs.

    “It will be an austerity budget and army, civilian and private institutions are on the same page. Fiscal consolidation, austerity and revenue mobilisation will be planks of new budget,” added Shaikh. The adviser, who acts as de facto finance minister, would unveil the new budget on June 11 in the National Assembly.

    The energy minister, special assistant to PM on information, minister of state for revenue, the Federal Board of Revenue (FBR) chairman, secretary finance and secretary information were present at the conference, highlighting the importance of the event for the government.

    “Serious, sustained and structured reforms and difficult decisions will be taken in the budget and everyone will participate,” Shaikh said while responding to a question whether tax concessions being enjoyed by armed forces heads and executive judiciary will be withdrawn.

    When asked if the defence budget will be cut from its total current level of Rs1.7 trillion including implicit financing since military and civilian institutions are on the same page to give an austerity budget, Sheikh said: “Pakistan is located in a difficult neighbourhood and its sovereignty will be protected by giving every possible sacrifice.”

    He refused to divulge the details of the IMF programme until it is approved by the fund’s executive board. But he said the $6 billion loan has been secured at 3.2% interest rate.

    Hafeez Shaikh also announced that the tax collection target for the FBR will be Rs5.550 trillion for next fiscal year 2019-20. This will higher by 36% or Rs1.450 trillion over the expected collection of Rs4.1 trillion in the outgoing fiscal year.

    The government will have to make additional tax efforts equal to 2.2% of the Gross Domestic Product (GDP) or Rs940 billion. It is not yet clear how much of it will be raised by slapping new taxes and through the enforcement measures. Due to nominal GDP growth rate of 12.5% next year (4% economic growth and 8.5% inflation), the FBR will get a bonanza of Rs512 billion.

    However, the FBR Chairman Shabbar Zaidi was not confident whether this steep tax collection target can be achieved. “If rich people of Pakistan do not play their due role, we cannot live up to the expectations of the people,” said Shaikh while seeking cooperation from the influential groups of the society who will be directly affected by the next tax-loaded budget.

    The finance adviser said 360 companies and individuals pay 85% of the total federal taxes and remaining nearly 2 million people pay only 15% of the total taxes. He once again vowed to use data to catch the tax thieves.

    “There are 50 million bank accounts in Pakistan and a sample check of 4 million accounts showed that only 10% of them were the income tax return filers,” said the finance adviser.

    Hafeez Shaikh said currency devaluation and increase in


    petroleum products prices caused inflation in Pakistan. But he made it clear that if the oil prices went up in the international market, the government would be compelled to also increase prices in the domestic market.


    He also added that if because of these measures inflation went up, the interest rates would be increased to contain the inflation. He plainly said the prices of electricity and gas would go up but he did not give a date for further raising these tariffs.

    “People using less than 300 electricity units monthly will be protected from the tariff hike. Similarly, 40% of the gas consumers will not be affected by the increase in prices,” he added.

    The adviser said the government will give Rs216 billion subsidy to protect consumers of up to 300 units from the increase in electricity prices. He said in order to protect the poor from the adverse measures being taken in the budget, the government will distribute Rs180 billion through newly introduced Ehsas Programme.

    The adviser said the government sector can no more create more jobs and this responsibility has to be taken over by the private sector. Shaikh also announced to launch crackdown against Benami assets holders after June 30 – the date when ongoing tax amnesty scheme will expire.

    “Next one year will be a year of stabilisation aimed at putting the economy on sustainable path of development and saving it from dangers,” said the finance adviser.


    Shaikh said entering the programme would send a good signal to the international community that Pakistan wishes to take its economy forward in a disciplined manner and people will find incentive to form alliances and partnerships with us.

    The adviser highlighted six measures that his government wanted to take in coming weeks. Shaikh said a staff-level agreement was reached with the IMF and over the next few weeks their board will accord their approval and the programme will become operational.

    He said due to the Benami law and other traditions of the past, there is a lot of money which is not part of the formal economy. A tax amnesty scheme was introduced to make all the cash, real estate and other assets — both here and abroad — part of the formal economy.

    The oil facility provided by Saudi Arabia worth $3.2 billion per year for three years will become operational on July 1. The pressure on foreign exchange reserves will be reduced as a result.

    He said Pakistan will also borrow an additional $2 billion to $3 billion worth of programme loans from the Asian Development Bank and the World Bank.

    The new budget will reflect the government’s philosophy and determination to bring Pakistan on track for stability and prosperity will be reflected in the budget. The Islamic Development Bank’s deferred payment facility worth $1.2 billion will continue in the year to come.

    He said the tax amnesty scheme has been given to make “dead real estate assets” a part of the economy. He warned that the deadline to avail the scheme was June 30, after which the government will take an action against individuals who did not avail the offer timely.
     
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  2. AsifIjaz

    AsifIjaz FULL MEMBER

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    How difficult is it to calculate the tax a person is supposed to file from his socioeconomic status...
    (monthly utilities bill + mobile expense + cars a person holds + the locality he lives + international travels he makes + the school his kids go to).
    We have bank accounts linked to NIC, we have school admissions requiring parents yo submit NIC copies, we have passports linked to NIC, mobile phones are linked to NIC and all new vehicles can be booked or registered only against NIC... How difficult is it to develop a software that adds this all up and gives a value... Going forward this can be made electronic or automated but currently can be filled via data operators...
    Where there is a will, there is a way.
     
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  3. Super Falcon

    Super Falcon ELITE MEMBER

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    Time to hang these yazeed a common pakistanis already paying more tax

    1 grocery every item taxed
    2 car taxed
    3 house taxed
    4 mobile etc taxed

    There is nothing which we dont give a tax now they might impose tax on air too

    If u have to cut cut defence budget
     
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  4. Rusty

    Rusty SENIOR MEMBER

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    1000%!!!!

    Govenment needs to be reduced by 80%. All jobs should be automated as much as possible.
    The government also needs to end mafias so the country can create jobs for all the people who leave government jobs.
    Otherwise it will be a disaster as the newly jobless will cause problems.
     
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  5. litman

    litman SENIOR MEMBER

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    pak is no place for an honest person. instead of broadening the tax payer sector they are putting more taxes on the already suffering salaried class.
     
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  6. MUSTAKSHAF

    MUSTAKSHAF SENIOR MEMBER

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    Let's see how much budget cut VIP's are going to have.
     
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  7. Jf Thunder

    Jf Thunder ELITE MEMBER

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    is the government stupid or what?
    taxing the already taxed?
    they are taking the easy way out, they dont want to tax strong quarters.
    why dont they start by reducing the unlimited perks and privileges given to the PM, CM, Ministers and Secretaries?
     
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  8. Khafee

    Khafee PROFESSIONAL

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    MNA' & MPA's as well as tax Vadearas and Chaudary's

    I would really love to see MNA's and MPA's audited by FBR in a transparent manner, and see how many survive.
     
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  9. Manidabest

    Manidabest FULL MEMBER

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    i think the most beneficial tax will be an agricultural tax ... that means tax the farmers or landlords who have more than 2 acres of land it will bring in vaderas automatically and 2nd is raid shops at hafiz center lahore and at hall road shopes also panama shops and check their tax number if they pay tax sincerely then give them certificate and if not then close down their shops and repeat this method in all other cities
     
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  10. Syed1.

    Syed1. SENIOR MEMBER

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    Maybe you live in UAE which has oil money, go to any decent country in the world and all of those items are taxed at much higher rates than Pak. Besides everybody's income is taxed at 20-50% based on how much they are earning.


    It's Pakistanis manufacturing defect that they hate paying taxes yet demand high-fly infrastructure, excellent schools and hospitals and a fully functioning government.


    Agree about cutting defense budget, but then again look at the situation around us. Just 2 months ago India tried to impose war on us.
     
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  11. Abdussamad

    Abdussamad FULL MEMBER

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    There is no will. It is not a priority. As long as we keep getting foreign bailouts there is no need to get our house in order. Foreign bailouts are preferred for other reasons as well:

    - The money received is in dollars which we can use to inflate the value of the rupee. A stronger rupee helps our kleptocrats launder more money abroad

    - The kleptocrats need willing accomplices in the tax and overall govt. machinery. So people get jobs and promotions on the basis of their willingness to cooperate in the theft not because of their competency. This applies to law enforcement as well. Tax evasion is a law enforcement problem and law enforcement is by design non existent in Pakistan.

    - You don't want tax officials asking questions about people's incomes and wealth. That's how corruption is uncovered. Just see what they found out by looking into benami bank accounts? These are dangerous questions.

    So bottom line is that as long as the west and east keep bailing us out we can get away with poor governance.

    Feudal landlords are in power so they will never impose taxes on themselves. As for shopkeepers there are no taxes for retail or wholesale trade in Pakistan. GST is only paid up to the manufacturing level. IMF wants it expanded to the whole value chain but it's unlikely to happen. It's been attempted before by the dictator Musharaff and he failed to do it despite having absolute power so there's little chance of a weak civilian govt. doing it.
     
  12. Salza

    Salza SENIOR MEMBER

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    As per news, defense budjet is set to cut by 1.2 billion dollars
     
  13. Counter-Errorist

    Counter-Errorist FULL MEMBER

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    It's the FBR that won't survive. We've given too much power to these vaderas and chaudrys
     
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  14. Baburfromsarmarkand

    Baburfromsarmarkand FULL MEMBER

    New Recruit

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    Don't wanna pay tax but expect first world roads, infrastructure, schools hospitals, military. The govt has done more for the ppl than they deserve.
     
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  15. Abdussamad

    Abdussamad FULL MEMBER

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    Govt. should stop doing people favours! Government employees should quit if they don't like their jobs!
     
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