BUDGET 2022 2023

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BUDGET 2022 2023​

LAHORE: Rejecting the proposal to impose new taxes on the common man in the forthcoming budget, Chief Minister Punjab Hamza Shahbaz said on Friday that instead of imposing new taxes, providing relief to the common man should be focused while expanding the tax base of the affluent.

While presiding over the meeting of the resource mobilisation committee, the CM made it clear that his government does not want to burden them.

He declared that resolution of the problems of the downtrodden is a priority and invited to suggest out-of-the-box measures, including consulting the stakeholders, to increase the provincial resources.

Provincial Ministers Sardar Awais Leghari, Atta Tarar, Kh Salman Rafiq, MPAs namely Mian Mujtaba Shuja-ur-Rehman, Zeeshan Rafiq, SMBR, secretaries of finance, local government and excise departments, Punjab revenue, economists and others were also present.

Moreover, while chairing a video link meeting of price control committees, commissioners, deputy commissioners and DPOs, the CM said that a comprehensive plan of action has been chalked out, to curb price-hike and hoarding and tasks have been assigned to price control committees and deputy commissioners across the province.

He directed to hold daily price control committee meetings in DC offices across the province. It was decided in principle to set up a committee to reduce the prices of tandoori roti and naan and the CM directed that a uniform price list should be displayed at shops, stalls and markets.

Welcoming the decision of wholesale dealers of Faisalabad who announced not to take profit on pulses, the CM said it was commendable for the business community to support the government in its efforts to reduce price-hike in these unusual circumstances.

He also directed the ministers and political assistants to monitor their respective districts and said that the monitoring of inter-provincial transport of flour should be intensified.

Copyright Business Recorder, 2022

CM rejects proposal to impose new taxes on common man

LAHORE: Rejecting the proposal to impose new taxes on the common man in the forthcoming budget, Chief Minister ...

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Green bonds, gender bonds: tax incentives proposed​

Sohail Sarfraz
04 Jun, 2022

ISLAMABAD: The Federal Board of Revenue (FBR) is expected to incorporate a budget proposal of the Securities and Exchange Commission of Pakistan (SECP) in the Finance Bill, 2022 to grant tax incentives on the issuance of Green Bonds and Gender Bonds from the next fiscal year (2022-23).

In this connection, the budget makers are seriously considering this budget proposal in the upcoming budget.

Another proposal under consideration is to grant tax credit for the issuance of Green Bond and Gender Bond, sources said.

Sources explained that the SECP has defined Green bonds as “debt securities, including Sukuks, issued by an issuer including corporates, entities owned or controlled by the government, whether through public offer or by way of private placement, where the proceeds exclusively applied to finance or re-finance, in part or in full, new and/or existing eligible Green Projects.”

All issuers who are eligible to issue debt securities, including Sukuk either by way of a public offer or private placement, are eligible to issue green bonds while ensuring compliance with the applicable regulatory framework.

Moreover, the Gender Bonds would increase the financial inclusion of women and encourage female entrepreneurship. This would facilitate companies and issuers of debt securities to diversify their source of financing and provide an additional financial instrument to a particular class of investors.

As a step towards the promotion of gender equality – the issuance of gender bonds will improve women’s access to leadership positions and gender-positive corporate policies.

The SECP has informed the FBR that the government should provide tax incentives relating to the issuance of green bonds and gender bonds. Such tax incentives would attract both issuer(s) and investors.

An increase in the issuance of green bond/gender bond would also contribute toward Social Economic Developmental Goals, benefiting society as a whole.

The proposed section in the Income Tax Ordinance 2001 reads as: The Second Schedule - Part IV Exemption from Specific Provision Income, or classes of income, or persons or classes of persons, enumerated below, shall be exempt from the operation of such provisions of this Ordinance, subject to such conditions and to the extent, as are specified hereunder:-(36E) The provisions of section 151 shall not apply on profit on debt paid on bonds issued under the Federal Government Duty Drawback Bonds Rules,2019]”. “36F) The provisions of section 151 shall not apply on profit/return of Green/Gender/ sustainable Bonds or Sukuks issued under SECP’s Guidelines for issuance of Green/Gender/ sustainable bonds.”

In case, the FBR grants tax credit facility, the following new section is proposed to be inserted in the ITO 2001: “65 H. Tax credit for issuance of Green Bond/Gender/sus-tainable Bond. — Where a taxpayer being a company issues a green/gender/sus-tainable bond as per the guidelines issued by SECP, a tax credit equal to five percent of the tax payable shall be allowed till redemption of said bonds, the proposed section in the Income Tax Ordinance 2001 added.

Copyright Business Recorder, 2022

 

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The government increased the defence budget for the outgoing fiscal year by nearly 6% to over Rs1.45 trillion in a bid to meet the needs of the armed forces, including their enhanced salary requirements.
The decision to increase the defence budget by another Rs80 billion was taken by the Economic Coordination Committee (ECC) of the Cabinet that in total approved Rs182 billion in supplementary grants.
The ECC also approved slapping a 10% regulatory duty on the import of petrol from China to curb the misuse of bilateral free trade agreement. Some oil marketing firms rerouted their imports through China to evade 10% customs duties.

 

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ISLAMABAD: The Institute of Chartered Accountants of Pakistan (ICAP) has prepared a Model Federal Budget (2022-23) to compile recommendations to the government for economic reforms which can help improve future outlook of the country.

An interactive session with journalists was held on Tuesday where President ICAP Ashfaq Yousuf Tola accompanied by Chairman Fiscal Laws Committee M Ali Latif and Chairman Economic Advisory Committee Zeeshan Ijaz informed the journalist that these proposals and recommendations have already been submitted to the government for consideration in new fiscal budget 2022-23.

The Institute of Chartered Accountants of Pakistan (ICAP) initiative of preparing Model Federal Budget 2022-23, along with ICAP proposals for federal and provincial budget 2022-23 and presenting it to the Ministry of Finance is a very praiseworthy professional exercise. With these proposals contributing to the budget-making process, Ministry of Finance will be able to have an understanding of the expectations of different segments of the economy from the next fiscal’s policy.

Tola highlighted that the country made a sound economic recovery from the Covid-19 induced contraction, however we are still facing greater challenges that are creating huge external sector pressures. The trade deficit and current account deficit had already exceeded from their annual targets. There is steep currency devaluation, weaker domestic demand due to monetary tightening and fiscal consolidation and global economic uncertainty. In order to mitigate these challenges, government needs to put in efforts for interest rate controls, emphasis on meeting tax collection targets as well as curb the challenge of mainstreaming parallel economy.

Some of the policy measures are expected to bring in fruitful results for our economy by improving our GDP and controlling the fiscal deficit. Moreover, the Model Budget has been drawn up keeping in view the impact of changing political circumstances, projections for the IMF, post-pandemic measures and global dynamics, he further added.

Tola stated that in the present economic condition which is also affected by global uncertainty and Pakistan’s political turmoil, there is a possibility that the FBR may not be able to reach tax revenue target of Rs 7,500 billion in the next fiscal year. In this scenario, following is the Sensitivity Analysis under two assumptions.

Under the Scenario 1: In case FBR’s tax collection in 2022-23 remains at Rs 7,000 billion instead of the ICAP’s model budget target of Rs 7,500 billion, the projected federal budget deficit would be around Rs 5,496 billion. This would be Rs 200 billion more or 8.22% of GDP in a single year when compared to 7.92% of GDP originally projected in the model budget.

 

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Ahsan foresees PSDP at Rs 700 Billion​

Naveed Butt
03 Jun, 2022

ISLAMABAD: Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal said that the total volume of the Public Sector Development Programme (PSDP) is likely to be Rs700 billion in the coming budget 2022-23, which would increase more development opportunities in the country.

“Federal government is making efforts to increase up to Rs200 billion more through the public-private partnership, which will escalate the development projects. There will be 44 percent of PSDP for provincial projects and the remaining 46 percent will be federal projects. For this purpose, we have sufficient opportunities,” the minister expressed these views while addressing a news conference here on Thursday.

Copyright Business Recorder, 2022

 

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Ishaq Dar from London

 

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If we don't recognize this government , who gave them authority to announce any budget ?

No one recognizes the budget they money is being distributed to 2 families and their private workers or friends

PSDP is just a welfare plan to give money to suited members of PML / PPP and few of their associates

The blood is sucked from people thru Utilities (Electricity , Gas, Hydro, Water ) charges


YET TO COME
Any extra money from loan is diverted thru to certain companies where they (PML OR PPP) own shares and they will buy the various Power Plants constructed inside Pakistan during last 15 years

 

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ISLAMABAD: The Federal Board of Revenue (FBR) has exempted sales tax on the import of oxygen gas, cylinders (for oxygen gas) and cryogenic tanks (for oxygen gas) from November 9, 2021 to June30, 2022.

In this connection, the FBR has issued an exemption notification on Friday.

According to the SRO.729(I)/2022, in exercise of the powers conferred by clause (a) of sub-section (2) of section 13 of the Sales Tax Act, 1990 , the Federal Government has exempted the import of the goods specified for medical purposes, from whole of the sales tax from the period starting from the 9th day of November, 2021 and ending on the 30thday of June, 2022 (both days inclusive): (i) Oxygen gas (Pakistan Customs Tariff heading number 2804.4000) (ii)Cylinders for oxygen gas (PCT heading 7311.0090) and Cryogenic tanks for oxygen gas (7311.0030).

 

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Fiscal affairs and Constitution​

Waqar Masood Khan
01 Jun, 2022

Ghalib once remarked that (In my construct, there is an element of malady). The genesis of fiscal malaise originates from the budgetary provisions contained in our constitution. The constitutional provisions relating to fiscal affairs are summarized below (for simplicity we have restricted the text)

Article-77 requires that no tax shall be levied except by or under the authority of Parliament.

Article-78 requires that all revenues of federation, all loans raised and moneys received as repayment of loans shall form part of the Federal Consolidated Fund. Other moneys, including those deposited in the Supreme Court or any other court shall form Public Account of the Federation.

Article-79 specifies that the custody of federal consolidated fund and public account shall be regulated by an Act of the Parliament; or until such time by the rules made by the President.
The above provisions provide for the setting of a financial system for the federal government. The manner in which finances will be expended and procedures adopted for seeking the authorization from the parliament are specified in the next five articles 80-84.

Article-80 requires Federal Government shall, in respect of every financial year, cause to be laid before the National Assembly a statement of the estimated receipt and expenditure (emphasis added) of the Federal Government for that year, in this Part, referred to as the Annual Budget Statement (ABS). (2) The ABS shall show separately — (a) the sums required to meet expenditure described by the Constitution as expenditure charged upon the Federal Consolidated Fund; and, (b) the sums required to meet other expenditure proposed to be made from the Federal Consolidated Fund;

Article 81. Specifies expenditure which are charged upon the Federal Consolidated Fund such as on the President, Judges of the Supreme Court, Chairman, Deputy Chairman, Speaker and Deputy Speaker, Auditor General, Chief Election Commissioner and some other offices.: — (a) the remuneration payable to the President and other expenditure relating to his office, and the remuneration payable to (i) the Judges of the Supreme Court [and the Islamabad High Court]; (ii) the Chief Election Commissioner; (iii) the Chairman and the Deputy Chairman of Senate; (iv) the Speaker and the Deputy Speaker of the National Assembly; (v) the Auditor-General, all debt services obligations ……

1. The charged expenditures may be discussed in the National Assembly but would not be presented for voting (emphasis added). So much of the Annual Budget Statement as relates to other expenditure shall be submitted to the National Assembly in the form of demands for grants, and the Assembly shall have power to assent to, or to refuse to assent to, any demand, or to assent to any demand subject to a reduction of the amount specified therein: No demand for a grant shall be made except on the recommendation of the Federal Government.
2. (1) The Prime Minister shall authenticate by his signature a schedule specifying— (a) the grants made or deemed to have been made by the National Assembly under Article 82, and (b) the several sums required to meet the expenditure charged upon the Federal Consolidated Fund but not exceeding, in the case of any sum, the sum shown in the statement previously laid before the National Assembly. (2) The schedule so authenticated shall be laid before the National Assembly, but shall not be open to discussion or vote thereon. (3) Subject to the Constitution, no expenditure from the Federal Consolidated Fund shall be deemed to be duly authorised unless it is specified in the schedule so authenticated and such schedule is laid before the National Assembly as required by clause (2).

Article-84, allows federal government the leeway to spend more than allocated funds or to fund unbudgeted expenditures or to incur excess expenditure in a given head. For such purpose the federal government shall cause to be laid before the National Assembly Supplementary Budget Statement or, as the case may be, an Excess Budget Statement, setting out the amount of that expenditure, and the provisions of Articles 80 to 83 shall apply to those statements as they apply to the Annual Budget Statement.

This then is the budgetary scheme specified in our constitution. The following important conclusions are evident:

First, regarding the power of taxation (Art-77) is not per-se a budgetary provision because it can be used at any time during a fiscal year. Within the budgetary documents declared as such doesn’t include taxation proposals;

Second, the Budget proper is what has been specified in Arts-80 to 83, which simply means, except for charged expenditures, voting on demand for grants by the National Assembly and which have been included in the Schedule of Expenditures duly signed by the Prime Minister and placed before the National Assembly.

Evidently, the constitution doesn’t require the government to commit to a given level of deficit, i.e., the difference between receipts and expenditures. The ABS requires specification of revenue receipts but it doesn’t constitute an element of an approved budget.

The only occasion where fiscal deficit is mentioned about is in the budget speech of the finance minister who would indicate his plan to contain it within a certain limit. However, this commitment is observed in breach than honor.

A comparison of last five budgets shows that on average, deficit at the time of budget was announced at 5.6% whereas in the final outcome it was 7.3%. An over-run of nearly two percentage points is a phenomenal sum and contributes directly to rising public debt increasing debt servicing burden. There are two aspects of constitutional provisions that afford unprecedented freedom to government to act as it wishes so long as it has the majority in the National Assembly.

First, no accountability of revenue collection performance and, second, the open license provided under Article-84 where it may go beyond the approved budget and do things not envisaged and also incur excess expenditure beyond the budget limit and get all this approved with the Assembly alongside the next year budget as supplementary budget.

 

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Pakistan's shadow economy accounts for 40pc of GDP​

Khalid Hasnain
June 5, 2022

LAHORE: As the authorities and key government figures have been drawing attention to the economic losses due to illegal trade, the country’s shadow economy accounts for about 40 per cent of GDP, while 6pc of the gross domestic product is being stolen every year, according to a study on tax evasion in five sectors, including tea, tobacco, tyres & auto lubricants, pharmaceuticals, and real estate.

The study conducted by the IPSOS—a global leader in market research—terms 6pc of the GDP being stolen, a significant amount of money that can be used to improve the living standards of the people by developing Pakistan’s economy on a sound basis.

It states the annual volume of tax evasion in these five sectors is around Rs310 billion, including Rs35bn from the illicit trade in tea; Rs80bn from tobacco; Rs90bn from tyres and lubricants; Rs45bn from medicines; and Rs60bn annually from the real estate sector.

Similarly, the report compiled by a team of Harvard economists and senior commerce ministry officials revealed that the top dozen commodities smuggled into the country generate as much as $3.3bn a year.

"A staggering 74pc of cell phones sold in Pakistan were smuggled into the country. When it came to vehicles, 53pc of diesel, 43pc of engine oil, 40pc of tyres, and 16pc of auto parts sold in the country were smuggled," the report reveals, adding that 20pc of cigarettes in Pakistan were smuggled, as was 23pc of tea. Surprisingly, law enforcement and regulatory bodies in the country are only able to seize 5pc of the goods smuggled into Pakistan.

Smuggling and illicit trade are a major obstacle to the national treasury as well as to the organised sectors and industries like tyre manufacturers doing business legally in Pakistan. The annual consumption of tyres in Pakistan is 14 million and around 15pc-18pc of demand is met by domestic production, while more than 50pc of the demand is met through smuggled tyres. Only 35pc of tyres are imported legally into the country.

“The government should take urgent steps to curb smuggling and import irregularities as, in the current scenario, Pakistan cannot afford a massive withdrawal of foreign exchange from the country in the form of imports or smuggling,” said CEO of GTR Tyre, Hussain Kuli Khan, while talking to Dawn.

National Foods CEO Abrar Hasan, while commenting over the report seconded this opinion and stated that fake consumer goods such as spices and other related items are posing serious threats to the FMCG market.

Published in Dawn, June 5th, 2022

 

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Centre, provinces plan spending spree​

Disregarding the country’s thin fiscal position, federal govt has proposed Rs60 billion for parliamentarians’ schemes

Shahbaz Rana
June 05, 2022

Totally disregarding the country’s thin fiscal position, the PML-N-led federal government has proposed Rs60 billion for parliamentarians’ schemes. PHOTO: FILE

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ISLAMABAD: Amid serious fiscal constraints, the government on Saturday approved allocations to the tune of Rs2.184 trillion under the national development spending plans for next fiscal year -- higher by Rs347 billion or one-fifth over the outgoing year’s revised uplift budgets of the Centre and the provinces.

Totally disregarding the country’s thin fiscal position, the PML-N-led federal government has proposed Rs60 billion for parliamentarians’ schemes. It is 30% higher than the outgoing fiscal year’s revised spending under this head.

The Annual Plan Coordination Committee (APCC) approved a national development outlay of Rs2.184 trillion, which is higher by Rs347 billion or 19% over this year’s downward revised budget, according to a statement.

The four provinces will spend Rs1.384 trillion from their own resources while the federal government has allocated Rs800 billion for the federal Public Sector Development Programme (PSDP).

Of the Rs2.184 trillion, an amount of Rs346 billion or 16% will be borrowed from abroad to fund these schemes. The federal government will take Rs70 billion and the four provincial governments have a plan to take Rs276 billion in foreign loans in the next fiscal year.

The proposed federal PSDP is higher by Rs250 billion or 45% over this year’s revised budget of Rs550 billion. This is despite the fact that the finance ministry is struggling to spare even Rs700 billion for the next fiscal year’s PSDP, indicating that all resources will not be provided.

The four provincial governments have indicated Rs1.384 trillion spending plans -- higher by Rs97 billion or 7.5%.

The Punjab government has proposed spending Rs585 billion on development in the next fiscal year, down by Rs45 billion or 7%. However, the Sindh government has proposed Rs355 billion under the annual development plan, up by 64% or Rs138 billion over this year’s revised allocation.

The Khyber-Pakhtunkhwa government too has indicated Rs300 billion spending plan -- up by Rs54 billion or 22%, but the Balochistan government has shown a 21% reduction in spending for next year, down from Rs180 billion to Rs143 billion.

Pakistan and the International Monetary Fund (IMF) have not yet agreed on next year’s macroeconomic framework and one of the outstanding issues is the lack of consensus on provincial cash surpluses.

The budgetary plans that the four federating units have shared with the APCC suggested that the provincial governments will open their purses before the next general elections.

The APCC has approved 54% of total PSDP or Rs433 billion for the infrastructure sector. The transport and communication sector will receive Rs227 billion with some major allocations made for road projects passing through Balochistan.

The energy sector has been given Rs84 billion. The water resources will receive Rs83 billion, including Rs18 billion for Diamer-Bhasha dam and Rs55.4 billion for the Dasu hydropower project.

The social sector bagged Rs144 billion or 18% of the federal budget. The High Education Commission received nearly Rs42 billion after it managed to put pressure on the government that initially wanted to allocate Rs30 billion. The health ministry has been given Rs12 billion.

The agriculture sector has been given Rs13 billion or 1.6% of the budget.
The Rs800 billion federal PSDP was equal to 46% of what the ministries had demanded from the government for the next fiscal year. The major chunk of demands was received from the water resources ministry that sought Rs279 billion but was allocated Rs97 billion.

The National Highway Authority demanded Rs317 billion but would receive Rs121.5 billion or 38% of its demand.

The Pakistan Atomic Energy Commission (PAEC) placed a demand of Rs175 billion but the government has allocated Rs25.6 billion or less than 15% of the demand.
Out of Rs25.6 billion, a major chunk -- Rs15.8 billion -- has been allocated only for Karachi’s nuclear power plants.

The Power Division demanded Rs98 billion and received Rs50 billion or half of its demand.

The Aviation Division had asked for Rs30 billion but was given Rs2.4 billion, including a mere Rs2 billion for the Gwadar International Airport project.

For K-P’s merged districts, the government has approved an allocation of Rs50 billion for the next financial year. The up-scaling green Pakistan programme has been given Rs9.5 billion.

The provinces and special areas have been allocated Rs96.5 billion aimed at accommodating allied parties' development projects and finishing a few ongoing schemes. Out of this, Punjab will get Rs16.7 billion, Sindh Rs1.4 billion and K-P Rs3.6 billion.

Balochistan will receive Rs20.4 billion, as some schemes of the coalition government’s ally in Dera Bugti, which began this year and will be finished next year - have been given full allocations.

The two road projects of Dera Bugti will get the full remaining sum of Rs624 million.
Azad Jammu and Kashmir (AJK) and Gilgit-Baltistan have been given Rs29.4 billion and Rs25 billion for development respectively.

The Pakistan Railways has been given Rs33 billion for the next fiscal year. However, the Mainline-I project of the China-Pakistan Economic Corridor (CPEC) has been given mere Rs5 billion for the next fiscal year, indicating that the PML-N government does not have a plan to start work on the strategically important project. The total cost of the project is Rs1.1 trillion.

The government has allocated Rs90 billion for “Viability Gap Funding” to encourage private sector’s investment in infrastructure.

 

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Finance Minister Miftah Ismail has said that the government will prioritise the agriculture sector, exports and growth in the upcoming federal budget 2022-23, set to be announced on June 10.

 

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Pre-budget conference on 7th​

Press Release
06 Jun, 2022

ISLAMABAD: Pakistan is currently facing several economic challenges, including accelerating inflation, large external deficits, exchange rate depreciation, declining foreign exchange reserves, and mounting uncertainty. In addition, the prevailing global economic situation is also posing risks to the domestic economic outlook.

The present government has inherited an economy with growing macroeconomic imbalances that have brought Pakistan to the brink of financial collapse. To overcome this, the present government has taken steps in a short time to strengthen the economy, price stability, and maintaining the sustainability of the external & fiscal sectors through various immediate measures.

The present government is preparing the budget for the next financial year 2022-23 and it is the vision of Prime Minister of Pakistan to make a progressive, development and people friendly budget by fostering public participation in budget making. Therefore the present government desires to partner with the business sector to ensure the budget reflects the expectations of the private/business sector and the public. The private sector is the backbone of the economy and has the opportunity for the public and private sectors to contribute for the development of the economy of the country.

To sensitize the private/business sector and incorporate their valuable input and suggestions, a pre-budget conference on business, agriculture and IT has been planned on 7th June, 2022. The conference will provide opportunity to renowned businessmen, agriculturists and IT experts to deliberate, exchange new ideas and present recommendations on IT, Agriculture, Textile, Business and Export sectors for incorporating in the next budget.

The Prime Minister of Pakistan will address the Conference. It is the aim of the Government to bring an inclusive pro- public budget that will steer the economy onto a higher, sustainable, and inclusive growth path and provide an opportunity for the public and private sectors to contribute in the development of the country in these challenging and pressing times.
Copyright Business Recorder, 2022

 

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FY 2022 / 2023 : The budget​

Anjum Ibrahim
06 Jun, 2022

Friday 10 June the budget for 2022-23 is scheduled to be laid before parliament by the unelected though a PML-N stalwart finance minister, Miftah Ismail, who will have the honour of presenting the second federal budget in his lifetime — the first presented on 27 April 2018, about five weeks before the usual time, and a little over a month before the end of PML-N tenure on 30 May necessitating an obvious statement, “the next elected government will be free to make changes in the budget priorities.”

To strengthen his political credentials with Nawaz Sharif, disqualified on 27 July 2017, Ismail added: “the budget being presented today reflects the vision of Mian Nawaz Sharif and aspirations and hopes of the people of Pakistan who voted for him as their Prime Minister in 2013. His absence today in the House is dearly missed.” Such statements are the norm by finance ministers — be they party stalwarts or (imported) technocrats.

Ismail’s eulogy did not end there and he claimed that “PML(N) came into power in 2013 and immediately embarked upon a home-grown agenda” – three home grown policies associated with his predecessor Ishaq Dar (disqualified from holding public office on the same day as Nawaz Sharif) that independent economists lament are: (i) the flawed policy to deliberately allow the rupee to be overvalued which led to the historic current account deficit of 20 billion dollars inherited by the Khan administration; (ii) wiping out the circular debt on the second last day of 2012-2013 that was later declared illegal; and (iii) by distinguishing between filers and non-filers in the levy of sales tax on consumer items/services (and crediting it under direct taxes though these were essentially levied in the sales tax mode whose incidence on the poor is greater than on the rich) the government legitimized non-filers (that the International Monetary Fund is at great pains to insist be included as income tax payees).

During Ismail’s tenure as the de facto finance minister after Dar left the country the rupee was allowed to depreciate, subsequent to an IMF mission visit, though the filers and non-filers distinction continued (which has since been abandoned though taxing high net worth individuals in spite of data sharing between Nadra and FBR remains a challenge to this day). And during Ismail’s watch there were massive releases to loyalists late 2017 under the head of development funds, a normal though economically unviable practice in common with all previous governments before elections.

Ismail then went on to claim in his budget speech that “economy, energy and good governance were the core elements of that agenda. Under the leadership of Mian Nawaz Sharif we took on the challenges head on. For five years we worked long and hard, took painful decisions and never allowed our personal interests to be our preference. There has been only one motivation and that is serving the people who are the real masters in a democratic dispensation.”

The energy policies during the party’s 2013-18 tenure were ill informed (coal preferred in a plant constructed away from its source/port leading to high transport costs and health issues), contracts signed for projects under the umbrella of the China Pakistan Economic Corridor (CPEC) were on the same pattern as Independent Power Producers established in the 1990s (take and pay instead of take or pay and in dollars that accounts for rising tariffs for end-consumers) and failure to focus on upgrading the obsolete transmission network which had a vacation capacity much less than the considerably enhanced generation capacity. Claims of good governance and never allowing personal interests to prevail are difficult to swallow after the weak defense presented by the then Prime Minister Nawaz Sharif in the Panama papers inquiry/case. No politically painful economic decisions were taken during the party’s tenure, including deferring privatization decisions due to workers’ opposition and keeping gas and electricity rates low that necessitated extending unsustainable subsidies.

Ismail stated in the 2018 budget speech that “increase in productive imports has led to a widening of current account deficit to $12 billion in the first nine months of the current fiscal year. Government has made adequate efforts to finance this deficit.” The claim that the government has adequate resources to finance this deficit was as hollow as Shaukat Tarin’s statement that the 28 February 2022 subsidies announced by the then Prime Minister Imran Khan were funded and not unfunded as claimed by the Fund.

The budget 2017-18 also reflected pre-poll rigging envisaging an entire range of tax relief measures including lower individual and corporate tax rates (with the philosophy that the lower the rate the higher the collection – a strategy effective in countries where there is an almost non-existent parallel economy), reducing tax on undistributed profits, reducing withholding tax on bank transactions. Reports indicate that taxes may have to be raised under some of these heads in 2022-23 with FRB suggesting to the Fund not to insist on raising personal income tax (a direct tax) to meet the projected revenue target of 7.2 trillion rupees and instead agree to a levy on profitable sectors that include banking, steel etc. – sectors that are likely to pass on the taxes to end consumers leading to higher inflation.

One hopes that Ismail is savvy enough not to repeat the accounting discrepancy that he made in the 2018-19 budget (he projected a revenue rise of 13.4 percent rise not matched by FBR’s fact sheet in which budgeted incentives were cited as negative 184.4 billion rupees, additional tax measures positive 93.3 billion rupees giving a negative 91 billion rupees revenue) for that would almost certainly be challenged by the Fund staff — a road that would not lead to the success of the seventh IMF review.

However, what is interesting is that twenty one days before the budget, on 6 April 2018 the then prime minister Shahid Khaqan Abbasi flanked by Ismail and Information Minister Marriyum Aurangzeb announced three major economic decisions: (i) tax amnesty scheme euphemistically titled Foreign Assets Declaration and Repatriation Ordinance, applicable to all Pakistani citizens except holders of public office provided for foreign exchange repatriation at two percent, with two options – bonds for five years at the rate of three percent per annum (6 month payment not encashable in year one) and all encashment in rupees at prevailing interbank dollar rate. This, Ismail stated at the time, would stop dollarization and enable dollar account holders who had purchased through undeclared money to regularise their accounts. Declaration of foreign fixed assets was to be on payment of 3 percent of the market price and foreign liquid assets including cash/securities/bonds at 5 percent payment. Imran Khan stated at the time that if elected he would seek the source of the funds though he abandoned this pledge and extended the scheme after taking oath as prime minister; however its success as those of previous amnesty schemes was very limited and generated 76,952 declarations, and whitened a total of 1505.7 billion rupees yielding 75.7 billion rupees only – an outcome that did not come close to meeting projections in common with all previous and subsequent amnesties; a tax amnesty is unlikely for next year given that Pakistan is focused on the success of the seventh review from the Fund which is opposed to amnesty schemes on the grounds that they act as a disincentive for the honest tax payers; (ii) all dollar remittances greater than 100,000/year/person to enjoy tax exemptions with only FBR able to question the source. And regularisation of all undeclared incomes earned before June 30, 2017 on all local assets (gold, bonds, property) on payment of five percent; and (iii) The FBR rate on property would be abolished and provinces will be requested to abolish the DC rate with no purchase possible for non-filers of tax returns of property over 4 million rupees with CNIC merged as National Tax Number (NTN). Federal government to have the power to buy individual properties anywhere in Pakistan within six months of registration for 100 percent more for properties registered in 2018-19, 75 percent more for properties registered in 2019-20 and 50 percent more for properties registered in FY 2020-21 and thereafter. This policy was adopted in India but abandoned due to enhanced corruption associated with the office responsible. One would of course hope that appropriate property tax reforms are implemented subsequent to all stakeholder inputs, particularly the provinces who have so far resisted all moves for reforms backed by powerful lobbies.

True to form this time around Ismail withdrew the subsidies announced by former Prime Minister Imran Khan before the budget and in two phases with only a six-day lag - effectivity on 28 May and 3 June — a gap not sufficient to allow householders to make the necessary adjustments in their budgets.

To conclude, the economic situation is a lot worse today than in 2018 and the constraints much more pervasive. What would make it a home grown good budget is to ensure that a minimal price is payable by the common man, and a lot more by the elite and by the government itself.

Copyright Business Recorder, 2022

 

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A pre-budget conference on business, agriculture and IT will be held in Islamabad on Tuesday to sensitise the private business sector and incorporate their valuable suggestions.

Prime Minister Shehbaz Sharif will be the chief guest and will address the conference.

The event comes as Pakistan faces a crippling economic crisis and the government hopes the conference will provide an opportunity to renowned businessmen, agriculturists and IT experts to present recommendations on IT, agriculture, textile and export sectors, among others.

The government's press release stated that "it is the vision of the prime minister of Pakistan to make a progressive, development and people-friendly budget by fostering public participation in budget making."