BUDGET 2022 2023

[ghazi52]

,.,.,.,.,

Budget 2023: ​

Living on a prayer​

The new budget is not just expansionary in nature, it also expects a substantial drop in commodity prices to square off its books.

Ammar H Khan
June 10, 2022


The next fiscal year's budget, announced by Finance Minister Miftah Ismail on the floor of the National Assembly earlier today, is not just expansionary in nature — in a constrained fiscal environment against the backdrop of geopolitical volatility and a potential global recession — it also expects a substantial drop in commodity prices to square off its books.

For starters, the price of petroleum products, which basically influences the growth trajectory and sustenance of the economy, is assumed to drop sharply, as evidenced by a targeted inflation rate of 11.7 per cent and a fairly liberal Petroleum & Development Levy assumption of Rs750 billion.

In reality, however, as the impact of increased fuel prices is passed on, inflation is projected to stay close to the 20pc mark, or may even exceed it. A targeted inflation rate of 11.7pc builds in expectations of a significant drop in commodity prices — a prayer that may, or may not work out.

Hits and misses​

Nonetheless, the new budget appears to be an attempt to nudge the economy to snap out of a boom-bust cycle and increase reliance on export-oriented growth through an increase in competitiveness. This is a welcome departure from the typical focus on import substitution.

The budget targets a growth rate of 5pc over the next fiscal year without expanding the current account deficit, while also reducing imports — something we haven’t been able to do in the last 20 years with the exception of a pandemic-related drop.
Similarly, the introduction of the laptop scheme and support for IT infrastructure of Rs17 billion is a welcome addition.

More importantly, efforts have been made to enhance the after-tax disposable income of a large chunk of salaried taxpayers through the adjustment of tax slabs, and elevation of minimum income for taxation purposes. In a double-digit inflationary scenario, this will certainly assist households in balancing budgets.

Targeting non-productive areas​

One of the more critical structural changes in the new budget is the introduction of the concept of deemed rental income, and a wealth tax on immovable property, which isn’t primary residence.

The introduction of 15pc capital gains in immovable property would dampen the speculative activity in the real estate market, which had been spiralling out of control, largely driven by excess cash in the economy. Through such a structure, the intent is to redirect capital from non-productive areas such as real estate to more productive areas, such that they may create incremental revenue, and jobs, which have a higher economic multiplier. One hopes that the government will remain steadfast with this proposal and will not capitulate under pressure

An increase in the allocation to the Benazir Income Support Programme (BISP) to Rs364 bn from Rs250 bn last year will provide additional comfort to the most vulnerable segments of the population, with more than eight million households getting direct cash transfers of Rs2000 per month in lieu of fuel subsidies. This will be in addition to the usual transfers that are done via the BISP.

Swapping out subsidies with cash transfers would avoid market distortion, while facilitating a soft landing for the most vulnerable segments of the population.

The tone of the budget has largely been pro-poor as taxes have increased on segments that were untaxed earlier, or are expecting windfall gains. One example of such segments are private banks, which would benefit from a high interest rate environment and end up accumulating windfall profits. Taxing the same at a higher rate of 42pc, rather than 39pc will generate precious incremental revenue for the government.

Broadening the tax net​

Another innovative measure is bringing in retailers in the tax net through electricity bills, with a fixed tax payment varying from Rs3,000 per to Rs10,000. More clarity is not available at this stage, but this will ensure that suddenly all retailers — with an electricity connection — can become tax payers.

Although similar schemes have been brought earlier as well, how this tax is imposed, and how it is transitioned towards a more economic activity driven tax will remain a question of execution.
The new budget is slightly different from the usual boilerplate that is presented every year.

There is a gradual nudge towards moving capital away from non-productive segments to more productive ones. The expansionary nature of the budget, and the expectation embedded in the targets that commodity prices may go down is considerably optimistic.

In the absence of such a scenario coming to fruition, we may see a few more mini-budgets to bridge deficits, or keep them under check. Bringing in retailers into the tax net, while providing a breather to the salaried class, and an expanded BISP umbrella are tweaks that will provide some relief in a double-digit inflationary environment.

Taking inspiration from the 1986 chart buster: "We are halfway there, we are living on a prayer".

 

[JamD]

This was done mainly to appease the trader voter base that N has...plain and simple. Now no matter how much of a trader you are, you are paying a measly 100,000 on annual tax. That is peanuts.

POS was actually a robust and data driven approach to the problem, which has been foregone to take a token action.

I'm sure it was. Any government with such shakey legs will make such compromised decisions . This is a matter of principle, not choice of political party. Don't get me wrong, I'm not defending garbage or anything, just being a realist.

This is actually a bad step. The tax was on import of solar panels, and local assemblers were now coming up in numbers and the local industry was propping up. I know a friend who is in the solar business, and I had a discussion about this a fair while ago. He said that the import taxation (it was actually a ban if I remember correctly) has given incentive to local industries. The local industry is just bringing in the same components and only assembling here, quality is broadly the same.

Anyone who has more experience with solar can better comment on this.

Hmmm...right. So yes I do see the merits of that argument. But here's a counter argument - what you are asking for is protectionism. IMHO Pakistan has had so much protectionism that almost everything local has become uncompetitive in the international market. This idea of "import substitution" where you levy tarrifs so that local industry can produce the product has led to bad results. I mean look at the shitshow of overpriced substandard cars Pakistanis have to deal with - not a single one of these cars would survive internationally at these prices (yes I heard one Oshan was exported but I don't know how significant that is). Also many economists argue that import substitution is the wrong thing to focus on:

Import Substitution Made Countries Such as Argentina Poorer

Trade policy discussions in Washington lately have centered on the possibility of raising trade barriers or instituting protectionist import-tax schemes that favor certain American industries in the hopes of generating U.S. jobs.

www.heritage.org

Instead, we should be focusing on exports - which is exactly what the PTI government was doing and this government isn't messing with.

This is kind of similar to the mobile phone tax, and you see how local assemblers were now being set up.

Glad you brought that up and I think this was a very targeted and well thought-out plan by the PTI government:

https://invest.gov.pk/sites/default/files/inline-files/Mobile-Device-Manufacturing-Policy_0.pdf

where import tariffs were more or less unchanged but the local taxes on imported vs local phones were rationalized, and more importantly incentives were created for localization. I think THIS is how you promote local industry - with a well-thought out policy and not with blanket import tariffs. But that's just my opinion - happy to debate.

 

[Jango]

Hmmm...right. So yes I do see the merits of that argument. But here's a counter argument - what you are asking for is protectionism. IMHO Pakistan has had so much protectionism that almost everything local has become uncompetitive in the international market. This idea of "import substitution" where you levy tarrifs so that local industry can produce the product has led to bad results. I mean look at the shitshow of overpriced substandard cars Pakistanis have to deal with - not a single one of these cars would survive internationally at these prices (yes I heard one Oshan was exported but I don't know how significant that is). Also many economists argue that import substitution is the wrong thing to focus on:

Import Substitution Made Countries Such as Argentina Poorer

Trade policy discussions in Washington lately have centered on the possibility of raising trade barriers or instituting protectionist import-tax schemes that favor certain American industries in the hopes of generating U.S. jobs.

www.heritage.org

Instead, we should be focusing on exports - which is exactly what the PTI government was doing and this government isn't messing with.




Glad you brought that up and I think this was a very targeted and well thought-out plan by the PTI government:

https://invest.gov.pk/sites/default/files/inline-files/Mobile-Device-Manufacturing-Policy_0.pdf

where import tariffs were more or less unchanged but the local taxes on imported vs local phones were rationalized, and more importantly incentives were created for localization. I think THIS is how you promote local industry - with a well-thought out policy and not with blanket import tariffs. But that's just my opinion - happy to debate.

Oh no...I totally agree with you.

I am with you on the point that we have made our local industries rent seeking in nature. Just pick any industry of ours, and everyone is running on a bucket load of subsidies or tex exemptions or any other incentive...but the question is, are they giving a proportionate return?

Hammad Azhar brought up a very good point a while back...that we have to have an analysis, whether the the textile industry is actually giving us an output which is proportionate to the numerous tax exemptions and benefits they get? And I do see the point in his argument.

I will bring up this little tidbit again. From Rs 1 worth of cotton, we make a Rs 10 worth yarn, while Bangladesh makes a Rs 600 worth pair of jeans. Value addition is almost non-existent in this country, and I believe a major reason of that is preciesly the comforts that the industry has. They have no incentive to improve...hakoomat bas mara'at di ja rahi hai, kaam chalayi jao. If the government would stop giving them the numerous exemptions, they might be forced to add value in their products and sell for an even higher price.

But to be fair to the textile industry, they have had a rough time and perhaps they didn't feel that any investement in diversification or value addition would bear fruit in the future. Take a recent example. Last year the textile industry installed equipment $5 billion, and according to the APTMA chairman, if run at full capacity, it can increase the exports by $2.5 bn immediately. But now we had a shutdown last week in Punjab. So perhaps they are moving to better products.

Another example, pink salt. We used to export pink salt rocks (large size) by the truck load to India, costing a few hundred rupees per ton or kg (I don't remember, saw the documentary a while ago). India crushed them into fine salt, packaged it, and sold it in the US and Europe in USD and for a hefty markup. Why can't we do that?

BTW, this budget has increased the tariffs in imported phones as well

 

[muhammadhafeezmalik]

Charitable hospitals’ supplies get ST relief ​

The federal government has restored the exemption of general sales tax on local supplies to charitable hospitals through an amendment in the sixth schedule of the Sales Tax Act, 1990 under the proposed finance bill 2022.


Commenting on the proposed Finance Bill, Arshad Shehzad, an expert explained, that the previous government has withdrawn the exemption and slapped sales tax at the rate of 17 per cent by omitting entry number 52-A from the Sixth Schedule of the Sales Tax Act, 1990 through the Finance (Supplementary) Act, 2022.


The relevant entry pertained to the exemption of sales tax on supplies to hospitals run by the federal or provincial government or charitable hospitals of 50 beds or more or the teaching hospitals of statutory universities of 200 or more beds.


By virtue of this entry, the essential supplies to the hospitals include equipment, consumables like syringes, needles, sutures, staples, packaging, tubing, catheters, medical glove, gowns, masks, adhesives, x-ray films, stores/ parts, and a whole host of other devices and tools used with a hospital or surgical environments have become chargeable to sales tax at the standard rate of 17 per cent along with further sales tax at the rate of three per cent.


Shehzad said the civil society and representatives of the health sector were continuously pursuing the government to revisit this decision. Health plays a key role in determining human capital. Better health improves the efficiency and productivity of the labour force, ultimately contributes the economic growth, and leads to human welfare. To attain better, more skilful, efficient, and productive human capital resources, governments subsidize the healthcare facilities for their people.


In this budget in spite of limited resources, economic pressures, and a very short span of budget preparation time, this government has taken a commendable step to restore the sales tax exemption for the healthcare sector.


Shehzad lauded this move and says this is one of the significant relief measures as a significant part of the private sector healthcare contribution in Pakistan is based on funding through donations, Zakat, and charity. Institutes such as Shaukat Khanum Hospital, Indus Hospital, S.I.U.T., L.R.B.T., and Kidney Centre are some of the world’s widely-recognized names and the removal of sales tax on their supplies will ease the healthcare cost on the general public which was already increased due to vulnerable rupee-dollar parity, Shehzad concluded.

Charitable hospitals’ supplies get ST relief

ISLAMABAD: The federal government has restored the exemption of general sales tax on local supplies to charitable...

www.brecorder.com

Oh no...I totally agree with you.

I am with you on the point that we have made our local industries rent seeking in nature. Just pick any industry of ours, and everyone is running on a bucket load of subsidies or tex exemptions or any other incentive...but the question is, are they giving a proportionate return?

Hammad Azhar brought up a very good point a while back...that we have to have an analysis, whether the the textile industry is actually giving us an output which is proportionate to the numerous tax exemptions and benefits they get? And I do see the point in his argument.

I will bring up this little tidbit again. From Rs 1 worth of cotton, we make a Rs 10 worth yarn, while Bangladesh makes a Rs 600 worth pair of jeans. Value addition is almost non-existent in this country, and I believe a major reason of that is preciesly the comforts that the industry has. They have no incentive to improve...hakoomat bas mara'at di ja rahi hai, kaam chalayi jao. If the government would stop giving them the numerous exemptions, they might be forced to add value in their products and sell for an even higher price.

But to be fair to the textile industry, they have had a rough time and perhaps they didn't feel that any investement in diversification or value addition would bear fruit in the future. Take a recent example. Last year the textile industry installed equipment $5 billion, and according to the APTMA chairman, if run at full capacity, it can increase the exports by $2.5 bn immediately. But now we had a shutdown last week in Punjab. So perhaps they are moving to better products.

Another example, pink salt. We used to export pink salt rocks (large size) by the truck load to India, costing a few hundred rupees per ton or kg (I don't remember, saw the documentary a while ago). India crushed them into fine salt, packaged it, and sold it in the US and Europe in USD and for a hefty markup. Why can't we do that?

BTW, this budget has increased the tariffs in imported phones as well

Textile industry is making no innovations except one or two, while our sports industry is doing much more innovations than textile industry though governments are much lesser tax and other incentives to them.

 

[Jango]

Textile industry is making no innovations except one or two, while our sports industry is doing much more innovations than textile industry though governments are much lesser tax and other incentives to them.

Generally agree with you on that, but it is a question of the chicken or egg coming first.

The textile industry says that due to disocuraging govt policies and irregular supply of raw input, they have no incentive to innovate...while the govt says to innovate first then they will provide.

THey have invested around USD 5 billion last couple of years into their machinery and setup, so let's see if it translates into increased output.

 

[ghazi52]

.,.,
THE annual budget presentation has traditionally been heavy on granular details of the government’s spending plans for the coming fiscal year. It helps the common citizen get a rough idea of what is in it for them.

This year, however, Finance Minister Miftah Ismail went with a speech that was heavy on rhetoric but lacking in substance. Was it to avoid the negative optics of having to formally announce that he plans to reinstate both the petroleum levy and the Gas Infrastructure Development Cess, which will result in another hit to citizens in the form of a third hike in fuel and gas prices?

Mr Ismail may have stayed mum, but citizens can expect more pain from their gas, electricity and fuel bills starting next month.

The budget document, on the other hand, reads as if the government simply ticked off items from a checklist handed to it by the IMF.

Having removed the major chunk of PTI’s fuel subsidy over two instalments ahead of the budget, all that had been left was the reimposition of the sales tax and petroleum levy, on which the government has obliged. Likewise, the Fund had demanded tight control over the primary balance, and the government has dutifully budgeted for a surplus. An attempt has also been made to better tax the real estate market, which had long been in the cross hairs for being a safe haven for grey money and tax evasion.

Given that the government seems to have more or less acceded to all of the IMF’s major demands, it is hoped that the lending agency will now be more forthcoming about the release of the much-needed funds.

However, it is worth asking the government if this budget was designed solely to secure an IMF loan because it otherwise seems to be lacking in intent.

There is nothing in it that suggests that the government is serious about fixing the structural imbalances inherent in the economy — the same imbalances that the finance minister had been complaining loudly about just a day earlier when he was unveiling the Pakistan Economic Survey.

It has budgeted for inflation to clock in at 11pc for the year, which seems highly unrealistic given the massive increases in fuel prices it has just unloaded, which have yet to be fully absorbed. Likewise, the budgeted growth figure seems unrealistic given that economic activity is going to slow considerably as the economy cools down. Little thought also seems to have been given to how the uncertainty roiling global commodity markets may impact the average citizen. If oil prices rise any further, the impact will snowball massively when combined with the reimposed sales tax and petroleum levy. Will the public be able to bear such an increase?

The finance minister should really have been more forthcoming about the government’s plans.

Published in Dawn, June 11th, 2022

 

[ghazi52]

,.,.

BUDGET 2022-23: Health ministry’s allocation gets a massive cut​

Ikram Junaidi
June 11, 2022

• Budget reduced from Rs154bn to Rs19bn
• Rs1.5bn set aside for construction of Jinnah Hospital in G-11

ISLAMABAD: The proposed allocation for the Ministry of National Health Services (NHS) has been reduced by eight times from Rs154 billion to only Rs19 billion for the fiscal year 2022-23.

According to the budget documents, Rs12.65 billion have been proposed in the Public Sector Development Programme (PSDP) for 42 new and ongoing projects in the health sector of Islamabad.

In the financial year 2021-22, a hefty amount was spent on the procurement of vaccines, medical equipment and treatment of Covid-19 patients and an allocation of Rs154 billion was proposed for the upcoming fiscal year.

However, as the pandemic seemed to be subsiding and is well under control, a major cut was made in the allocation.

In his budget speech, Finance Minister Miftah Ismail claimed that the government was committed to improving the healthcare delivery system in the country. He said Rs24 billion will be used for the betterment in the health delivery system and diseases control and prevention. The minister said the amount will also be utilised for purchasing medical equipment, vaccination and improving the capacity of health establishments.

Moreover, an amount of Rs12.65 billion has been proposed in the PSDP for the completion of 42 new and ongoing projects.

Over Rs10 billion of the allocation will be utilised for 33 ongoing and over Rs2 billion for nine new schemes which have been included in the programme.

The documents showed that over Rs2 billion have been proposed for the Prime Minister’s National Health Insurance Programme and Rs1.5 billion for the construction of Jinnah Hospital in Sector G-11 Islamabad. Moreover, Rs800 million have been proposed to build a 200-bed accident and emergency centre at the Pakistan Institute of Medical Sciences (Pims) Islamabad.

In addition, Rs500 million has been proposed for the development of integrated disease surveillance and response system (IDSRS) with public health laboratories network and workforce development for transition of field epidemiology and laboratory training program.

An amount of Rs500 million has been proposed for Covid-19 emergency response and ensuring universal health coverage in Islamabad. Moreover, Rs500 million will be spent on strengthening common management unit (TB, HIV/Aids and malaria) and accelerating response to control the three diseases.

Besides, Rs495 million have been proposed for upgradation of the neurosurgery department and provision of essential equipment in Pims.

An amount of Rs396 million has been proposed for the purchase of new electro-medical equipment to replace the obsolete and old fashioned machines to treat patients at the National Institute of Rehabilitation Medicine (NIRM).

For the upgradation of the rural health facilities and strengthening of the health department, Rs393 million have also been proposed.

According to the documents, Rs250 million have been proposed for the implementation of the national action plan on population for the next five years.

Published in Dawn, June 11th, 2022

 

[ghazi52]

.,
The new budget has imposed several duties and taxes on the telecom sector, which is likely to restrict several development projects related to the growth of telephony, internet services, and mobile set manufacturing in the country.

The federal budget, which was unveiled here on Friday, raised the regulatory duty (RD) on optical fibre cable imports from 10 per cent to 20pc in the hopes of encouraging local manufacturing of the high-tech cables.

However, industry players have expressed concerns that it would hit the fibreisation plans of the private sector as well as the government-led Universal Support Fund (USF) programmes.

“There is a need for localisation of all backend industry, including various kinds of cables, but manufacturing takes time and ongoing projects by all the IT and telecom companies to lay fibre optic cable across the country will become costly,” said a senior official of Jazz Pakistan.

Another significant change in the sector’s taxation regime was the increase in sales tax on the import of completely knocked down (CKD) kits for mobile devices exceeding $100 in value from Rs 10 per set to 10pc of their value.

However, the industry has pointed out that sales tax at completely-built-up units (CBU) was Rs1,680 per set, whereas the sales tax at completely and semi-knocked-down (SKD) kits will be around Rs4,000 at the rate of 10pc for phones valued at $200.

“This will encourage under-invoicing and imports of phone sets of up to $200,” said Zeeshan Miannoor, vice president of the All Pakistan Mobile Phones Association.

He also stated that 80pc of the sets sold are between $100 and $200.

 

[ghazi52]

,.,.,
The provinces are set to receive 17 per cent more share from the federal divisible pool in the next financial year as the government has estimated to transfer Rs4.099 trillion to the four federating units as compared to Rs3.511tr last year.

As usual, Punjab will get over 50pc of the share from the divisible pool, leaving behind the same amount to be distributed among the three other provinces, shows a document of the federal budget for the financial year 2022-23.

 

[ghazi52]

,.,.,.
Rs699 billion in the federal budget 2022-23 for subsidies to provide relief to the people. Around 92 per cent of the allocated amount will be spent on fuel and electricity subsidies, the documents show.

The figure represents a slight increase from the Rs682bn allocated to this head last year.

 

[Jango]

.,.,
THE annual budget presentation has traditionally been heavy on granular details of the government’s spending plans for the coming fiscal year. It helps the common citizen get a rough idea of what is in it for them.

This year, however, Finance Minister Miftah Ismail went with a speech that was heavy on rhetoric but lacking in substance. Was it to avoid the negative optics of having to formally announce that he plans to reinstate both the petroleum levy and the Gas Infrastructure Development Cess, which will result in another hit to citizens in the form of a third hike in fuel and gas prices?

Mr Ismail may have stayed mum, but citizens can expect more pain from their gas, electricity and fuel bills starting next month.

The budget document, on the other hand, reads as if the government simply ticked off items from a checklist handed to it by the IMF.

Having removed the major chunk of PTI’s fuel subsidy over two instalments ahead of the budget, all that had been left was the reimposition of the sales tax and petroleum levy, on which the government has obliged. Likewise, the Fund had demanded tight control over the primary balance, and the government has dutifully budgeted for a surplus. An attempt has also been made to better tax the real estate market, which had long been in the cross hairs for being a safe haven for grey money and tax evasion.

Given that the government seems to have more or less acceded to all of the IMF’s major demands, it is hoped that the lending agency will now be more forthcoming about the release of the much-needed funds.

However, it is worth asking the government if this budget was designed solely to secure an IMF loan because it otherwise seems to be lacking in intent.

There is nothing in it that suggests that the government is serious about fixing the structural imbalances inherent in the economy — the same imbalances that the finance minister had been complaining loudly about just a day earlier when he was unveiling the Pakistan Economic Survey.

It has budgeted for inflation to clock in at 11pc for the year, which seems highly unrealistic given the massive increases in fuel prices it has just unloaded, which have yet to be fully absorbed. Likewise, the budgeted growth figure seems unrealistic given that economic activity is going to slow considerably as the economy cools down. Little thought also seems to have been given to how the uncertainty roiling global commodity markets may impact the average citizen. If oil prices rise any further, the impact will snowball massively when combined with the reimposed sales tax and petroleum levy. Will the public be able to bear such an increase?

The finance minister should really have been more forthcoming about the government’s plans.

Published in Dawn, June 11th, 2022

Exactly my sentiments.

The speech was political rhetoric, no details about anything, just a khanapuri to complete the major checklist items, and be done with it.

 

[ghazi52]

Exactly my sentiments.

The speech was political rhetoric, no details about anything, just a khanapuri to complete the major checklist items, and be done with it.

Absolutely no input from him or PMLN, just prepared by the ministry staff to please the IMF. He just delivered a useless political speech with no opposition in the hall.
He should not come to hall. Only delivered directly on TV channels, in that case he would had a very clear Urdu speech without any laugh.....

 

[ghazi52]

.,.,

Mobile phones​

The government has proposed a levy on mobile phones in the new budget, with the rate per set between Rs100-16,000.

For mobile phones having a cost-and-freight (C&F) up to $30, it will be a mere Rs100. For phones more than $30 and less than $100, it will be Rs200.

In the same way, for phones costing between $101-200, it will be Rs600. For phones between $201-350, it will be Rs1,800.

For more expensive handsets, costing between $351-500, the rate of levy will be Rs4,000. Meanwhile, for phones between $501-700 it will be Rs8,000, while for phones more than $701 it would be Rs16,000.

Cigarettes​

If the stress from the current economic situation of the country was making you smoke incessantly in an effort to curb your anxiety, you might want to find another outlet for your nerves.

The federal excise duty (FED) on locally produced cigarettes with a retail price of more than Rs5,960 per 1,000 cigarettes has been raised by 7.14pc. The tax has been raised from Rs5,200 to Rs5,600 which equals an increase of Rs0.4 per cigarette.

Similarly, the FED on locally produced cigarettes with a retail price of less than 5,960 per 1,000 cigarettes has been increased by 10.81pc from Rs1,650 to 1,850. This amounts to a tax of Rs0.2 per cigarette.

Income tax​

Salaried individuals can perhaps breathe a sigh of relief as the budget has proposed enhancing the limit of taxation to Rs1.2m from Rs600,000 per year. This means that those earning up to Rs100,000 per month will not be liable to pay income tax.

The slabs for income tax have also been reduced from 12 to 7. Where the taxable income is between Rs600,000-Rs1.2m per year (Rs50,000 to Rs100,00 per month), the tax is Rs100.

However, for income between Rs1.2m-2.4m per year (Rs100,000 to Rs200,000 per month), it would be seven per cent of the amount exceeding Rs1.2m.

For income between Rs2.4m-3.6m per year (Rs200,000 to Rs300,000 per month), the tax applicable is Rs84,000 plus 12.5pc of the amount exceeding Rs2.4m.

Where income is between Rs3.6m-6m (Rs300,000 to Rs500,000 per month), it would be taxed at Rs234,000 plus 17.5pc of the amount exceeding Rs3.6m

Further, where income is between Rs6m-12m per year (Rs500,000 to 10,00,000 per month), the tax would be Rs654,000 plus 22.5pc of the amount exceeding Rs6m.

For income more than 12m per year (more than 10,00,000 per month), it would be a little more than Rs2,004,000 plus 32.5pc of the amount exceeding Rs12m.

Meanwhile, business individuals and association of persons (AoPs) will also some relief as the limit of taxation has been increased from Rs400,000 to Rs600,000.

Petroleum​

The budget document shows that the government has proposed a petroleum levy of Rs750bn, more than five times higher than the revised allocation of Rs135 billion for FY22, which means that it is going to reinstate the levy abolished by the former government.

Already, the new government has increased the prices of petroleum products by Rs60 over the span of a week after removing subsidies. Be prepared, as there is another price hike on the cards.

At this stage though, the volumetric breakdown of the price increase (meaning the increase in price per litre) has not been issued but you can expect an announcement on this soon.

Real estate​

All citizens who have more than one immovable property in Pakistan with a value of over Rs25m would be deemed to have received a rent amounting to 5pc of that immovable property's fair market value. They would have to pay 1pc in tax on this deemed rental income. However, one house of every person would be excluded from this tax.

The government has also proposed the imposition of a 15pc tax on capital gains on immovable properties if the holding period was a year or less. The tax would be reduced by 2.5pc every subsequent year, eventually going down to zero once the holding period reached six years.

The advance tax rate on the purchase and sale of property for filers is proposed to be enhanced to 2pc from the current 1pc, while it would be 5pc for non-filers.

Under the budgetary proposal, the government said any citizen of the country who is not a tax resident of any other country would be treated as a tax resident of Pakistan. It said the criterion for a resident person in connection to taxation was being modified as the current regime was being "misused by wealthy individuals".

 

[ghazi52]

.,.

Vehicles​

The budget has also proposed an increase in the advance income tax of "luxury" vehicles with an engine of 1,600cc, which typically means sports utility vehicles and some sedans.

Further, it has also proposed an advance two per cent tax on the value of high-value hybrid and electric vehicles.

Other interesting points​

Flying in style has also gotten a bit more expensive. The FED on club, business and first-class air travel has been increased from Rs10,000 to 50,000.

The FED on telecommunication services has also been raised from 16pc to 19.5pc.

On the bright side, if you have been worried about rising electricity prices and considered switching to solar, now is the time. All imports of solar panels and local supply will be exempted from tax.

In addition, imports by and local supply to charitable hospitals, all types of seeds and tractors have been exempted from tax. Withholding taxes on educational expenses and machinery on rent to be reduced.

The tax on Behbud certificates has been reduced from 10pc to five per cent.

 

[Crimson Blue]

Miftah Ismael announced import tax exemption for certain solar systems in his 2022-23 budget, here's why:

https://twitter.com/x/status/1535648749573357568