Mini budget discussion

[ziaulislam]

If these measures work and IMF is avoided for this fiscal year, what happens for the next one starting in six months or so? The economy still remains precarious for the foreseeable future despite these hopeful signs of improvement.

Pakistan CAD this year is expected to be 12 b dollars..i cant say what will it be next year..but anything less than 6b$ is easily manageable.(2% of GDP)

So if govt increase it remiitances and exports by 6b in 2020 while controlling imports it can avoid IMF for financing need

Now govt export target this year is 2b more than last year(27b) next year target will be 29b-30b ..this increase in exports is primarily driven by two things..bumper rice due to new gen rice (and hence aggressive push by GoP to get rice bans removed) and textile rebond due to low gas/electr prices and current tax reforms

If govt achieve this target it will avoid IMF as remittances are showing a healthy growth ...

The one threat in addition to above inability to get export target will be fiscal deficit ..as higher deficit will lead higher imports

GDP growth will take time as govt is contracting PSDP and is betting on private sector

 

[VCheng]

Pakistan CAD this year is expected to be 12 b dollars..i cant say what will it be next year..but anything less than 6b$ is easily manageable.(2% of GDP)

So if govt increase it remiitances and exports by 6b in 2020 while controlling imports it can avoid IMF for financing need

Now govt export target this year is 2b more than last year(27b) next year target will be 29b-30b ..this increase in exports is primarily driven by two things..bumper rice due to new gen rice (and hence aggressive push by GoP to get rice bans removed) and textile rebond due to low gas/electr prices and current tax reforms

If govt achieve this target it will avoid IMF as remittances are showing a healthy growth ...

If what you estimate is achievable, given any lack of estimates that will be generated by the measured just announced, then yes, you will be correct. Halving the CAD would be a huge success, no doubt. But given the loan repayment schedule with the estimated installments coming due to for the next year, it will be nothing short of a miracle.

 

[Zee-shaun]

All good and I am pleased to see positive comments.
But can someone please elaborate how this tax reduction/exemption relates to economic growth?
I fail to understand how these relief measures will enhance export and manufacturing or have any positive effect on the treasury.
@Nilgiri are you following this thread?

 

[xyxmt]

Can someone pass these on to PTI gov too:

- Have a "Clean Pakistan" day once a week, where you get everyone together to clean their respective city/town/village. Get everyone involved regardless of background through volunteering. Also, this day can be used to raise awareness about littering, the environment and other forms of pollution.

- "Unity day", invite Pakistanis of all religious and ethnic backgrounds to a celebration of unity and love, so we can combat hatred and intolerance in our society.

- Raise awareness of following traffic rules and enforce lane discipline.

- how about also declare hand wash and shower days
- Brush your teeth day
- eat on time day
- "go to bed at 10 like human are suppose to do" day
- dont go out buying nashta at 1:00 pm day

 

[Dil Pakistan]

All good and I am pleased to see positive comments.
But can someone please elaborate how this tax reduction/exemption relates to economic growth?
I fail to understand how these relief measures will enhance export and manufacturing or have any positive effect on the treasury.
@Nilgiri are you following this thread?

In every country, the internal and external businessmen invest to make money which results in job creation and economic growth.

Businessmen move their capital to the countries where taxation laws are simple and taxes are low. In this way they make more profits - due to lower taxes.

When the investment comes in, there are new factories, jobs, spending by the employed etc. etc.

 

[shahbaz baig]

Tax Exemptions

• The minister announced to eliminate withholding tax on banking transactions for filers to encourage the tax-paying culture.
• Asad Umar announced that products for renewable energy will also be exempted from sales tax and customs duty for the next five years.
• Withholding tax on trading in the stock exchange will also be removed.
• Duty on import of newsprint paper has been eliminated as well.
• The government has also removed the tax on bids for sports franchises until they reach profitability.
• All machinery in special economic zones exempted from all taxes.
• New industries to be exempted from income taxes for five years.
• From July 1 super tax will also be eliminated for non-banking companies.

Reduction of Taxes

• The government has proposed a decrease of 20% on income tax from loans to SME and agriculture sector.
• Similarly, the government has cut the taxes on small marriage halls to just Rs. 5000 from Rs. 20,000.
• Reduction on import duty on raw material announced.
• Asad proposed to continue 1pc per annum reduction in corporate income tax.
• Non-filers can now buy houses of up to Rs. 5 million after paying excessive taxes.

Auto Sector

• Under the new finance bill, non-filers will now be able to purchase vehicles of up to 1300cc engine capacity after paying higher taxes. Non-filers will only be allowed to buy vehicles that have been locally assembled/manufactured.
• Tax increased for vehicles over 1800CC.
• A decline of five percent on duty announced on diesel engines for agricultural purposes.

Telecom & Mobile Phones

• Taxes on low priced phones have been decreased. Meanwhile, expensive phones will be taxed at a similar rate. However, the scheme has been simplified into three taxes and slabs.
• Taxes on Imported Phones:
  • Rs. 150 Customs Duty on imported phones valued under $30.
  • Rs. 1,470 Customs Duty on imported mobile phones worth $30 to $100.
  • Rs. 1,870 Customs Duty on imported mobile phones worth $100 to $200.
  • Rs. 1,930 Customs Duty on imported mobile phones worth $200 to $350.
  • Rs. 6,000 Customs Duty on imported mobile phones worth $350 to $500.
  • Rs. 10,300 Customs Duty on imported mobile phones worth more than $500.
• Customs Levy on Imported Phones:
  • No Levy on imported phones valued under $100.
  • Rs. 500 levy on imported mobile phones worth $100 to $200.
  • Rs. 1,500 levy on imported mobile phones worth $200 to $350.
  • Rs. 3,500 levy on imported mobile phones worth $350 to $500.
  • Rs. 7,000 levy on imported mobile phones worth more than $500.
• Another slabbed tax has also been imposed on imported mobile phones:
  • Rs. 70 on imported phones valued under $30.
  • Rs. 730 on imported mobile phones worth $30 to $100.
  • Rs. 930 on imported mobile phones worth $100 to $200.
  • Rs. 970 on imported mobile phones worth $200 to $350.
  • Rs. 3,000 on imported mobile phones worth $350 to $500.
  • Rs. 5,200 on imported mobile phones worth more than $500.

Miscellaneous

• Easy loans will be given to the low-income sector for housing. A revolving fund of Rs. 5 billion introduced for this purpose.
• Promissory notes for exporters, which will allow them to take loans from banks on the basis of these notes.

The complete draft of Finance Supplementary Bill, 2019 is given below:

 

[Nilgiri]

@Nilgiri are you following this thread?

I am now... Will look through it in a bit and give my 2 cents. Thanks for the tag.

The complete draft of Finance Supplementary Bill, 2019 is given below:

Thanks bud!

 

[Rafael]

question is how would govt manage fiscal deficit

As huge tax releif has been given but without this Pakistan industry was simply not competitive

This also explain why govt tax target is relatively low this year..(4450billion) vs 37000 last year
But achieving this will not be easy..and could spell disaster for already high fiscal deficit of 5.1% (down from 6.6% or 10% if circular debt counted)

If govt achieves 5.1% of fiscal deficit without decreasing the development budget of around 700b than this will truly be a miracle

But if it has it has decrease development fund
Development has to be led by private sector not by PSDP

Perhaps they will cover it for this year only through 350 BN + offered by Bahria town?

 

[ziaulislam]

Perhaps they will cover it for this year only through 350 BN + offered by Bahria town?

Revenues is different form tax collections
How would they achieve the 4450b target while already 170b behind is the real question

Serious work is needed in tax collection nothing done so far

LNG plant sale will yeild 2-3b$ by it self

I think govt should take bahria town offer as investment is already made..

For one it can fund the bhasha dam completely ..dam govt portion cost is 292b rupees (total 486b)

Even without electric part, the dam is going to build 5 billion units(almost
Same production as munda dam) due to down flow water management on 12000mw

 

[VCheng]

Revenues is different form tax collections
How would they achieve the 4450b target while already 170b behind is the real question

Serious work is needed in tax collection nothing done so far

LNG plant sale will yeild 2-3b$ by it self

I think govt should take bahria town offer as investment is already made..

For one it can fund the bhasha dam completely ..dam govt portion cost is 292b rupees (total 486b)

Even without electric part, the dam is going to build 5 billion units(almost
Same production as munda dam) due to down flow water management on 12000mw

It is not just the shortfall, it is also that they have only half a fiscal year to make up for it. And then comes the next fiscal year on top of what gets carried over.

 

[zeroboy]

 

[Rank]

Aqeel Karim Dhedhi "Business Community nay jo kaha tha uske 80% batain Asad Umar nay mani hain aur implement karde hain, business community ko bohat faida hoga" - opposition foooth hotay huway

Patwari aur PMLN supporters aur Anti IK brigade kuch b likhnay say pehlay search karlena Aqeel Karim Dhedhi koon hey

 

[ziaulislam]

It is not just the shortfall, it is also that they have only half a fiscal year to make up for it. And then comes the next fiscal year on top of what gets carried over.

collections are low in the first half of any fiscal yr especially since you had an elections..

FBR data shows its going to only lose 20b rupees due to very low lending to private sector because of this high tax..

Also additional revenues are expected in car imports /luxury cars

So based upon this they are going to cross 4000-4100 easily whther they will get 4300 is yet to be seen.. So pretty sure fiscal deficit will be less than 5% unless govt fails to do plan sell off of LNG plants and PPL stocks

 

[VCheng]

collections are low in the first half of any fiscal yr especially since you had an elections..

FBR data shows its going to only lose 20b rupees due to very low lending to private sector because of this high tax..

Also additional revenues are expected in car imports /luxury cars

So based upon this they are going to cross 4000-4100 easily whther they will get 4300 is yet to be seen.. So pretty sure fiscal deficit will be less than 5% unless govt fails to do plan sell off of LNG plants and PPL stocks

The recent steps do seem to be in the right direction, but what their actual impact be in raising the required revenuers remains to be seen. It may be too little too late, but a huge success if it indeed does work out well enough to avoid going to the IMF.

 

[Syed1.]

Pakistan won't rise till revenue collection rises to Rs. 8-10t and that can only happen through direct income tax.

Not talking about other cities but just go to Karachi's DHA, even basic 4-5 bedroom house is worth Rs 8-12cr ($ 600-900k) and I can say with some degree of certainty that there are more than 50,000 such houses. Then we hear that only 70,000 Pakistanis earn more than Rs 2 lac a month such that they pay direct income tax???? How can you afford a Rs 8-12cr house if you earn less than Rs 2lac per month?