Rs2.482 trillion Federal Budget presented in NA

ISLAMABAD: Federal Budget 2009-10 envisaging a total outlay of Rs2.482 billion has been presented.

State Minister for Finance and Economic Affairs Hina Rabbani Khar presented the Federal Budget 2009-10 in which 15 percent raise has been announced in the salaries and pension of in-service and retired government employees.

The target of GDP for the next fiscal year has been fixed at 3.3 percent while measures will be adopted for bringing the inflation rate below 10 percent.

The State Minister said the total allocation for Public Sector Development Program (PSDP) has been made at Rs646 billion; Rs 343 billion for Defence Rs31.60 billion for education sector and; Rs6.5 billion for health.

The allocation for Benazir Income Support Program has been raised to Rs70 billion which will be distributed among 5 million deserving people. Rs50 billion have been earmarked for the relief and rehabilitation of affectees of Malakand Division. 

In order to impart training to the youth under National Internship Program Rs3.60 billion have been allocated. Under the program 30,000 youth will be provided professional training in their respective fields.

The target for tax revenue collection has been raised by 15.7 percent to 1.3775 trillion while the rest of the expenditure will be met through foreign loans and grants.

Rs178 billion are expected to be received through Friends of Pakistan Consortium. 

The fiscal deficit is expected at 4.9 percent for the next fiscal year.

Increase in the allowance has been announced for the armed forces deployed on the western front. This allowance will be equal to one month’s initial basic pay with effect from 1st July 2009, as announced by the President of Pakistan. 

Feel free to share your opinion with us on the State Minister’s speech on Budget 2009-10.

Pervez Elahi terms budget ‘disappointing’

ISLAMABAD: Central leader of Pakistan Muslim League-Q Chaudhry Pervez Elahi has described the Federal Budget 2009-10 as disappointing.

He said Pakistani people are calling for ‘Roti, Kapra aur Makan’ (food, clothing and shelter) but the government seems hell bent on imposing taxes and taking internal and external loans for meeting targets.

Chaudhry Pervez Elahi said neither will there be any reduction in inflation and unemployment nor will the employees get any relief.

The budget document is not in congruence with the economic condition and political situation of the country.

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                                              From Newspaper


A budget based on promises, assumptions

By Khalid Mustafa
ISLAMABAD: The government is set to unveil the consolidated budget on Saturday for the fiscal year 2009-10 with an outlay of over Rs2.9 trillion based on uncertain external flows, mainly pledges from Friends of Democratic Pakistan (FoDPs), for the social sector spending and from donors and other countries for relief and rehabilitation of the internally displaced persons (IDPs).

However, the federal budget is likely to hover around Rs2.2 trillion with current expenditures of Rs1.5 trillion and development expenditures of Rs261 billion.It will be the first budget based on uncertain source of external flows. However, the government is learnt to have increased relaxation in the budget deficit from 4.6 to 4.9 per cent or over 5 to 5.5 per cent, meaning the budget deficit would stand somewhere between Rs723 billion and Rs798 billion.

It will really put a spanner in the government work, as it would be hard to arrange financing for the huge fiscal deficit. In case the government fails in managing the external resources to bridge the gap then it would have to increase its reliance on domestic sources.

In this scenario, the government will have no option but to massively borrow from commercial banks at high interest rates, as under the IMF covenants the government cannot borrow from the State Bank. This will retard the central bank to bring down discount rates, which is essentially required to stimulate the almost stalled economic growth. If this horrific scenario continues then the economic activity will not increase and continue to be subjected to high discount rates.

Adviser on Finance Shaukat Tarin was of the view the government remained stuck with the fiscal deficit of 3.4 per cent. However, an increase to 4.6 per cent deficit target has been made to spend inflows from FoDPs on the social sector and further relaxation of 4.9 per cent has been made to spend donors amount for IDPs.

So here arises a question for the decision-makers: why don’t they accept that the budget is purely based on the fiscal deficit of 3.4 per cent, and the allocation for the education or the health sectors will be increased only when inflows from FoDPs will start coming. Otherwise, in the absence of exact knowledge about inflows from FoDPs and donors the allocation for the social sector will create problems for the government, making it unwise to make the budget on assumptions.

The outlay for the Public Sector Development Programme (PSDP) will be Rs621 billion and revenue collection target, Rs1.4 trillion.However, the government is likely to revise the revenue target down because the FBR has told the government that collecting over Rs1.4 trillion will be a gigantic task.

The government has withdrawn many exemptions and is also bringing the real estate and the services sectors under the tax net, including imposition of carbon tax on POL products. Different tax measures and carbon tax would bring additional revenue of Rs160-170 billion to the government which includes Rs80-90 billion through carbon tax.

But in case crude oil price surges past $75 per barrel in the global market it will be impossible to impose taxes on the POL products, as after July 1 the government will be bound to fully pass on to masses the price fluctuation in oil prices in the world market. The carbon tax will not be a feasible revenue collecting tool in case oil prices go up, rendering the government with huge deficit in its revenue.

There should be a rational and intelligent taxation and it should not be done for the sake of increasing the revenue. There are reports that the government intends to levy taxes on computers. If adopted, the measure will hurt the government’s own drive to develop quality human resources. Besides, it will deprive the youths of global and quality access to information.

The government is going to reduce the central excise duty and rationalise other taxes on the industrial sector to ensure its growth, and to this effect, the government wants to declare the next fiscal year as industrial year. But even then the industry will not be able to grow unless and until the discount rates are brought reasonably down.

Although, Shaukat Tarin was of the view the increase in the fiscal deficit up to 4.9 per cent will have no inflationary impact as the expected $2 billion from FoDPs and $550 million from donors will mainly come in terms of grants, but still it remains hypothetical. All pledges as per expectations can never be materialised, and only time will tell if making the budget on assumptions will serve the country or not?

Carbon tax on POL to help achieve
Rs 1,400 bn revenue target

By Mehtab Haider
ISLAMABAD: The government is all set to impose flexible rate of carbon tax on POL products in the budget 2009-10 in order to achieve its envisaged tax collection target in the range of Rs1,390 to Rs1,400 billion, it was learnt.

The upcoming budget will be unveiled by Minister of State for Finance Hina Rabbani Khar in the National Assembly on Saturday. The government has made commitments with the International Financial Institutions (IFIs) that it will move towards elimination of tax exemptions in a gradual manner. There may be some progress towards this direction in the budget 2009-10, said the official.

The carbon tax may be slapped at an average rate of Rs5-6 per litre in order to replace the existing petroleum development levy (PDL). The rate of carbon tax will be flexible which can be changed in case of fluctuation in prices of POL products in the international market. The government also intends to move towards imposing GST on services at the rate of 5 to 8 per cent in the next budget.

“Keeping in view the Indian model where they started GST on services at the rate of 5 per cent, Pakistan’s tax authorities should also move ahead with reduced rate in order to attract taxpayers to get them registered,” said the official.

“Our main focus will be bringing improvements in enforcement in order to achieve the tax collection target in the range of Rs1,390 to Rs1,400 billion envisaged for the next fiscal year,” a high-level official involved in the budget making process told The News here on Friday.

The official said the FBR had initially proposed to double the rate on cash withdrawal from banks from 0.3 per cent to 0.6 per cent but the State Bank sternly opposed it by arguing the deposits shrank by over 20 to 25 per cent and the situation was not ripe to increase such taxation measures.

The leadership crisis in the FBR also played havoc with the budget making process as several proposals failed to get through. The FBR, he said, also proposed to abolish the federal excise duty of 5 per cent on cars in the budget 2009-10 in order to give boost to the auto sector.

Another proposal for imposing 2.5 per cent tax on personal assets was rejected by the incumbent regime. This proposal was rejected because the government considered it as regressive taxation.

According to the proposal initiated by the FBR, taxation authorities recommended the government to exempt owners of one house and cars and impose 2.5 per cent tax on assets exceeding the value of Rs2 million.

The proposed tax collection target around Rs1,400 billion was envisaged on the basis of Rs1,150 billion benchmark for the outgoing fiscal year as well as 12.5 per cent nominal growth and taxation measures, jacking up the tax collection by Rs250 billion and touching the number of Rs1,400 billion by 2009-10.

The nominal growth (real GDP growth + inflation) will help in revenue collection to the tune of over Rs100 billion while the remaining Rs150 billion will be collected through enforcement as well as taxation measures.

According to the Economic Survey 2008-09, there were a total of Rs119 billion tax exemptions in three major taxes, including income, sales tax and custom duty in 2008-09 against Rs86.657 billion in 2007-08.

Newspaper industry may get tax exemptions

By Khalid Mustafa
ISLAMABAD: The government is all set to provide relief to the newspaper industry by announcing certain tax exemptions in the budget on Saturday.

According to one of the budget-makers, the government will substantially increase the allocation for advertisements of federal ministries and their attached departments, which will help the newspaper industry to stand on its feet.

The official said that the advertisement budget is not sufficient and has not been increased for years, but the government is now prepared to provide more funds for that account.

“There is a suggestion that a substantial amount equal to 1 per cent of gross domestic product should be allocated for a bailout package for the newspaper industry. Under the package, the government will also extend soft loans to the industry for importing machinery and other related items,” he said.

The government also seems inclined to allow the newspaper industry to import second hand printing machine on either zero customs duty or under concession. In addition, the government is also considering zero-rating special excise duty on the value of goods imported for the print industry.

The government is also examining a proposal to waive general sales tax on the import of newsprint and other raw material. Last year, that proposal was deferred. If allowed the import of newsprint inks, plates and films will be exempted from general sales tax and central excise duty as a bailout package.

Moreover, exemption from withholding tax on advertisement income is also under consideration. The government is also likely to exempt goods related to the print industry from 1 per cent duty at the import stage.

Budget presentation at 4pm

ISLAMABAD: The Business Advisory Committee of the National Assembly has decided that Budget for 2009-10 will be presented on Saturday at 4pm sharp followed by a two-day break of the session.

The general discussion on the budget will commence from June 16 and continue till June 23, according to the decision of the Business Advisory Committee.

The meeting of the Business Advisory Committee of the National Assembly was held on Friday presided over by Dr Fehmdia Mirza, Speaker of the National Assembly, in the Parliament House.

The meeting discussed agenda and ways to run the proceedings of the budget session of the National Assembly.

It was also decided that discussion and voting on demands for grants will be held on June 24 and 25, the Finance Bill will be passed on June 26 and discussion on supplementary demands for grants and appropriation will be held on June 27.

The meeting decided that the daily session will commence from 10am and continue till 8pm. It was also decided that the budget session would conclude on June 27.