Budget 2020-21: Govt to provide incentives to hotel, airlines and other COVID-19 hit sectors

ISLAMABAD: With just a few days left in the government unveiling the budget 2020-21, authorities are weighing various options to give incentives to industries severely impacted by COVID-19 such as the hotel industry, airlines and the poultry sector. 

The government is all set to reduce turnover tax for different sectors of the economy. The government has slashed all heads of non-development expenditures such as procuring vehicles, petrol, filling of vacancies and defence budget was also curtailed by Rs50 billion than its initially envisaged demand. 

These exercises have created a cushion and the government has increased the development budget outlay at the federal level from Rs530 billion to Rs650 and to Rs700 billion for the next budget 2020-21.

Without having a net revenue impact in the upcoming budget, the FBR will be assigned a tax collection target of Rs4.95 trillion during the next fiscal year 2020-21. “It will be a low inflationary budget,” said one of the participants of the budget-making exercise while talking to The News here on Sunday night.

Official sources said that the government decided in principle that there would be no additional tax burden in the coming budget as some tax measures would be taken but overall there would be no net revenue measures. “It indicates that there will be net relief in the budget,” said the official.

They said that the government would have to generate the desired revenue collection to the tune of Rs4.95 trillion in the next budget to align with the macroeconomic framework envisaged by the IMF for reviving Pakistan’s economy.

“Pakistan cannot afford derailment of IMF programme so all such measures will be taken that can protect the existing Fund programme,” said the official.

They were of the view that the tax incentives would be granted to COVID-19 hit sectors such as the hotel industry, airlines, poultry and retailers. The retailers for tier-1 tax is likely to be reduced, as efforts are underway to convince the IMF, said the sources. The cement sector is also under consideration for the provision of relief in the next budget.

However, sources said that the government will have to strike a balance in order to generate tax revenues so that the FBR collection can reach its desired target of over Rs4.92 to Rs4.95 trillion in the next budget.

The withdrawal of the zero-rating regime for five export-oriented sectors will not be reversed but such measures will be protected in the next budget. The official said that the tariff rationalisation will be done with the major objective to boost industrialisation in the next fiscal year.

Originally published in The News