Friday Jun 12, 2020
Financial analysts have offered mixed reactions to the FY 2020-21 budget, with most expressing disappointment and a lack of enthusiasm, calling it ambitious and "directionless", while others going so far as to say it can be viewed as "business friendly".
Speaking to Geo News right after Minister for Industries and Production Hammad Azhar's budget presentation, Financial analyst Khurram Shehzad said that the budget did not entail anything extra-ordinary, although tax relief on custom and import duties has been given and the hard-hit hotel industry also got respite in terms of taxes.
Shehzad lamented that despite no new taxes, the GDP rate will be difficult to maintain with 2% deficit and 6.5% inflation rate, adding that due to these factors the FBR will have a hard time achieving its target which is 24% of the total tax collection.
The analyst welcomed the government’s move to not raise the rate of pension and salaries this year, explaining that the government in previous years has been making an increase in these un-funded pensions with no sources to generate revenue for them.
“Most people receiving pensions are not even alive, hence, cutting this expenditure would cushion economy in times of pandemic,” he said.
He said that for tackling bare-level poverty the government has the Ehsaas Programme.
Another analyst, businessman Mian Zahid Hussain said that this is a status-quo budget which happens to appear quite "directionnless".
“Our post-covid-19 economy will require a jump start and I found no such recommendations in the budget.,” he told Geo News.
"We had proposed zero rating (VAT exemption) for some goods and we saw no mention of that. Nothing for SMEs and nothing of note for governance. However, we see many measures for revenue," he noted.
Hussain said it seems there is no good news as such for the business community and "I am sure is some bad news".
"The audit measures they have adopted and for third party information and revisions in appeals and the sales tax revisions and other revisions do not make it seem like there is anything good in particular contained for the business community," said the businessman.
"And we did not ask for any concessions. We asked for facilitation and the creation of an environment conducive to business. So there is nothing satisfactory there. Yes, they have raised the limit for purchasing beyond which a CNIC will be required which I feel should have been abolished," he added.
He said the business community wanted audits to be deferred for a year or two "but I feel like it (the time period) has been narrowed down even more".
"The Rs650bn non-revenue income allotted — here will they get it from? Last year they had kept Rs150bn for privatisation. How do they hope to privatise? How will steel mills be revived? How will Railways and PIA be revived" he questioned, expressing dissatisfaction.
Abdul Qadir Memon, an expert on tax issues, said that the outlay of the budget is more than the allocation this time, adding that the targets also seem quite ‘unattainable’.
He did acknowledge that many relaxations have been given this year in terms of property income and withholding taxation.
Industrialist Siraj Kassim Teli said that the government mentioned the coronavirus mentioned several times in the budget, however, it failed to frame any policies in wake of the situation.
Teli said the main focus seemed to be the construction sector and cement and tourism industries in terms of relief.
“These are Khan sahab’s favourite sectors, rest of all the local industries are suffering. This is a disappointing budget for the business community,” he said.
All Pakistan Anjuman-e-Tajran (APAT) Secretary-General Naeem Mir rejected the 2020-21 budget, saying small businesses were ignored and that the condition of presenting a copy of CNIC for transactions was encouraging the undocumented economy.
"The CNIC condition should have been revoked amid the coronavirus" crisis, Mir said, noting that no easy loan scheme for small business owners was launched.
Small businesses provide employment to about 40% of the workforce, he added.
"Poor government policies have shrunk the Rs51 billion economy," the top APAT official said, adding that the incumbent regime was "hiding" behind the coronavirus pandemic.
"If no new tax is imposed, how will the budget deficit be brought from 7% to 4.4%," he wondered, stressing that the government could not let itself off the hook by playing a game of filers and non-filers.
Mir mentioned that other sectors, too, should be facilitated the way the construction sector was aided by the Prime Minister Imran Khan-led government.
"Should traders just shut down their shops and start constructing houses? The per-capita income has fallen and shops are deserted," he added.
Another member of the business community, Mohammad Sohail, spoke to Geo News, calling the budget "impractical".
The analyst said that the most important factors that concern the common man are employment and income, which are under threat due to the current pandemic. “The budget seems quite incomplete and uncertain. “
He said that the biggest threat is the fiscal deficit, which was not addressed in the budget, adding that in case of a negative deficit, the government does not know how to overcome its shortcomings.
On the flip side, Islamabad Chamber of Commerce and Industry (ICCI) President Muhammad Ahmed said he welcomes the budget, terming it "business friendly".
Ahmed noted that the customs and regulatory duties were reduced and relief provided to the industries, which brought down the inflation rate. "The government presented a business-friendly budget," he added.
The ICCI president also welcomed the move of relaxing the condition of presenting CNIC copies for transactions — now at Rs100,000. "Now new taxes were introduced and that is great," he said.
The move to give concessions on imported products for children was commendable. "From the budget speech, it seems that [the government] gave a lot of concessions," he said.
"The government's direction of running business operations is clear," Ahmed noted, adding that the fixed tax rate, however, may pose challenges to the small business owners.