Govt Presents Rs 8.487tr Federal Budget With 19% Increase Despite COVID

ISLAMABAD, (UrduPoint / Pakistan Point News - 11th Jun, 2021 ) :The Pakistan Tehreek-i-Insaf (PTI) government on Friday presented its third development-centric federal budget for the Fiscal Year 2021-22 with a total outlay of Rs 8.487 trillion, and around 19 percent additional allocations as compared to the last year's Rs 7.137 trillion.

� Despite the severity of the 3rd wave of COVID-19 pandemic, the government made remarkable allocations to carry out massive development projects and welfare activities for the downtrodden segments of society, besides promoting the agriculture sector to ensure food security and reduce dependence on imports.

"We have given an economic programme which addresses the welfare of all segments of the society. What we are doing, is to realise the prime minister's vision of establishing the welfare society, on the pattern of Sate of Madinah, set up by our Prophet Hazrat Muhammad (PBUH)" Minister for Finance and Revenue Shaukat Tarin said while presenting the budgetary proposals in the National Assembly.

� The fiscal plan focused on pursuing all-inclusive, sustained and robust economic growth through comprehensive planning and development. "We have given a budget which is full of hope. In Sha Allah, this budget will bring the good news for sustainable growth," he said.

The minister said the government steered the economy, out of crisis and put it on the growth trajectory by pursuing prudent policies under the dynamic leadership of Prime Minister Imran Khan.

Tarin said the stabilization phase of national economy was over now and the budget 2021-211 would focus on 'inclusive and sustainable growth.' "The budget 2021-22 will be about fostering growth and investment. We have set a target of 4.8% growth, which would be broad-based as it encompasses all the key sectors of the economy." He announced 10 percent ad-hoc relief allowance in the salaries and pensions of federal government employees, which would be effective from July1.

Similarly, to minimize the inflationary pressures, especially on the labourers and workers, the government has increased the minimum wage to Rs 20,000 per month.

Sharing achievements of the incumbent government, the minister said that the government completely eliminated current account deficit of $20 billion to a surplus of about $800 million, brought down the Primary deficit from a high of 3.8% to less than 1%; reduced expenditures and increased revenues, improved allocations for social sector under Ehsaas, and introduced Public Finance Management, encompassing all areas of budget, finance, expenditures, debt management, cash management and development spending.

During the current year, the agriculture sector did perform well despite locust attacks and all the major crops, except cotton, witnessed positive growth.

Likewise, the services and the large scale manufacturing sectors also had considerable growth despite COVID-19 factor.

He said during the next fiscal year, Rs 1 billion would be spent on the Locust Emergency and Food Security project, Rs 2 billion for enhancing productivity of rice, wheat, cotton, sugarcane and pulses, Rs 1 billion for enhancing olive cultivation on commercial scale, and Rs 3 billion for improvement of water-courses.

He said the government was evolving a comprehensive strategy, under which the farmers would be provided seeds, fertilizers, loans, tractors and machinery, besides setting up cold storages and commodity warehousing to help increase their income.

He said one of the top priorities of incumbent government was to uplift the downtrodden segments, and for the purpose 40% of the total population was given cash transfers, besides providing relief to 15 million households across the country.

He said the downtrodden segments would be fully taken care of as the government would adopt a 'bottom-up approach' to help upto six million households and save them from 'trickle-down effect'.

Tarin said the government would have to ensure 6 to 7 percent growth to accommodate the youth, as 65 percent of the population was below 30.

He said the housing and construction sector was also on priority as around 10 million houses were required, adding a comprehensive strategy has also been devised to bring improvements in energy sector.

The minister said the development budget was enhanced from Rs 630 billion to Rs 900 billion, which was an increase of around 40%.

He said the three large dams - Dasu, Diamer Bhasha, and Mohmand dams - were the priority in the budget. Some Rs 91 billion had been proposed in the budget for ensuring water security, including Rs 57 billion for Dasu hyrdopower project, Rs 23 billion for Diamer-Bhasha Dam, Rs 6 billion for Mohmand Dam, and Rs 14 billion for Neelum-Jhelum hydropower project.

The minister said the government was committed to fast tracking implementation of CPEC as to date 17 projects worth $13 billion had been completed and another 21 of $ 21 billion were underway, while additional 26 strategic projects of $28 billion were in pipeline.

The finance minister said in order to increase exports for moving out of recurrent balance of payment crisis and repeatedly opting for the International Monetary Fund (IMF) programmes, the government was investing in establishment of special economic zones, supporting new exports in IT (information sector) sector and agro-based industries, and endeavouring to make CPEC the platform where industries would be relocated, employment opportunities created and exports were made possible.

He said efforts would be initiated to promote foreign direct investment in the export sector.

The government, he said, was also involving the private sector in the development projects. Currently, the Public Private Partnership Authority had 50 infrastructure projects of around Rs 2,000 billion at various stages of processing. While, six projects of Rs 710 billion would be processed in the next fiscal year, he added.

The minister also mentioned the flagship Billion Tree Tsunami project for which the government had earmarked Rs 14 billion in the next budget.

The minister said the social sector development was also the priority of the government. Health, education, attaining sustainable development goals and climate change were some key areas of focus for which an amount of Rs 118 billion was proposed in the PSDP, he added.

Highlighting budget's salient features, the minister said the gross revenues for the next year had been estimated at Rs 7,909 billion against revised estimates of Rs 6,395 billion for 2020-21, showing growth of 24 percent.

He said the revenues of Federal board of Revenue (FBR) were projected to grow by 24 percent from Rs 4,691 billion to Rs 5,829 billion. The non-tax revenues were expected to grow by 22 percent, he added.

The minister said the provincial share in federal taxes would increase from Rs 2,704 billion last year to Rs 3,411 billion. It meant that additional Rs 707 billion or 25 percent as compared to the revised estimates, would be made available to the provinces, he added.

Tarin said after provincial transfers, net federal revenues were estimated at Rs 4,497 billion as compared to Rs 3,691 billion under the revised estimates for the last year, showing growth of 22 percent.

He said the federal expenditures were budgeted at Rs 8,487 billion for next year as compared to the revised ones of Rs 7,341 billion for 2020-21, showing an increase of 15 percent.

Tarin said the current expenditure was projected at Rs 7,523 billion for next year against Rs 6,561 billion for last year, reflecting an increase of 14 percent.

Excluding interest and non-off expenditure on Covid-19 and settlement of IPP (Independent Power Producers) dues, the current expenditure was projected to increase by 12 percent, he added.

The subsidies, he said, were projected at Rs 682 billion for next year against revised estimates of Rs 430 billion last year, mostly comprising payments of dues of IPPs, tariff differential subsidies and subsidies on food.

He said the allocation for Ehsaas programme including that of Pakistan Baitul Maal and Poverty Alleviation Fund, had been increased from revised estimate of FY2020-21 of Rs 210 billion to Rs 260 billion, with an increase of 24 percent.

It was so far the highest amount allocated for the low income segments of the society, he added.

The minister said the overall fiscal deficit budget was estimated at 6.3 % as opposed to the revised estimate of 7.1% for the current year, while the primary deficit was targeted at 0.7% as against the revised estimate of 1.2% for the year 2020-21.

Despite Covid-19, the government had continued its journey of reducing the primary deficit, he added.

Talking about the key-expenditure priorities in the budget 2021-22, the minister said it would focus on vaccinations, for which around $1.9 billion would be spent to protect the population from the COVID-19.

In addition, universal health coverage would be rolled out in collaboration with the provinces while SME support programmes would be introduced for risk sharing and collateral free lending to SMEs for which various schemes had been envisaged for which an allocation of Rs12 billion had been made.

Likewise, he said Rs10 billion allocation was made for Kamyab Pakistan Programme whereas an anti-rape fund was being established with an initial allocation of Rs100 million.

An amount of Rs 66 billion had been proposed to be provided to HEC for the current budget and Rs 44 billion for the development budget, which would be subsequently expanded by an additional Rs 15 billion, he added.

The minister said the government also announced various schemes for export sectors and public entities.

He said the Federal Government has increased allocations for Azad Jammu and Kashmir from Rs 54 billion to Rs 60 billion, for Gilgit Baltistan from Rs 32 billion to Rs 47 billion and for merged districts of Khyber Pakhtunkhwa from Rs 56 billion to Rs 60 billion.

Moreover, Shaukat Tarin said a special grant of Rs19 billion had been provided to Sindh and Rs 10 billion to Balochistan over and above their National Finance Commission (NFC) share.

He said Rs 5 billion was proposed as federal share for undertaking new population census in 2022, and Rs 5 billion for the local government elections.

The minister said the government also proposed Rs100 billion for meeting exigencies related to Covid-19 pandemic.

Meanwhile, presenting taxation proposals, Tarin said the government had taken several measures to provide tax relief to existing tax-payers, besides introducing measures to enhance tax-to-GDP ratio.

During the current year, he said historic refunds were paid which stood at 119 percent higher than the corresponding period of last year.

He said that the proposed tax policy would emphasize on expansion of tax base through identification of new tax payers, gradual removal of exemptions and concessionary provisions and reduction in tax rate.

The tax policy would be based on self-assessment, under which outside auditors would be conducting the audit of filed returns, however the government would introduce a mechanism to go after tax evaders.

The minister said no new taxes would be imposed on the salaried class, while a system of track and trace would be implemented initially with four industries and expanded to the full spectrum of industrial and trading activities.

A major strategy would be the expansion of GST base and in this regard, he said the government would bring into the tax net all retail and wholesale transactions which were using emerging and evolving digital and electronic payment systems.

"To this effect, we would help traders install the point-of-sale (POS) equipment and link it up to the FBR system", he added.

The minister said Pakistan Single Window would be operational in near future to facilitate clearance of imports and exports.

To facilitate small businesses, he said threshold of annual turnover was being enhanced and now a cottage industry, having annual turnover of up to Rs 10 million will not be required to register for sales tax.

He announced withdrawal of FED and Reduction in Sales Tax on Locally Manufactured cars up to 850 cc, adding that rising prices of locally manufactured small cars was a major concern for low-earning families. Accordingly, he proposed that small cars up to 850 cc capacity may be exempted from FED besides reducing Sales Tax rate from 17% to 12.5%.

The minister said that tax incentives for promoting electric vehicles were also proposed to address environmental issues, reduce reliance on gasoline and provide cheaper source of transportation to public.

The rate of federal excise duty on telecommunication has been proposed to be reduced from 17% to 16% The minister also proposed FED on mobile phone calls, exceeding 03 minutes, internet data usage and SMS messages.

He proposed inclusion of sugar in the Third schedule to the Sales Tax Act so that tax is charged on actual retail price of the product The delay in the issuance of exemption certificate was a major concern of taxpayers, he said adding that it was proposed that time limit of fifteen days might be observed for issuance of exemption certificate for corporate taxpayers after the lapse of statutory time limit.

He said reduction in Withholding Tax Regime by 40 percent was proposed, adding that in past, there has been a trend to collect direct taxes in the indirect manner. He said it would not only increases burden on the people but raise compliance cost for the documented sectors of the economy.

The government proposed that withholding tax on services related to oilfield, warehousing, security, logistic, telecommunication and collateral management, may be reduced to 3% from existing 8%.

The rate of capital gain tax would be reduced to 12 5% from 15%, he said adding that adjustment of Losses against Property Income under present legal dispensation current year business loss was adjustable against income under all heads except property and salary income.

To promote IT services, freelancers and export of other services, a special regime at par with export of goods regime, has been proposed for all services receipts which are brought to Pakistan through banking channel, shall be taxed at a reduced rate of 1% under final tax regime and no question thereafter shall be asked about it, he added.

The Special Economic Zones were exempted from tax however, under the law they are still liable to pay minimum tax on their turnover. This is causing hardship to the investors. It is proposed that SEZ enterprises would be exempted from minimum tax for tax-year 2021.

He said multiple relief measures have been taken for livestock & poultry sectors as well as agricultural sector in this budget.

The minister said that that government has taken kinetic measures to boost the industrial growth to tear away the label of fragile, attached with the economy, adding that this government from the day one, focused on boosting domestic industry and reducing their cost of doing business.