Pakistan Federal Budget FY 2020-21: Analysis and Discussion Thread

[Arsalan]

PTI government is presenting the federal budget for finical year 2020-2021 today in the national assembly. Please use this thread for discussing small budget points, appreciation and condemnation (which will surely be coming).

IN wake of COIVD-19 i am not expecting a great budget anyway but as per some rumors in business circles, it looks that thankfully there wont be additional tax burden put on exports. Little relief lower income people also expected.

BUDGET 20-21
BULLET POINTS

1- No new tax to give relief to people
2- Ahsas program to continue by increased budget
3- To improve tax collection
4- To decrease in govt. expenditure
5- To improve subsidy system
6- Poverty elevation program
7- Higher education budget increased
8- Measures taken to improve remittances
9- Kamyab Naujawan program budget introduced
10- To improve public services through E-governance
11- Artist welfare fund increase
12- Inflation to be decrease
13- FBI increase by 25%
14- To improve health services by ICT
15- To open smart schools
TAXES :
16- POS of retailer business to increase
17- 14% to 12% sales tax on retailers
18- Hotel minimum tax decrease to 0.5% July to September
19- Fixed tax scheme introduced for Small and medium businesses
20- Export rebate, to direct transfer in business bank accounts
21- Raw Material fully exempt from custom duty to respective nature of businesses having 20000 items
22- Custom duty of 200 items in tariff line decrease
23- PRD to decrease
24- Poor people benefits --- corona—supplements etc to be exempted from duties and taxes
25- Custom official powers has been decreased
26- Inclusive of advance ruling methods in custom law
27- Unregistered sales tax person—CNIC condition from 50 thousand to one lakh
28- Covid 19 sales items exemption period increased
29- 237 sro for relief extended for further 3 months
30- 11th schedule of sales tax to improve
31- Increase in FED in all type of cigarettes and its articles increased to 100%
32- Caffine items FED from 13 to 25%
33- Double pick up FED to be taxed as other vehicles
34- 17% sales tax on potassium cholaride decrease
35- 14% sales tax decrease to 12% of big retailers
36- Wastage to fixed in manufacturing business
37- 12 schedule sales tax of VAT—manufacturers no sales tax
38- Cement sector decrease from 2 to 1.75 per kilo
39- If Appeal than reference can be made to following years
40- ADRC law to be change
41- STAY provision to be made in ADRC
42- FED law to be enhanced
43- Sales tax act 9th schedule mobile phone manufacture decrease in sales tax
44- E Audit / video link introduced for audit
45- Online sharing of assess data introduced
46- WHT Regime to delete 9 sectors (Education and marriage hall etc)
47- Commercial importer and manufacturer importing on raw material and machinery from 5.5 top 2% and 1%
48- Machinery examination certificate abolished
49- Aop and individual allowed expenditure to be claimed against property Income
50- Foreign remittances transfer from one bank to another – no tax on that
51- Tax Refund procedure – now changed – one centralized system introduced
52- 152 WHT of non resident for Hajj Companies
53- Advance tax abolished under section 231b and 234 on rickshaw and cars
54- Advance tax payment threshold increased
55- Exemption certificate through automation system
56- Schedule 12 Exemption certificate for advance tax to be produced by person who had already paid advance tax
57- RIET residential properties CGT period extended
58- Free Zone benefits also to be given modern developers
59- To simple law and business only for PE tax deduction to be made
60- Tax deduction under section 235 now fully adjustable
61- Inclusion in Active tax payer list, proper enquiry to be conducted
62- Automatic return process system to be introduce for any error in return if any
63- For and increase in data base and WHT 236V to be introduce
64- Non resident and resident tax should be same
65- Purchase and leased vehicle threshold to be same
66- Depreciation to be as per best international practice
67- NPO status per 2nd schedule section 100C condition to be strictly followed and only those NPO be there who benefits the community in general
68- 10% tax to be paid while filing appeal
69- Auto system advance tax to introduce through IRIS by 5th of every advance tax due date
70- CGT on Immoveable property decrease from 5 years to 4 years
71- Non Resident- royalty, fees etc to be decrease


72- FTR to be filed with section 114
73- Appeal fees increased
74- Section 165 WHT for bio annual now to be filed by 3 months instead of 6 months
75- Immoveable taxation CGT from 8 to 4 years and every year decrease by 25%


File attached, Salient features of budget 2020-21

 

[Arsalan]

Some key points so far:
According to budget documents volume of federal budget has been kept at Rs. 7600 billion. According to the details Rs 3235 billion will be spent on interest and repayment of loans

Government projects growth of 2.1 percent for next fiscal year, up from a 0.4 percent contraction in the outgoing year.

The government expects 17% increase in revenues in FY21 while the total revenue collection target is Rs6.57 trillion – including Rs4.96 trillion of the Federal Board of Revenue. The non-tax revenue target is set at Rs1.61 trillion.

The agricultural sector grew this time by 2.7%. But the government missed all its sub-sectoral targets, except forestry and other crops. The government had set a target of 3.5% growth in the agriculture sector for this fiscal year.

The tax revenue target has been set at Rs 4950 billion.

Rs 475 billion will be set aside for pensions.

29.5 billion for Higher Education Commission plus 4 billion for education.

Ease of doing business, “Pakistan climbed from 136 to 108 in one year." Withholding tax regime to be made easy to improve this further.

“No new taxes have been levied and expansionary policies are needed.”

 

[Norwegian]

Industries Minister Hammad Azhar presents Rs7.13 trillion budget FY2021 in NA
Dawn.com Updated June 12, 2020

Minster for Industries Hammad Azhar is presenting the federal budget for the fiscal year 2020-21. — DawnNewsTV
Minster for Industries Hammad Azhar is presenting the federal budget for the fiscal year 2020-21— referred to as the ‘corona-budget’ by Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh yesterday during a presser to unveil the economic survey for fiscal 2019-20.

Prime Minister Imran Khan in the National Assembly. - APP Photo


Prime Minister Imran Khan is also attending the session. The minister started the session by saying it was honour for him to be presenting the second budget of the PTI government under the leadership of PM Imran.

He then went on to highlight some of the major achievements of the government in the outgoing fiscal year, pointing to a 73 per cent decline in the current account deficit, which is now under $3 billion, he said. "There is also a primary surplus which we achieved in the past nine months," he said.

Opposition held placards and chanted slogans against the PTI govt as the budget was being presented. — Amir Wasim


In the background of Azhar's speech, loud slogans against the premier and table-thumping by the opposition benches can be heard as the minister highlights PTI-led government's efforts to streamline the economy.

Azhar said "our budget deficit shrank from 5pc to 3.8pc while IMF gave us an extended facility of Rs6 billion and remmittances increased from 16 to 17 billion". He noted that Bloomberg had called PSX the top performing market in Dec 2019.

Presenting details of the new budget, the minister emphasised that "no new tax was introduced in this budget". He said the need of the hour was an expansionary fiscal policy which the government was implementing.

Total expenditure
He said the total size of the budget or the total expenditure budget for the next year was Rs7,136 billion slightly higher than the budgeted figure for the previous year.



Growth rate
The budget deficit, he said, would be 7pc of the GDP. Azhar said the government will pull out the economy from a 0.4pc contraction and is aiming for a 2.1pc growth in GDP for fiscal year 2021.



Total revenue
Total revenue, he said is budgeted at Rs6,573 billion, of which net federal revenue will be Rs3700 billion. Azhar said Rs64 billion had been budgeted for the Higher Education (HEC).

This year's budget session is being seen as a formality as both PPP and PML-N, the major opposition parties, have agreed not to press for voting on cut motions and not to point out quorum till the passage of the budget by June 30.

Also read: Budgeting in the time of corona

'Corona budget'
The budget comes as the country tackles the ongoing health crisis caused by the outbreak of the novel coronavirus, which has shaken the economy. It was finalised after talks with the International Monetary Fund (IMF) and it was agreed that the federal government would freeze the size of its expenditures.

Presenting the Economic Survey of Pakistan 2019-20 at a press conference on Thursday, Shaikh spent a large part of his speech building narrative around inheriting a troubled economy and putting it on road to recovery before the Covid-19 pandemic hit economies of the world and Pakistan.

Dr Shaikh said it was still very difficult to quantify the accurate impact of Covid-19 on the economy, but there was no doubt that it had been really hit hard and different institutions were making different projections based on quantum, severity and duration of the pandemic.

The adviser said the government had no intention to go for aggressive taxation but this did not mean that those who were rich would not be made to pay their due taxes.

What's expected?
Austerity and belt-tightening remain the focus of the upcoming budget for which every section and arm at the federal and provincial level would be required to contribute and sacrifice.

With FY2021 finance bill, the government aims to give a strong message to the world that it is “fiscally responsible despite severe challenges” and will prudently utilise whatever fiscal space becomes available through international flows.

The government and IMF have agreed on Federal Board of Revenue (FBR) revenue target of about Rs4.95 trillion for next year under which the defence allocations would be kept under Rs1.3 trillion. The federal development programme would go beyond Rs650 billion to support growth prospects.

Besides a tight lid on civil expenditures, subsidies would be targeted and reduced, debt would be smartly structured and cash disbursements for relief and stimulus would be linked to the availability of fiscal space to rein runaway fiscal pressure. Fiscal deficit is being targeted around 9pc of the GDP.

No fresh posts would be created during the year and utmost care would be taken in filling unavoidable posts. Generally, vacant posts for over six and nine months would be considered for abolition.

Similarly, the posts and ministries of devolved subjects would be actually transferred to the provinces including higher education and major hospitals in major cities.

SOPs in place
In order to ensure that the social distancing policy to prevent the spread of Covid-19 pandemic is followed, the opposition and government have agreed that only a maximum of 86 members (one-fourth of the total 342-member house), 46 from the treasury and 40 from the opposition, will be present in the house at one time.

The terms of the agreement, which were called guidelines for ensuring implementation of the standard operating procedures, were read out on the floor of the house by none other than by PPP’s Syed Naveed Qamar on the directive of Speaker Asad Qaiser at the outset of the sitting on Wednesday.

According to the accord, the members and the staff of National Assembly Secretariat who have not got themselves tested for Covid-19 would not be allowed to enter the hall. The proceedings of the house will continue for maximum of three hours daily until June 30. The opposition will not point out quorum, except on the day the budget would be voted upon.

Qamar further said that chief whips of the parties would be responsible for providing the lists of the attending members on a particular day and only those members would be allowed to come to the house whose names were present in the lists.

Explaining further points, the PPP leader said there would be no need for the members to come to the assembly hall for attendance as they could mark their attendance at the main entrance, known as Gate No 1.

The Jamiat Ulema-i-Islam-Fazl (JUI-F), however, not only rejected the agreement, terming it “unconstitutional and illegal”, its members also staged a sit-in in front of the dais of the speaker to protest removal of their chairs from the house as only 86 chairs were placed in the house after the agreement.

 

[Bilal.]

Not happy about expected 0.5% primary deficit.

 

[Norwegian]

Not happy about expected 0.5% primary deficit.

Not that important. Trade and current account deficits is all that matters.

 

[Bilal.]

Not that important. Trade and current account deficits is all that matters.

Very important as it means we will go deeper into debt trap and will take debt to pay off interest. Each year more will go pay the debt and interest and less will be available for other expenses which is already at 50%. It need to be reversed or the end game will be very ugly.

 

[Syed1.]

Waiting for people with tax knowledge to comment on the budget

 

[Norwegian]

Very important as it means we will go deeper into debt trap. Each year more will go pay the debt and interest and less will be available for other expenses which is already at 50%. It need to be reversed or the end game will be very ugly.

Trade and current account deficits are already at their lowest. So fiscal deficit doesn't matter much.

Waiting for people with tax knowledge to comment on the budget

You mean you are waiting for Patwaris+Jiyalas to comment on the budget?

 

[Dr. Strangelove]

I have seen too many People comparing Education Budget with Defense Budget People should Keep in Mind After 18th Amendment and NFC Award Education is now a Provincial Responsibility they Spent 776 Billion on Education last year they should spend more this year. Federation is only Responsible for Education in Islamabad CT.

Federal Government is no way Responsible for Cattle Living in Ghost schools of Larkana.

 

[Norwegian]

https://twitter.com/x/status/1271418197040865281

 

[Syed1.]

You mean you are waiting for Patwaris+Jiyalas to comment on the budget?

Even though I have studied economics as a second major but I don't claim to be an expert and instead want people with in-depth knowledge on the matter to give their opinion first so that we can analyze. The p+j crowd are irrelevant just like their parties.

 

[StormBreaker]

They should revisit their real estate policies, since Real estate Fell, Everything in Pak is in turmoil

 

[Syed1.]

I have seen too many People comparing Education Budget with Defense Budget People should Keep in Mind After 18th Amendment and NFC Award Education is now a Provincial Responsibility they Spent 776 Billion on Education last year they should spend more this year. Federation is only Responsible for Education in Islamabad CT.

Federal Government is no way Responsible for Cattle Living in Ghost schools of Larkana.

Same with the health budget.... Cumulatively it is quite sizeable but again I have serious doubts on how far each ruppee is going in the actual health services specially if you look at the condition of hospitals in interior Sindh Baluchistan, South Punjab and parts of KPK. Lots of leakages in our system.

 

[StormBreaker]

Imran Khan kuch na karay bas 18th amendment khatam karwade, Wohi kaafi hai...

 

[Norwegian]

Even though I have studied economics as a second major but I don't claim to be an expert and instead want people with in-depth knowledge on the matter to give their opinion first so that we can analyze. The p+j crowd are irrelevant just like their parties.

I guess Lifafas are happy so it must not be too bad.

https://twitter.com/x/status/1271414529600126979

They should revisit their real estate policies, since Real estate Fell, Everything in Pak is in turmoil

Real Estate is rent-seeking parasite economy. Pakistan needs to revive manufacturing and services sector along with agricultural growth.

Wohi kaafi hai...

For whom? Armed forces?