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ISLAMABAD: Finance Minister Asad Umar presented proposed amendments for the federal budget 2018-19 in the National Assembly on Tuesday.
Presenting amendment in the house on Tuesday, he said in his speech that the government would collect Rs300 billion on account of Petroleum Levy.
Prime Minister Imran Khan, ministers, and lawmakers from various political parties attended the NA session today.
As he began his speech, Umar recalled that fiscal deficit had increased from 4.1% at the start of the last government’s tenure to 6.6% at the end of its term.
“The country stands at the same place where it was after five years,” the finance minister lamented, adding that the fiscal deficit might reach to 7.2% [Rs2,900 billion] in FY19.
Umar also recalled that the current account deficit increased from 2.5 billion dollars in 2012-13 to 18 billion dollars in FY18.
“In the five-year term [of the Pakistan Muslim League-Nawaz government], foreign debt increased by 34 billion dollars, while foreign exchange reserves continued to decline speedily,” Umar said.
He further said that the depleting foreign exchange reserves have led to the Pakistan rupee’s depreciation.
The proposed amendments by the Pakistan Tehreek-e-Isnaf government include removal of regulatory duty on raw materials used by export industries. “Zero duty on raw materials will benefit the export industries by Rs 5 billion,” Umar noted.
In a nutshell:
1. Govt withdraws decision to increase petroleum development levy
2. Rs5 billion relief provided to export industry
3. Minimum pension increased to Rs10,000
4. Duty on expensive mobile phones to be increased
5. Duty on 1800cc and above vehicles set at 20%
6. WHT on banking transactions for non-filers increased to 0.6%
7. Health card system will be introduced across Pakistan
8. Non-filer will be able to buy vehicles, property
The approval of the amended Finance Act 2018 is imperative for the government’s forthcoming engagements with the International Monetary Fund (IMF), according to a report. The Fund would send a team to Islamabad on September 27 for a week of discussions on Pakistan’s balance of payments crisis.
Anticipating tough terms, Asad Umar decided to first initiate remedial measures for Pakistan’s record twin current account and budgetary deficits. This would empower Pakistan’s position at the exploratory talks with the Fund representatives.
To reduce the budgetary deficit, the government has already decided to shelve 200-300 unapproved schemes. This would slash the development expenditure to Rs600-650 billion in 2018-19, from the current allocation of Rs1,030 billion.
The finance minister said that unchanged gas tariff for the export industries is expected to provide a relief of Rs 44 billion to the export industry.
A new health card system will allow citizens to buy medicine at lower prices. According to the finance minister, 4.5 million citizens will benefit from this scheme. “We will provide Rs540,000 per family in FATA and Islamabad in the form of the Sehat Insaf Card to cover doctors’ fees and medicines. We have also instructed the Punjab government to introduce the facility in that province as well.”
Furthermore, an increase in tax on expensive mobile phones and vehicles above 1800cc were proposed. The finance minister also announced that non-filers will be able to buy vehicles and property.
“For farmers, we are ensuring the provision of urea by boosting local production and by importing 100,000 tons from abroad. A Rs6-7 billion subsidy has already been approved.”
“We have also directed the release of Rs4.5 billion for the completion of a housing scheme for the underprivileged.”
“Minimum pension has been increased to Rs10,000 for EOBI pensioners.”
“The past government had projected that it would increase the petroleum levy from Rs185 billion to Rs300 billion, but we feel that this is highly unfair on the average customer. The government will absorb that impact.”
“The big decision we made yesterday was a Rs44 billion benefit for the textile industry in Punjab. We will also work to ensure benefits for the zero-rated sectors in our electricity policy.”
“We will also raise Rs183 billion in additional revenue. Half of this will be raised merely through better administrative procedures that utilise technology to plug leakages in the system. The Federal Board of Revenue has accepted this challenge.”
“The rate of withholding tax on non-filers has been increased back to 0.6% on banking transactions.”
“We have also decided to increase taxes on cigarettes. This is something that is close to my heart, as my own brother passed away a few months ago from lung cancer.”
“We have also increased some taxes on the rich. We have doubled the federal excise duty on cars of 1800cc engine capacity or more from 10 per cent to 20%. We have also decided to increase the duty on several imported luxury products. Likewise, the duty will be increased on expensive phones.”
The proposed changes would facilitate the setting of a new revenue collection target. The Federal Board of Revenue collected Rs3,842 billion in the financial year which ended on June 30. The existing target for 2018-19 is an implausible Rs4,435 billion. The proposed changes to the budget would aid the government in changing the overly optimistic macroeconomic targets currently in place. The projected rate of Consumer Price Index-based inflation would increase from six percent to somewhere between seven and eight percent.