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From austerity to growth: PTI presents Rs8,400b Budget 2021-22

Salaried people get tax relief, pensions increased by 10%

SAMAA | - Posted: Jun 11, 2021 | Last Updated: 2 weeks ago
Posted: Jun 11, 2021 | Last Updated: 2 weeks ago

Finance Minister Shaukat Tarin presented a Rs8,400 billion budget for the upcoming year on Friday. The government has announced major tax relief for different sectors and set the GDP growth rate at 4.8%.

The government has allocated funds for the following programmes, schemes and sectors.

  • Rs260 billion for the Ehsaas programme.
  • Rs900 billion for public sector development programmes, which has been increased by 40%. The amount will be spent on water distribution, road infrastructure, special economic zones, combatting climate change, among others.
  • Rs12billion for agriculture.
  • Rs1,370 billion for defence.
  • Rs23 billion for Diamer and Bhasha dams.
  • Rs14 billion for Neelum-Jhelum hydro-power plant.
  • Rs244 billion for Gwadar airport and highway.
  • Rs25 billion for small dams in Sindh.
  • Rs118 billion for energy and power projects.
  • Rs22 billion for Jamshoro coal power plant.
  • Rs16 billion for KI, KII projects in Karachi and Tarbela power plant.
  • Rs100billion for special development packages for the development of poorer cities.
  • Rs54 billion for the development of KP’s merged districts.
  • Rs14 billion for tree plantation programmes and combatting climate change.
  • Rs739 for Karachi transformation plan.
  • Rs100 billion for covid-19 emergency fund.
  • Rs1.1 billion for the procurement of coronavirus vaccines. The government aims to vaccinate 100 million people by June 2022.
  • Rs12 billion for SME support programmes.
  • Rs10b for Kamyab Naujawan programme.
  • Rs66 billion for HEC and education programmes.
  • Rs60 billion for Azad Jammu and Kashmir, which was previously Rs56 billion.
  • Rs47 billion for Gilgit-Baltistan, which was Rs32 billion before.

Some features of the budget:

  • Pakistan reduces sales tax on locally manufactured electric cars to only 1%. Previously, it was 17%.
  • Pakistan reduces sales tax on locally manufactured cars from 17% to 12.5%.
  • No federal excise duty on 850cc locally produced cars.
  • Action to be taken against those harassing taxpayers. Government to use tax machinery against those not paying taxes and those not filing them.
  • No new tax on salaried people.
  • FBR to form special retail cells to facilitate people.
  • No import taxes on books and magazines.
  • Special technology zones will be formed in the country. Plants, machinery and other equipment will be tax-free in these zones.
  • The government has reduced the Capital Gain Tax from 15% to 12.5%.
  • Sales tax on locally made electric cars has been reduced to 1% from 17%.
  • Withholding tax reduced by 40%. There will be no withholding taxes on banking transactions, margin financing, air travel services, debit card and credit transactions and discovery of minerals.
  • Withholding tax on mobile phones will be reduced by 10%, and then to 8%.
  • No tax on certain locally made heavy motorcycles.
  • No Customs duty on animal vaccines.
  • To facilitate the tourism sector, there will be either 0% Customs duty or discount on raw material being used in the sector.
  • Salaries of the government employees to increase by 10%.
  • Pension to increase by 10%.
  • For Grade 1 to 5 officers, integrated allowance to increase from Rs450 to Rs900.
  • The minimum wage to be Rs20,000.
  • Reduced rate of withholding tax of 3% on oilfield services, warehousing services, logistic services, collateral management services and telecommunication services.
  • Extension in exemption from customs duties on import of COVID-19 related items for six more months.

Tarin, the third person in three years to present the budget for the PTI government, took the floor of the National Assembly while opposition members staged a protest. Many of them chanted slogans against the government, while many held placards criticising the budget.

PML-N MNA Marriyum Aurangzeb registers protest against Budget 2021-22.

“Many challenges came our way this year but we tackled them all under the leadership of PM Imran Khan,” said Tarin. When the PTI came into power, the previous governments had taken many loans. No government had faced such a situation before. The current account deficit was $20 billion.

Coronavirus proved to be a big challenge for us but we combatted three waves of the deadly virus. Pakistan survived the devastating effects of the pandemic and continued the progress towards economic growth. “We even increased the capacity of our hospitals and provided them with the necessary equipment.”

The government also provided relief to people who suffered because of the coronavirus pandemic through cash programmes. In the first phase, aid was given to 12 million people.

We tried to promote e-commerce and online marketing too. Despite, Covid-19 outbreak, our per capita income increased by 15%, he said. “This shows that incomes have increased.”

Pakistan’s agricultural sector performed well. All crops, including wheat, rice, sugarcane, and corn, witnessed exceptional growth despite locust attacks. Only our cotton crops suffered because of pest infestation.

The country received historic levels of remittances. Majority of remittances were sent by low-income people. It improved their purchasing power. It will reach $29billion.

‘Sustainable growth’

The Budget 2021-22 seeks inclusive and sustainable growth. We hope to increase our growth rate to 4.8%.

We want to focus on the poorer segments of society and can’t let them at the mercy of the trickle-down effect again. “We want them to be able to fulfill their dreams.”

The government will focus on a bottom-up approach under which we will provide Rs500,000 loans to the poor, and Rs150,000 loans to farmers.

Under our low-cost housing scheme, we will give Rs2 million loans to them so that they are able to build their houses. They will be given Sehat cards and technical training.

Food security

Pakistan controlled its current account deficit despite heavy imports of food items. “We should accept that inflation is mostly because of the increase in imports of food items.”

shaukat tarin presents budget
Finance Minister Shaukat Tarin presented the budget in the National Assembly on June 11, 2021. Photo: National Assembly of Pakistan/Twitter

Pakistan has become a food deficit country because not paying any attention for the last 10 to 15 years.

Wheat price increased because one-fourth of the wheat supplies were imported to meet our consumption needs. Internationally, sugar price increased by 56%, but in the country, it increased by only 18%. “We had to rely on imports to control sugar prices.”

Edible oil prices increased 76% internationally. In the domestic market, it increased by only 21%. “We have to make our country food sufficient.”

We will give incentives to the agriculture sector, so the production increases and we don’t have to import food item. We will have to make commodity warehousing, cold storages, the farm-to-market road so farmers can sell their products directly in the wholesale market without approaching the middleman.

FED levy on internet data

The FED levy on internet data usage was not approved by PM Khan and his cabinet. It won’t be included in the final draft of the budget that will be placed in parliament for its approval, says Minister for Energy Hammad Azhar.

In the budget document, the government had proposed a Rs5 per GB increase on internet data. But Hammad Azhar, the minister for energy, said the FED levy on internet data usage was not approved by PM Khan and his cabinet.

It won’t be included in the final draft of the budget that will be placed in parliament for its approval, he added.

Relief for salaried people

Information Minister Fawad Chaudhary has said that salaried people would get a relief in taxes in the Budget 2021-22.

He said this on SAMAA TV’s morning show NayaDin ahead of the Rs8,400 billion federal budget, which the government will present in the National Assembly later today.

The government officials are saying this budget will be “growth-oriented” and incentives will be given to agriculture, industry and IT sectors.

After contracting 0.4% last year, the economy recovered and is expected to grow at 3.9% this year, nearly double the government’s own target of 2.1%. For the next year, it is targeting a growth rate of 4.8%.

Finance Minister Shaukat Tarin said earlier this week that they would use the bottom-up approach, which would include marginalized and lower-income segments. They would be given business loans, health cards and technical training, he added.

The government has not released official data for unemployment, but Tarin said about 20 million people lost work last year as the coronavirus pandemic compelled the government to shut the economy for three months. Even now 2.5 million people are out of work, according to Tarin.

Other reports suggest an additional 20 million have slipped below the subsistence level, thanks in part to inflation that remained in high single digits throughout the year, higher than the annual target of 6.5, and was recorded in the double digit in the last two months.

The government has decided to increase the size of the Public Sector Development Programme by 38%, according to the finance minister. It will spend Rs900 billion on the PSDP in the next fiscal year.

The government has set a tax collection target of Rs5,829 billion for the next fiscal year, but it remains unclear where this money will come from.

News reports suggest the International Monetary Fund wants it to impose new tax measures, but the government is reluctant. Its top ministers are saying they will neither introduce new taxes nor increase the current ones, and rather go for expanding the tax net, which means the government will go after tax evaders with a focus on retail sector.

Tarin said they would take additional revenue by selling some of the government-owned enterprises, which are not making any profits.

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