The federal cabinet on Tuesday approved the federal budget for the year 2014-15, with a total outlay of Rs3.945 trillion, and a Public Sector Development Programme allocated at Rs525billion.
Finance Minister Ishaq Dar told parliament n his budget speech that he aimed to reduce the budget deficit to 4.9 per cent of economic output in the 2014-15 fiscal year from 5.8 per cent a year earlier.
Budget spending has been set at Rs3.8 trillion ($39.3 billion), while tax revenues that Pakistan would be able to collect in the next fiscal year are estimated at 3.94 trillion rupees.
With the budget, the government has introduced welfare schemes for farmers, homeless, the unemployed, businessmen and 10 per cent relief for government employees.
Dar also said Pakistan would invest at least Rs205 billion ($2.08 billion) in power projects in the next fiscal year as part of a plan to reform the struggling sector.
Spelling out the revenue generation plans of the government, the minister said the share of provincial governments in the taxes would be Rs 1.72 trillion against Rs 1.41 trillion last year. Net resources left with the federal government would be Rs 2.22 trillion against the revised estimate of Rs 2.18 trillion for last year.
He said the expenditure for the next fiscal year had been budgeted at Rs 3.937 trillion, 2 per cent higher than the previous year's, which was much lower than the inflation rate.
The minister said the budget deficit had been reduced to 4.9 per cent and estimated at Rs 1.71 trillion for the next fiscal year. By requiring surplus of Rs 183 billion last year, the government had projected an overall fiscal deficit of Rs 1.422 trillion for the next year, he added.
Dar also announced measures to simplify the existing tax regimes and remove inequities created by SROs-based concessions, which would be carried through a phased plan.
The finance minister said that, to ensure continued stability in the stock market, it was proposed that from July 1, 2014, the Capital Gains Tax (CGT) rate would be 12.5 per cent for securities held up to 12 months and 10 per cent for those held for 12 to 24 months.—Agencies
Finance Minister delivers concluding remarks of budget speech, and ends with a couplet by Allama Iqbal.
Dar quotes Mohammad Ali Jinnah's speech in Lahore on 30th October 1947:
"Do not be overwhelmed by the enormity of the task. There is many an example in history of young nations building themselves up by sheer determination and force of character. You are made of sterling material and are second to none. Why should you also not succeed like many other, like your own forefathers. You have only to develop the spirit of a Mujahid, You are a nation whose history is replete with people of wonderful grit, character, and heroism. Live up to your traditions and add to it another chapter of glory. "
Minimum wage rate is being increased from Rs.10,000 to Rs.11,000.
A 5% increase will be allowed in conveyance allowance to those employees working in Grade-1 to 15
A 10% increase will be allowed to those employees in Grade-1 to 15 drawing fixed medical allowance of Rs.1000 per month;
A 10% ad-hoc relief will be allowed to all federal government employees with effect from 1st July 2014;
Imports previously exempt from customs duty will now be charged custom duty at 1%. This will not include socially sensitive items like petroleum products, fertilizers, and all food items.
Maximum custom duty being brought down from 30% to 25%.
Tax on tobacco to be increased according to details in Finance Bill.
Tier-II: All remaining retailers will pay sales tax through their electricity bills. "Retailers having electricity bills of less than Rs.20,000 in a month shall be charged only 5% of the bill as sales tax on retail sales, while those with higher bills shall be charged 7.5% as sales tax on retail sales."
Tier-1: retailers operating as part of national and international chain stores, or in air-conditioned shopping plazas; or having machines for credit or debit cards; or having monthly electricity bills in excess of Rs 50,000, will be required to pay sales tax in the normal regime.
Finance minister announces reforms in sales tax regime for retailers.
No new tax being imposed in case of sales tax and federal excise duty, announces Ishaq Dar.
"The government has made a conscious policy decision to enhance the contribution of direct taxes, which are progressive taxes, and gradually reduce the burden of indirect taxes, which affect the common man," announces finance minister.
Measure to broaden the tax net: Proposal to make obtaining of NTN a compulsory condition for seeking commercial/industrial electricity and gas connections.
For corporations, alternate corporate tax at the rate of 17% is proposed to be imposed on accounting income.
Proposal to reduce tax liability of disabled persons having income up to Rs.1 million by 50%.
Reduction in rate of advance income tax on Shadi (wedding) functions from 10% to 5%.
Proposal to reduce corporate tax rate by 1%. Corporate tax year 2015 shall be 33%.
Sales tax on high irrigation equipment and equipment for green house farming is also proposed to be exempted.
Concessions proposed for encouraging tunnel farming by removing customs duty on import of plastic coverings and mulch film, anti-insect net and shade net.
Corporate tax rate be reduced to 20%
Dar pauses during the budget speech during Maghrib prayers.
Capital Gains: "With effect from 1st July 2014, Capital Gains Tax rates shall be 12.5% for securities held up to 12 months and 10% for securities held for a period which is between 12 to 24 months, whereas the securities held for more than 24 months shall be exempt from CGT."
Dar now highlights some of the relief measures to be introduced through the budget.
Finance minister announces phasing out of SRO-based concessions over a period of three years.
Tax collection up by 16.4%, claims finance minister.
Overall fiscal deficit project at Rs1,422 billion
Federal deficit is projected at Rs.1,711billion for 2014-15 compared to the revised estimate of Rs.1,660 billion for last year
Budget deficit to be brought down from 5.8% to 4.9%.
Total budget of National Assembly: Rs 2.609 billion
Total budget allocation for Ministry of Information: Rs.756.425 million Allocation for Ministry of Information Technology: Rs.3.029 billion Allocation for Ministry of Interior: Rs.610.872 million
Credit availability to agriculture sector to be increased from Rs.380 billion to Rs.500 billion.
To encourage use of tractors by farmers, sales tax on tractors to be brought down to 10% from 16%.
Finance minister announces a "Credit Guarantee Scheme for Small and Marginalized Farmers". Scheme will benefit 300,000 farmer households with loan size up to Rs.100,000 and total disbursement of Rs30 billion.
To develop national policy for long-term sustainability of agriculture, govt has decided to establish a National Food Security Council. "The council will be responsible for ensuring policy coordination across provinces and relating to productivity improvements, market reforms, value addition and prices that ensure stable incomes for farmers."
In view of the need to take full advantage of GSP plus facility, textile sector will enjoy duty free import of machinery for two more years.
SBP markup rate for Export Refinance Scheme to be reduced from 9.4% to 7.5% from 1st of July 2014.
Draw-back for local taxes and levies to be given to exporters of textile products on FOB values of their enhanced exports if increased beyond 10% (over last year’s exports) at the following rates: Garments 4%, Made ups 2%; and Processed fabric 1%
Govt has decided to reduce mark-up rate on exports finance from 9.4% to 7.5%, which will reduce the financial cost of exporters by 2%
Funding for the provincial programs for population welfare has been kept at Rs8.2 billion.
Combined outlay of Rs.63billion will be made for higher education, which represents about 10% increase.
"A sizeable allocation of Rs.20 billion has been made for 188 projects of the Higher Education Commission, which will support development plans of different universities all over the country," announces finance minister.
Special initiatives in the budget include the setting up of the EXIM Bank of Pakistan (Specialized DFI) to enhance export credit and reduce cost of borrowing for exporting sectors on long term basis. "The bank will provide liquidity to exporters. Its authorized capital will be Rs.100 billion while the initial Paid-up Capital will be Rs 10 billion. Legal framework for the establishment of the Bank will be developed through an Act of Parliament."
Budget allocates Rs26.8 billion for health sector programs. "Our major focus will be polio eradication. An emergency plan has been made for this purpose and the federal government will work closely with the provincial jurisdictions to eradicate polio from Pakistan."
Click here to read a copy of the budget speech
A total of Rs. 937.327 million allocated for defence production division for development schemes.
The budget proposes 5 per cent additional tax for those who did not submit their tax returns last year.
Rs.2.26 billion allocated for ongoing and new schemes of the Defence Division under the Public Sector Development Programme (PSDP) for the year 2014-15.
The new federal budget proposes 7.5 per cent "Advance Tax" on electricity bills above Rs100,000 to discourage excess consumption and conserve energy.
Dar says Benazir Income Support Fund was Rs40billion during previous govt's tenure. PML-N govt increased it to Rs75billion last year, and is now increasing it to Rs118billion. BISP will now reach out to 5.3 million people, up 29 per cent.
3 per cent tax to be levied on sale of first-class airline tickets.
1 per cent reduction in taxes on telecommunications. Telecom tax to be brought down from 19.5 percent to 18.5 percent.
Five per cent reduction in tax on wedding functions, according to details of budget document.
Rate of capital market gains tax to be increased from 10 per cent to 17.5 per cent effective from July 1 2014, according to details obtained by DawnNews.
"We have been successful in curtailing inflation with strict measures taken during the previous budget," claims the finance minister.
Short-lived uproar started in the House by MNA Jamshed Dasti as Finance Minister talked about privatisation.
According to a copy of budget speech obtained by DawnNews, the budget deficit is considered the main culprit behind economic instability as it leads to both inflation and exposes country to external vulnerabilities.
Total expenditure for 2014-15 is budgeted at Rs3,937 billion, according to budget details obtained by DawnNews.
Gross revenue receipts of the federal government are estimated at Rs 3945 billion, showing an increase of 10 per cent, according to details obtained by DawnNews.
The government has allocated a total of Rs. 329.330 million for the Textile Industry Division for different ongoing and new development schemes.
Minimum pension for government employees has been raised from Rs5,000 to Rs6,000, according to details obtained by DawnNews.
According to details obtained by DawnNews, the cabinet has approved a 10 per cent increase in salaries and pensions of government employees.
Finance Minister Ishaq Dar is now reading out the budget speech on the floor of the National Assembly.
A Public Sector Development Programme worth Rs525 billion has been approved by the cabinet.
Cabinet approves budget 2014-15. Total outlay at Rs3.945 trillion.