Finance Minister Miftah Ismail presented the budget for fiscal year 2022-23 (FY23) in the National Assembly on Friday.
This year the budget session was less chaotic than the last few presentations during the PTI-led government as there was no opposition present in the House since PTI members had tendered their resignations.
Ismail began his speech by bashing the previous PTI government, saying its policies had hurt the economy and damaged the lives of the country's masses.
"An inexperienced team brought the country to the brink. Different people presented the budget every year presenting different policies which hurt investor sentiment," the finance minister said, adding that his government had begun repairing the economy by taking the tough decisions that were the need of the hour.
Shortly after the budget was presented in the lower house of parliament, Prime Minister Shehbaz Sharif took to Twitter to assure the public that the government was prepared to take tough decisions in an effort to rectify "years of economic mismanagement".
"These are difficult times brought upon us by recent years of economic mismanagement. Through this budget, my government will steer our way out of these challenges by taking tough decisions while minimising [the] impact on vulnerable segments of [the] population," he said.
Key budgetary proposals
- Petroleum levy of Rs750bn proposed
- No tax on salaries of up to Rs100,000 per month; previously minimum taxable salary was Rs50,000/month
- Taxes proposed on real estate holdings (property valued over 25m) and capital gains on property sale
- Minimum tax bracket for small business persons to be raised from Rs0.4 million to Rs0.6m
- 15pc increase in salaries of government employees
- Sales tax exemption on import of solar panels and distribution
- Advance withholding tax will be collected from those sending remittances abroad via credit, debit and pre-paid cards
- Advance tax will be increased on cars above 1,600cc
- Exemption of complete custom duty on pharmaceutical ingredients
- Rs51bn proposed for education projects
- Rs24bn for health sector
- People earning an annual income of Rs300 million or more per year are proposed to pay 2pc extra tax
- Advance 2pc tax on the value of high-value hybrid and electric vehicles.
The budget outlay this year is Rs9,502 billion, almost a trillion rupees higher than last year's outlay.
The government has budgeted total current expenditure at Rs8,694bn for FY23, which is 15.5pc higher than last year's budgeted figure.
Defence expenditure is budgeted at Rs1,523bn, which makes up 17.5pc of total current expenditure and is 11.16 per cent higher than last year.
Interest payments, or debt servicing, budgeted for FY23 have risen a whopping 29.1pc from last year to Rs3,950bn — making up the single largest expenditure of the government, accounting for 45.4pc of total current expenditure.
Net federal revenue
Total revenue budgeted for FY23 stands at Rs9,004bn. After subtracting provincial transfer of Rs4,100bn as part of the National Finance Commission (NFC) Award, net revenue comes out at Rs4,904bn, nine per cent higher than last year.
FBR tax target
The government has set the tax collection target for the Federal Board of Revenue (FBR) at Rs7,004bn for FY23, which is 20.1pc higher than last year's Rs5,829bn.
Fiscal deficit, or overall budget deficit, which is the difference between the government's total expenditure and revenue is calculated as: Gross Revenue at Rs9,004bn (minus) Transfer to Provinces Rs4,100bn (plus) Provincial Surplus Rs800bn (minus) Total Expenditure Rs9,502bn.
For FY23, overall deficit is budgeted at Rs3,798bn, which is 4.9pc of GDP. Last year, the deficit was budgeted at 6.3pc of the GDP.
Total allocations for the Public Sector Development Programme (PSDP) have been budgeted at Rs2,158bn for FY23, up just one per cent from Rs2,135bn last year.
Under this, federal PSDP makes up Rs727bn, which has gone down 19.2pc from last year's budgeted amount of Rs900bn.
Provincial PSDP for FY23 has been allocated at Rs1,432bn, an increase of 16pc from last year's budget of Rs1,235bn.
"The problem of our economy is that growth is 3-4pc, but when it moves up to 5-6pc, our current account deficit goes out of control, because we give priority to the elite, which increases our imports. We need to adopt new thinking, to facilitate the lower-income section to increase domestic production," the minister said.
He said the government had to move towards "sustainable growth", adding that the growth target for next year was set at five per cent.
"The government is aware that the common man is struggling with high prices and we are doing our best to bring them down," Ismail said, adding that the government had set a target for 11.5pc inflation next year.
Tax on real estate
During his speech, the finance minister pointed out that the wealth of the majority of rich people was parked in real estate.
Terming it a "double-edged sword", Ismail announced that all people who have more than one immovable property in Pakistan with a value of over Rs25m would be deemed to have received a rent amounting to 5pc of that immovable property's fair market value. They would have to pay 1pc in tax on this deemed rental income. However, one house of every person would be excluded from this tax.
The government has also proposed the imposition of a 15pc tax on capital gains on immovable properties if the holding period was a year or less. The tax would be reduced by 2.5pc every subsequent year, eventually going down to zero once the holding period reached six years.
The advance tax rate on the purchase and sale of property for filers is proposed to be enhanced to 2pc from the current 1pc, while it would be 5pc for non-filers.
Under the budgetary proposal, the government said any citizen of the country who is not a tax resident of any other country would be treated as a tax resident of Pakistan. It said the criterion for a resident person in connection to taxation was being modified as the current regime was being "misused by wealthy individuals".
Header image: Finance Minister Miftah Ismail presenting the budget in the National Assembly. — PID