Rs 3 trillion federal budget to be announced today

For the first time in the country’s history, a democratic government led by the Pakistan People’s Party will be presenting its fifth federal budget today (Friday) with an outlay of around Rs 3 trillion and envisaging additional tax revenue of Rs 85 billion to achieve a revenue collection target of Rs 2.338 trillion.
A federal cabinet meeting to be chaired by Prime Minister Yousaf Raza Gilani will be briefed on the final budget proposal and once approved, it will be announced by Finance Minister Dr Abdul Hafeez Shaikh in parliament today.
An official source said the cabinet would be deciding about the increase in the salaries and pensions of the government employees for which 25 to 30 percent raise is proposed.
The federal government will be transferring provinces’ shares in federal taxes under the NFC Award of close to Rs 1.427 trillion in 2012-13 against the projection of Rs 1.245 trillion in 2011-12, showing an increase of 18 percent. Debt servicing and debt repayment are estimated at Rs 933 billion in the next fiscal year.
The government is eyeing containing fiscal deficit at just five percent of the GDP for the next fiscal year.
Provinces will be expected to create a budget surplus of Rs 112 billion to help the federal government contain fiscal deficit at the projected level. Non-tax revenue target will also be jacked up from earlier proposed target of Rs 562 billion to Rs 737 billion.
The source said allocation for federal Public Sector Development Program had been set at Rs 360 billion and Rs 100 billion would be spent on development program outside the PSDP, making a total of Rs 460 billion for 2012-13.
Allocation for subsidies have been increased from Rs 120 billion to Rs 150 billion for the upcoming fiscal year, with a focus on power sector subsidies, including subsidy for KESC, and Rs 20 billion for fertilizer subsidy.
The Benazir Income Support Program (BISP) will get an allocation of Rs 60 billion to start new initiatives in poverty reduction. It is expected that auto rickshaws and other similar income generation tools will be provided under this scheme. Grants to provinces and special areas will have a higher allocation of Rs 60 billion.
Taxes: The federal government has estimated a tax collection target of Rs 2.338 trillion for the next fiscal year that contains Rs 85 billion revenue generation measures, including Rs 40 billion in new taxes through broadening of the tax base and Rs 45 billion from administrative measures.
Income tax on salaries will be shifted from gross income to net income.
The income tax exemption limit is likely to be enhanced to Rs 400,000 per annum from Rs 350,000.
The reduction in tax rate will likely encourage voluntary tax payments and tax collection to improve in the next fiscal year. As the budget is likely to be revenue neutral, the government would compensate this revenue loss from revenue measures and administrative measures in the next fiscal year. In the area of import tariffs, the federal government has decided to make import regime investment-and-industrial friendly.
Import duties on industrial raw materials and inputs would be drastically reduced. There is also a proposal to impose 10 percent federal excise duty on alcoholic beverages and liquor and similarly, a suggestion to increase federal excise duty on cigarettes by five percent.
To align the import regime with national tariff protection policy, the government is likely to announce constituting a committee to prepare tariff rationalization plan within the next few months. The Ministry of Industries has also proposed a reduction in import duty on automobiles.