- Tax revenue target for FY 2016-17 likely to be set around Rs 3.62 trillion will be met through burdening existing taxpayers through indirect taxation
- Development spending earmarked Rs 800 billion, defence Rs 860 billion, debt and interest servicing Rs 1,394 billion
After three years of austerity and belt-tightening, Finance Minister Ishaq Dar will announce the Rs 4.4 trillion fourth budget of the Pakistan Muslim League-Nawaz government on Friday in which he is expected to announce measures for reviving the agriculture and manufacturing sectors.
According to official sources, the tax revenue target for the next fiscal year 2016-17 is likely to be set around Rs 3.62 trillion as compared to the ongoing financial year’s target of Rs 3.1 trillion. The target is likely to be met through burdening the existing taxpayers through indirect taxation.
The government has allocated Rs 800 billion for development spending, Rs 860 billion for defence while a whopping Rs 1,394 billion has been earmarked for debt and interest payment during the next financial year.
The government has calculated expenditure at Rs 3.4 trillion and has set fiscal deficit target of 3.8 per cent for the FY 2016-17. However, it will be possible only if the provinces save about Rs 335 billion or one per cent of the GDP (gross domestic product) from their income.
The government has estimated subsidies at Rs 169 billion for the next financial year.
The government is likely to announce reduction in GST (general sales tax) on urea from 17 per cent to 7 per cent, while the collection of gas cess may be disbanded on urea.
The GST on pesticides will be reduced to zero from the current fiscal year’s seven per cent. Besides, duty-free import of Euro II and III grade tractors is likely to be allowed.
Import for shrimps and fisheries sector equipment is likely to be exempted from taxes and duties.
The duty on agriculture machinery is likely to be further reduced from nine per cent to seven per cent in the budget. The 34 per cent cumulative duty, including 15 per cent customs duty, 10 per cent sales tax, 6 per cent withholding tax and 3 per cent additional tax on the import of tractors, is likely to be reduced to less than 10 per cent.
The government is likely to announce implementation of the plants breeders rights act to protect intellectual property in the seed and other agriculture areas. This step alone will lessen woes of farmers ranging from low productivity to low quality.
The government is likely to announce 23 years tax exemption to businesses for Gwadar Free Zone, 40 years GST and FED exemption on materials, equipment, ship bunker oils for ships in Gwadar Port. It will maintain tax concessions for the five export-oriented sectors and “no tax no refund regime” for the textile, leather, surgical, carpet and sports sectors will be introduced in the budget.
The government is likely to impose 17 per cent GST on mineral water, a new federal excise duty regime on cigarettes, Rs 1/kg FED on cement, 8 per cent sales tax on sugar, 10 per cent sales tax on poultry ingredients, enhanced sales tax on the steel sector, new sales tax regime on the marble industry (electricity consumption basis), 11.5 per cent FED on beverages.
The dairy sector will be brought under the GST regime and they will not manage tax refunds, as prices of packaged milk are expected to increase by Rs 6 per kg. The duties and taxes on cosmetic items and other imported goods are likely to be further enhanced.
The FED on cigarettes is likely to be increased from Rs 3,030 per thousand sticks to Rs 4,500 for expensive brands and for low price brands from Rs 1,320 to Rs 2,000 per thousand sticks. The revenue theft in smokes sector alone causes a loss of Rs 24 billion per annum. Similarly, tax on mobile phones is expected to be enhanced from Rs 500 to Rs 1,000 for basic phone and Rs 2,000 for smart phone.
The Finance Bill, 2016 is likely to amend taxation laws to disallow input tax credit on undeclared supplies to control the use of fake and false claims of input tax credit, causing huge loss to the national exchequer.
The government is planning to introduce different tax slabs for filers and non-filers in salaried class to increase tax rate by 15 per cent for each slab for non-filers in the upcoming federal budget.
The government is also likely to further limit the tax free cash withdrawals limit from banks by restricting its limit to Rs 50,000 per identity card. The withholding tax on non-filers is also likely to be enhanced to 0.6 per cent. The government is also likely to introduce voluntary declaration of foreign assets and accounts to get tax concession on declaration and bringing back the accounts.
The government may announce taxing remittance of more than $ 25,000 per annum. It will help curb retention of exports proceeds abroad and then bringing them as remittances to avoid payment of taxes.