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Asad Umar presents ‘Mini Budget’

Asad Umar presents ‘Mini Budget’

Rs5b relief for exporters, duty on 1800cc & above vehicles set at 20%, minimum pension increased to Rs10,000, Duty on expensive mobile phones to be increased, WHT on banking transactions for non-filers hiked to 0.6 per cent, non-filer will be able to buy vehicles, property, tax on tobacco to be increased

 

ISLAMABAD: Federal Finance Minister Asad Umar on Monday presented an amended finance bill for the year 2018-2019 on the floor of the National Assembly.

Addressing fellow parliamentarians, Umar said that the country is engulfed in a severe economic crisis, emphasising that the deficit can reach a mark of 7.2% if present conditions prevailed.

“These are difficult times and difficult decisions need to be made. You do not have to be an economic expert to realise this,” Umar said.

Prime Minister Imran Khan, ministers, and lawmakers from various political parties attended the NA session today.

As he began his speech, Umar recalled that fiscal deficit had increased from 4.1 per cent at the start of the last government’s tenure to 6.6 per cent at the end of its term.

“The country stands at the same place where it was after five years,” the finance minister lamented, adding that the fiscal deficit might reach to 7.2 per cent [2,900 billion rupees] in FY19. Umar also recalled that the current account deficit increased from 2.5 billion dollars in 2012-13 to 18 billion dollars in FY18.

“In the five-year term [of the Pakistan Muslim League-Nawaz government], foreign debt increased by 34 billion dollars, while foreign exchange reserves continued to decline speedily,” Umar said.

He further said that the depleting foreign exchange reserves have led to the Pakistan rupee’s depreciation.

“We need to decide, not the government alone, but the Parliament together, if we want to continue like this,” Umar said.

“The government overestimated revenues by 350 billion rupees and understated expenditures by 250 billion rupees. In total, there is an 890 billion rupees difference in the projected and budgeted figures for the deficit which we have to arrest.”

“These are difficult times, and they call for difficult measures,” the finance minister added.

“We need to make sure the burden of our economic measures fall on those who can bear it. The poor are already resource-stressed, and we cannot burden them further.”

“Sure, we can seek bailouts but that is not the solution. We can only grow when our economy grows, our industries and our people grow,” Umar stressed.

The proposed amendments by the Pakistan Tehreek-e-Insaf government include removal of regulatory duty on raw materials used by export industries. “Zero duty on raw materials will benefit the export industries by Rs 5 billion,” Umar noted.

Major points

  1. Govt withdraws decision to increase petroleum development levy
  2. Rs5 billion relief provided to export industry
  3. Minimum pension increased to Rs10,000
  4. Duty on expensive mobile phones to be increased
  5. Duty on 1800cc and above vehicles set at 20 per cent
  6. WHT on banking transactions for non-filers increased to 0.6 per cent
  7. Health card system will be introduced across Pakistan
  8. Non-filer will be able to buy vehicles, property
  9. Tax on tobacco to be increased

 

Health card

Announcing the launch of a new health card system, the finance minister said this would allow citizens to purchase medicines at lower prices. The scheme would benefit 4.5 million citizens with 540,000 rupees being provided per family in FATA and Islamabad in the form of the Sehat Insaf Card which would help cover medical expenses. The finance minister added that the government of Punjab had been instructed to introduce the facility in the province as well.

Tax on luxury items

An increase has also been proposed in tax on expensive mobile phones and vehicles 1800cc and above. “The federal excise duty on 1800cc cars and above has been increased from 10 per cent to 20 per cent.”

Duty on several imported luxury items will also be increased. “If someone likes imported products like the human rights minister they should be allowed to purchase it but we will take a tax on it,” Umar said in a joking manner.

“These are all products used by the wealthy.”

Non-filers

The finance minister further announced that the blanket ban on non-filers seeking to purchase property and vehicles would be lifted.

WHT on banking transactions

“Withholding tax for non-filers has been increased back to 0.6 per cent on non-cash banking transactions,” Umar said.

Agriculture

During his address, Finance Minister Umar said 6-7 billion rupees subsidy had been approved for farmers and the provision of urea would be ensured by increasing local production and importing 100,000 tons from abroad.

Housing scheme

For the completion of a housing scheme for the underprivileged, the release of 4.5 billion rupees was announced.

Pension

According to Umar, 10,000 rupees would be the minimum pension for those under the EOBI programme. “There will be a ten per cent increase in pension immediately so some relief can be offered. We will increase this further in the next budget.”

 

Petroleum levy

The government would also absorb the impact of the petroleum levy as this would be unfair to the average consumer. “The previous government had projected that it would increase the petroleum levy to 300 billion rupees from 185 billion rupees,” Umar said.

Income tax

“The final decision we have taken is that we will maintain the Rs1,200,000 limit on tax exemption. We are also maintaining the tax rate for those earning between 100,000-200,000 rupees. For all categories above that, we are increasing the tax rate that was applicable in May, but it will remain lower than what it was last year.”

“We hope that the people who have the means will not oppose us on this” Umar said.

“We are asking the privileged to sacrifice for the sake of Pakistan, we have also decided to withdraw certain tax exemptions from prime ministers and ministers.”

Furthermore, tax slabs for the salaried class were announced as follows:

  • Upto Rs400,000 – Exempt
  • Rs800,000-Rs12,00,000 – Rs2,000
  • Rs12,00,000-Rs24,00,000 – 5 per cent fixed tax
  • Rs24,00,000-Rs30,00,000 – Rs60,000 fixed tax
  • Maximum tax for salaried class – 25 per cent
  • Maximum tax for non-salaried class – 29 per cent

Textile industry

Speaking on benefits to the textile industry, the finance minister said a decision had been taken yesterday of 44 billion rupees benefit for the textile industry in Punjab. He added that government would also work towards ensuring benefits for the zero-rated sectors in the electricity policy.

The unchanged gas tariff for export industries is expected to provide relief of 44 billion rupees to the export industry, Finance Minister Umar said.

The mini-budget includes the governments plans to raise 183 billion rupees in additional revenue, half of which would be done through improving administrative procedures.

Tax on cigarettes

An increase in taxes on cigarettes was also announced, with the finance minister stressing that measures would be taken to tackle smuggling of tobacco products. “We are increasing taxes on tobacco but at the same time are taking technological measures which would curb smuggling.”

PSDP

The finance minister further said, “661 billion rupees were spent on development last year and we will spend 725 billion rupees this year. Out of this, we will be spending 50 billion rupees on development in Karachi. This is a joint venture between the federal and Sindh governments.”

“We have also identified infrastructure priorities for the National Highway Authority, on which we will spend 100 billion rupees. We will spend another 500 billion rupees on Public Sector Development Programme (PSDP),” he added.

The minister said he was sure past governments had done whatever they believed was necessary for the benefit of the country. “The nation collectively needs to acknowledge that those measures had not worked,” Umar stressed.

Promising that he would uphold and continue with the projects introduced by the past governments -especially the China Pakistan Economic Corridor and dams on which work is under way- the finance minister stressed that the economy’s success was linked to the Parliament’s success.