ISLAMABAD: The federal cabinet has approved the proposed amendments to the finance bill.
According to sources, the cabinet has decided to cut the federal development programme by Rs250 billion to Rs725 billion, whereas the budget deficit will be brought down to 5.1 per cent of the growth rate.
The government has also decided to increase regulatory duties on imports of vehicles and cell phones. It is also going to reduce the tax relief accorded to salaried persons as well as individual taxpayers.
According to sources, the government has also decided to raise the tax rate in the highest income tax slab from 15pc to 29pc. They said customs duty will also be increased on more than 5,000 items, whereas regulatory duty will be increased on the import of more than 900 items. The ‘mini-budget’ will also increase the rate of withholding tax on banking transactions for non-tax filers. The cabinet also approved the issuance of health cards, sources said.
Media reports have suggested that the government is looking at a fiscal adjustment of 1.5 to 2pc of gross domestic product (GDP), or Rs600-750 billion, through amendments to the federal budget 2018-19.
The government is aiming at a massive cut in development expenditure to the extent of over one per cent of GDP and through the withdrawal of tax and duty exemptions.
Consultative sessions continued until the last moment to deliberate completely banning the import of some 130-150 unnecessary items such as second-hand cars, while increasing duty rates on others including luxury items such as expensive phones, jewellery and food items. These trade measures are estimated to have an impact of over $1 billion on the current account deficit.
The current cumulative cost of tax and duty exemptions is estimated to be to the tune of Rs550bn which the government aims to bring down to around Rs200bn, thus transferring an impact of almost Rs350bn back to the people.