The 15-month-old coalition government on Friday presented its second business-friendly, relief and development-oriented Federal Budget for the fiscal year 2023-24, with a total outlay of Rs14.46 trillion, aimed at coping with the inherited economic challenges and laying the foundation for a sustainable, inclusive and resilient economy.
The annual fiscal plan, put before the National Assembly by Minister for Finance and Revenue Senator Mohammad Ishaq Dar, contained radical and rigorous measures to reduce the sufferings of the inflation-hit common man, transform the agriculture sector, promote Information Technology, increase exports and boost business activities.
Main Highlights of Pakistan’s Budget 2023-24
Unveiling the budgetary measures, the minister announced the government’s major relief to increase the salaries of government employees from 30 to 35 percent on ad-hoc basis and 17.5 percent enhancement in the pensions of the retired persons realizing their financial hardships due to the increased inflation.
There would be a raise of 35 percent [ad-hoc relief] in the salaries of employees from Grade1-16 and 30 percent to Grade 17-22 employees aimed at increasing their purchase power.
Besides, the government fixed the minimum pension at Rs 12,000 and increased minimum monthly wage from Rs 25,000 to Rs 32,000 within the Islamabad Capital Territory (ICT).
The minister said there was a proposal to enhance the pension of Employees‘ Old-Age Benefits Institution (EOBI) from Rs 8,500 to Rs 10,000.
Ishaq Dar said the government was going to introduce a scheme under which it would itself pay up to Rs 1 million loans of the Housing Building Finance Corporation (HBFC) owed by the widows of government employees.
The minister said the deposit limit of CDNS (Central Directorate of National Savings) Shuhada Account and Behbood Saving Certificates would be increased from Rs 5 million to Rs 7.5 million.
To achieve the sustained path of progress and prosperity, he said a real Gross Domestic Product (GDP) growth target of 3.5 percent had been fixed for the next fiscal year against the existing GDP rate of 0.29 percent after the government put the national economy in the right direction with tough and timely corrective decisions.
“Keeping in view the economic scenario, the government has set the modest growth target and despite being the election year, it presented a responsible and balanced budget and not a popular one,” he said.
The total expenses’ estimate, the minister said, was set at Rs14.46 trillion, out of which Rs7.3 trillion would be spent on interest payment. The budget deficit was expected to remain 6.54 percent and the primary balance would be a surplus of 0.4 percent to the GDP.
Ishaq Dar said the tax collection target of the Federal Board of Revenue (FBR) for the next fiscal year had been fixed at Rs 9.2 trillion, including provincial share of Rs 5.276 trillion.
The federal non-tax revenues, he added, would be Rs 2.963 trillion while total income of the Federal Government would be Rs 6.887 billion.
He said an amount of Rs 950 billion was being allocated for the development projects under the Public Sector Development Programme (PSDP 2023-24). Moreover, an additional amount of Rs 200 billion would also be part of the development budget to be managed through public-private partnership, he added.
He said for the country’s defence and civil administration, Rs 1.8 trillion and Rs 714 billion would be provided respectively; whereas Rs 761 billion had been allocated for the payment of employees’ pensions.
Ishaq Dar said the government had estimated an expenditure of Rs 1.074 trillion for the provision of subsidies in electricity, gas and other sectors.
The finance minister said a grant of Rs 1.464 trillion had been earmarked for Azad Jammu & Kashmir, merged tribal districts of Khyber Pakhtunkhwa, Higher Education Commission, Benazir Income Support Programme (BISP), Railways and other sectors.
To boost the agriculture production, he said the agriculture credit for the upcoming fiscal year was being increased from Rs 1.8 trillion to Rs 2.25 trillion, besides earmarking Rs 30 billion to switch 50,000 tubewells to solar energy.
Similarly, Ishaq Dar said, under the PM’s Youth Business and Agriculture Loan Scheme the government would provide Rs 10 billion as subsidy.
In a bid to boost IT (information technology) exports, the minister said 0.25% concessional rate of income tax would remain intact until June 30, 2026. Moreover, the freelancers earning up to $24,000 per year would also be exempted from sales tax registration and filing tax returns while a singe page income tax return would be introduced for them, he added.
Likewise, he said, the government was establishing a venture capital fund with seed money of Rs 5 billion to provide business resources to the IT entrepreneurs.
The government had also reduced the sales tax rate from 15% to 5% for IT services in the Islamabad Capital Territory, he added.
The minister said during the upcoming financial year, the government would provide professional training to 50,000 IT graduates.
Highlighting the relief measures proposed for the Small and Medium Enterprises (SMEs) sector, the finance minister said the turnover threshold under the tax facilitation system for the SMEs was being expanded from Rs 250 million to Rs 800 million while under the PM’s Youth Loan Programme, the government had earmarked Rs 10 billion to provide concessional loans for small businesses.
For the industry and export sector, he said the government would establish Export Council of Pakistan under the chairmanship of the prime minister which would meet every quarter to make decisions about the sector.
Other relief measures for the sector included the reduction of minimum tax for all the listed companies from 1.25% to 1%, withdrawal of 5% regulatory duty on synthetic filament yarn which was not manufactured locally, reduction of customs duty on pet scrap from 20% to 11%, and exemption of customs duty for manufacturers of rice mill machinery and machine tools, he added.
Ishaq Dar also announced relief measures for the overseas Pakistanis, which included withdrawal of 2% final tax on purchase of immovable property through foreign remittances.
Similarly, he also announced the issuance of Diamond Cards to the overseas Pakistanis sending remittances of over $50,000 per year. The Diamond Card holders would avail various facilities, including non-prohibited bore licenses, gratis passports, preferential aces to Pakistani embassies and consulates, fast-track immigration facility at Pakistani airports, and provision of handsome prize money through lucky draws.
Highlighting the measures taken for the education sector, Ishaq Dar said the government had earmarked Rs 65 billion for current expenditure and Rs 70 billion for development expenditure.
The government, he said, was also establishing the Pakistan Endowment Fund under which an amount of Rs 5 billion had been earmarked in the budget to provide merit scholarships to the high school and college students.
He said the Federal Government would distribute 100,000 laptops among deserving and the most talented students for which an amount of Rs 10 billion was being set aside.
Similarly, he said, the government was also allocating Rs 5 billion to promote sport activities in schools and colleges.
He said the government had earmarked Rs 5 billion for women empowerment under which concessional loans for businesses would be provided, besides projects of skill development and training for running business would be initiated.
Under the Prime Minister’s Youth Programme for Small Loans, he said, the government had allocated Rs 10 billion to provide loans on concessional rates for opening new businesses.
The minister said to promote the construction sector and facilitate common man for building new houses, a tax exemption of 10% or Rs 5 million (whichever is lower) would be given on business income of the construction enterprises and the people intended to build new houses would be given concession of Rs 1 million or 10% tax credit (whichever is lower) for next three years.
He said the government had increased the budget of Benazir Income Support Programme (BISP) to Rs 360 billion which was being enhanced by another Rs 40 billion for the upcoming fiscal year. In the fiscal year 2023-24, as many as 9.3 million families would receive Rs 8,750 each per quarter for which an amount of Rs 346 billion had been earmarked, he added.
With respect to the PSDP 2023-24, the minister said 80% projects were near completion and expected to be completed by the end of 2024.
“In order to attract Foreign Direct Investment and to provide state of the art infrastructure the government has allocated 52% share of the total PSDP outlay,” he added.
The minister said the government had planned to issue the Working Journalist Health Insurance Card and Artist Health Insurance Card during the year 2023-24.
Tax Relief Measures
Announcing relief measures in the taxation sector, the minister said no new tax had been proposed in the budget to provide maximum relief to the common man.
He said it would help improve the standard of living of the public, create ease of doing business, encourage industrialization and promote exports to achieve sustainable economic growth.
He said the other objective of the proposed tax relief measures was to enhance foreign exchange reserves to strengthen the value of local currency against the dollar.
The minister said the basic principle of tax policy for the current year was to encourage exports of IT and IT-enabled services, besides promoting remittances for enhancing foreign exchange reserves.
The finance minister said the agriculture sector was the backbone of the national economy and the government had enhanced the limit of agriculture credit from Rs 1,800 billion to Rs 2,250 billion and 50,000 agri-tube wells would be switched over to solar energy.
The minister said the government had also proposed to remove all taxes and duties on quality seeds and customs duty on the import of saplings. To avoid post-harvest losses and promote the use of combine harvesters, the import of harvesters was exempted from all taxes and duties.
To enhance the rice output, he said, the duties on dryers, rice planters, and seeders were also removed.
Besides, measures were taken to support local industry, encourage SMEs, and promote the agriculture and construction sectors, the minister said, adding the government had also proposed digitization of the economy in order to broaden the tax base and bring the elite class under the tax net and provide relief to inflation-hit people.
Ishaq Dar said a one percent increase in withholding tax on services, supplies and contracts was proposed, which would be applicable to individuals, associations of persons, and companies.
He said the Super Tax under Section 4C was imposed on the high income people in the year 2022, which was to be increased from one to four percent. Besides, the super tax of 10 percent on 15 high-income businesses and sectors with minimum income limit of Rs150 million had been proposed.
It was a progressive tax, which was suggested to increase gradually, he added.
Pakistan’s Budget Speech 2023-24
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