ISLAMABAD: Though the headlines of the 2013-14 budget were missed targets, there were a number of heartening numbers in the Economic Survey – indicating that the government may be in the process of turning the ship around.
With such expectations in mind, the Pakistan Muslim League-Nawaz (PML-N) government presented the 2014-15 budget. Technically, this was the PML-N’s second budget, but for all intents and purposes is its first – given that the 2013-14 budget was put together after barely a month in power.
This budget will be the first real test for the PML-N’s policy muscle, given its heavy mandate in parliament. With industrial growth having registered a more than expected increase in 2013-14, Finance Ishaq Dar has his eyes on even greater gains next year in the fields of industry, services and, most importantly, an ambitious target for investment.
With murmurs of an impending recovery, all eyes were on the PML-N’s ‘business-friendly’ government and its financial wizard Ishaq Dar.
It was a long presentation of an ambitious budget by Dar, peppered with positive comparisons with the last few budgets and promises for further improvements in years to come.
There’s a lot to pore over in the Finance Bill, for which our real-time analyses which will be coming up shortly.
7:51pm
The National Assembly session has been adjourned.
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7:49pm
Finance minister says Prime Minister Nawaz Sharif, who believes in this destiny of the nation, is expending his energies in transforming Pakistan to its true worth.
Dar quotes Quaid-e-Azam Muhammad Ali Jinnah in his concluding remarks:
“Do not be overwhelmed by the enormity of the task. There is many an example in history of young nations building themselves up by sheer determination and force of character. You are made of sterling material and are second to none. Why should you also not succeed like many other, like your own forefathers. You have only to develop the spirit of a Mujahid , You are a nation whose history is replete with people of wonderful grit, character, and heroism. Live up to your traditions and add to it another chapter of glory.”
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7:45pm
A 10% ad-hoc relief will be allowed to all federal government employees with effect from July 1, 2014.
For welfare of the labour class, and in line with the increase in pay of government employees, the minimum wage rate is also being increased from Rs10,000 to Rs12,000.
A 10% increase will be allowed to those employees in Grade-1 to 15 drawing fixed medical allowance of Rs1,000 per month.
Considering the difficulties faced by low pension employees, Dar announces a further increase of Rs1,000 in minimum pension to make it Rs6,000.
A 10% increase in pension will also be allowed to all retired federal government employees
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7:37pm
Budget figures:
President House: Rs243,253,000
National Assembly: Rs2,609,390,000
Senate: Rs1,539,011,000
Supreme Court: Rs1,206,470,000
Water and Power ministry: Rs399,913,000
Inter-faith harmony: Rs349,886,000
Information and Technology: Rs3,029,877,000
At present rate deduction of tax on services are 6% and 7% for corporate and non-corporate taxpayers respectively. It is proposed to enhance tax rate on services to 8% in corporate cases and 10% in other cases.
Currently, the foreign institutional investors neither file returns nor their tax is collected on capital gains. It is therefore proposed to bring FIIs under the withholding tax regime. This measure will broaden the tax net
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7:32pm
Dar says that an adjustable advance tax will be collected on purchase of immovable property. The proposed rate of tax is 1% for complaint taxpayers and 2% for non-compliant persons.
However, properties with value less than Rs2 million and schemes introduced by the government for expatriate Pakistanis will be excluded from this provision, he adds.
Similarly, the rate of adjustable capital gains tax on sale of immovable property is proposed to be enhanced from 0.5% to 1% for the non-compliant persons.
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7:30pm
It is proposed that airlines may collect advance tax at 3% on the sale of first class and club/executive class air tickets if the passenger is a compliant taxpayer (i.e. those who filed their Income Tax returns for the preceding tax year), and 6% tax if the passenger is a non-compliant person.
The passengers travelling through the economy class shall be exempted from this tax to ensure that working classes and students travelling to foreign destinations are not burdened by this measure, says Dar.
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7:28pm
Dar says that the telecom sector, which adds a huge amount of revenues to the national exchequer, will be given relief. It has been decided to withdraw FED from those provinces which have imposed GST on telecom services. In areas where FED shall continue to be collected, the rate is proposed to be reduced from 19.5% to 18.5%.
This is lower than what the telecom sector had expected. Earlier, Cellular Mobile Operators had argued that the GST and FED rate should be rationalised in line with other sectors of the economy – the FED on telecom sector was applied at the rate of 19.5% compared with 17% on other sectors.
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7:20pm
In order to attract Foreign Direct Investment (FDI) in manufacturing, construction and housing sectors, it is proposed that corporate tax rate be reduced to 20% if the investment is in a new industrial undertaking or a construction or housing project to be set up by June 30, 2017 and at least 50% of the total project cost in the form of equity through FDI. This will also generate employment, which is one of the major challenges of the government.
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7:16pm
Dar says that the PML-N government had inherited perhaps the worst possible tax collection performance during the fiscal year 2013-14.
Against a budget target of Rs2,381 billion, the government was given the revised collection figure of Rs2,050 billion, which meant a massive reduction of Rs331 billion from the budget estimate.
The final collection was only Rs1,946 billion, another shortfall of Rs104 billion from the revised target. This amounted to a meager growth of 3% over tax collections during 2011-12, the lowest ever nominal growth.
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7:13pm
Explaining the policy mechanism of the newly introduced taxes in the budget, Dar said that the government wants to increase the direct taxes and also wants to bring the untaxed sectors under the tax net. He also warned those who do not pay taxes of dire consequences.
“Tax collection should be made easy, and the tax-to-GDP ratio should be improved,” he added.
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7:09pm
Against a revised estimate of Rs425 billion for PSDP, we have budgeted it at Rs525 billion showing an increase of nearly 24%.
Budget deficit was brought down to 5.8% from 8.2% last year. This year it will be reduced to 4.9%, says Dar.
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7:07pm
The finance minister says that the share of provincial governments out of taxes will be Rs1,720 billion as compared to Rs1,413 billion revised estimates for 2013-14, showing an increase of about 22%. Net resources left with the federal government will be Rs2,225 billion compared to the revised estimates of Rs2,184 billion for last year.
The level of provincial transfers over the last year has been increased from Rs1,215 billion to Rs1,720 billion, which is an increase of 42%.
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7:03pm
Dar announces that a company titled Pakistan Development Fund Limited has been established for which resources of Rs157 billion have been arranged. The Company will provide financing to key infrastructure projects and promote Public-Private Partnerships (PPPs) for this purpose.
Gross revenue receipts of the federal government for 2014-15 are estimated at Rs3,945 billion compared to the revised figures of Rs3,597 billion for 2013-14, showing an increase of 10%.
not only has the budget increased CGT; but also imposed advance tax on dividends and interest income
— Miss Khatarnaak (@Miss_Khatarnaak) June 3, 2014
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7:00pm
Dar announces that for establishment of processing units in Makran, Gilgit-Baltistan, Swat Valley and Fata, the government is introducing a policy to support processing projects which will enjoy duty and tax-free import of machinery not locally manufactured and will also have access to SBP LTF facility and 5 years tax holiday.
Government has also decided to provide 50% airfreight subsidy for horticulture produce from Gilgit-Baltistan.
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6:55pm
Agriculture sector: To encourage use of tractors by the growers it is proposed that the sales tax will continue to be charged at the reduced rate of 10%, says Dar.
Government has increased credit availability to agriculture sector from a targeted Rs315 billion to Rs380 billion, he adds. The State Bank has now decided to enhance overall credit to Rs500 billion for the year 2014-15.
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6:52pm
Dar, talking about the textile sector, says the government is introducing Credit Guarantee Scheme in order to encourage banks for financing to un-banked small farmers.
Government has introduced the crop loan insurance scheme for farmers with landholdings of 12.5 acres, and is also introducing the Livestock Insurance Scheme for all farmers getting financing for up to 10 cattle. An allocation of Rs.300 million has been made in the current budget for the scheme.
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6:50pm
Mark up rate for Export Refinance Scheme of State Bank of Pakistan is being reduced from 9.4% to 7.5% from 1st of July 2014.
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6:46pm
Dar gives the following points during his speech:
1. Higher education has been allocated Rs20 billion for as many as 88 projects. This is the highest ever allocation to the higher education, boasts Dar. Additional funds will also be given, taking the total budget to Rs63 billion.
2. Health has been allocated Rs26 billion in the budget. Polio will be given the highest priority, and the federation will work with the provinces to help eliminate polio.
3. The population welfare fund from last year will be continued to the upcoming year as well, with Rs8 billion allocated to it to help curb diseases like Tuberculosis and Hepatitis.
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6:38pm
Dar announces funds for urban railway projects for Karachi and Lahore.
A new company by the name of Kashmir Railways is always being established, Dar says adding that it will be a “gift” from the PML-N government.
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6:36pm
To ease the traffic flow in cities, funds have been allocated for work on several projects including the Peshawar Northern by-pass, Karachi Nothern by-pass, Lyari Expressway and Sukkur by-pass, says Dar.
He adds that more roads and bridges will be built for better transportation.
A 10 per cent advance release will be allowed to those employees in grade 1-15 drawing fixed medical allowance of Rs1,000 per month with effect from July 1, 2014.
A five per cent will be allowed in conveyance allowance to those employees working in grade 1-15. The post of superintendent is being upgrade from grade 16 to grade 17.
One premature increment will be allowed to employees of grade 1 to 4.
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6:32pm
World Bank will hopefully give $700 million for Dasu Dam by the end of June, reveals Dar.
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6:29pm
Talking about the energy crisis, Dar says that Prime Minister Nawaz Sharif has been personally taking interest in the energy crisis which has paralysed the country. He mentions funds allocated to several power projects in the budget to overcome the crisis.
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6:27pm
Dar talks about the Diamer-Basha dam and reveals that Rs15 billion have been allocated for the construction of the dam and work on the project will start soon.
He also mentions several other dam projects across the country to improve the water situation and to prevent floods.
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6:24pm
Reiterating the figures presented in the economic survey, Dar says that the government will aim at increasing the GDP growth every year by 1%, and also try to keep the inflation to a single-digit.
Rs425 billion have been allocated to the development programme, he says, adding that the BISP and PM youth programme funding will be raised to Rs200 billion.
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6:17pm
Rs118 billion is the social safety net expenditure – 200% increase from last year.
https://twitter.com/RadioPakistan/status/473814803765420032
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6:15pm
What to expect from the budget:
PSDP will be increased from Rs425 billion to Rs525 billion – 24 percent increase.
Rs205 billion will be invested in the power sector next year.
Tax on wedding halls decreased to 5% from 10%.
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6:14pm
“Government is committed to provided business-friendly environment for the private investors”
“The spectrum technology will increase employment opportunities for the young.”
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6:11pm
According to the budget, minimum wage for labourers is Rs11,000.
“Energy is our top priority; we were given this sector in very bad shape.”
“Power projects were ignored; these problems didn’t scare us.”
“We are working on a program to ensure uninterrupted supply of power to the people.”
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6:07pm
Dar emphasises on privatisation to eliminate poverty.
The finance minister says economic indicators show the economy is on the right track and all this was made possible because of our friendly policies.
The finance minister says his government focuses on: increase in trade, progress of private sector, developing infrastructure, no tax exemption, decresase in government expenditure, providing relief to the poor.
Dar says his government is working on this vision.
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6:02pm
Dar says his government started multiple projects in order to end energy crisis.
Dar was interrupted during his speech by Jamshed Dasti. “I will have to use extreme measures, Dasti sahab. This is not the way,” says the speaker.
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5:57pm
Dar tells his fellow MNAs that the industrial growth reached 5.84% in the outgoing year.
The inflation rate was 8.6%, he says.
Pointing out his party’s austerity policies, Dar says salaries of ministers have not been increased.
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5:53pm
Dar, with pride, says rupee has appreciated by 11% in the outgoing year.
He says the foreign reserves were just $6 billion and are now at $13.5 billion. Dar says he is hopeful to take it to $15 billion soon.
Dar says we have saved the fast declining foreign reserves and that they will remain stable.
The finance minister says the economy has grown by 4.14%.
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5:49pm
Investment in private sector increased because government borrowing was reduced and there was more money for private businesses to borrow.
Dar says exports have been increased by 4.24% in the last year.
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5:47pm
Dar says he is aware Pakistan has to move forward and that the final destination is very far away.
The finance minister briefly informed the parliamentarians about the achievement of the last year.
Dar adds that FBR revenues increased during the FY2013-14. He further says that the fiscal deficit has reduced to only 4%.
He also says current inflation rate is 8.6% as compared to more than 12% in the tenure of the previous government.
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5:45pm
Dar says he was faced with a broken economy. “It was a big challenge to fix it.”
Dar says PM Nawaz made difficult decision to ensure economy gets on the right track.
Dar says those policies not only brought economy on the right track but also set the direction for the future.
The finance minister says he can say today’s Pakistan is better than last year’s.
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5:40pm
According to Express News, the government will give subsidy worth Rs226 billion to the power sector. The amount allocated for health is Rs102 billion, security Rs79 billion, defence Rs700 billion, development projects Rs1,310 billion and education 124 billion.
Express News further reported that the government plans to collect Rs2.810 trillion in taxes.
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5:37pm
Prime Minister Nawaz Sharif arrives at the National Assembly as parliamentarians gather in the house for the budget speech.
Finance Minister Ishaq Dar will present Budget 2014-15 during the session.