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Category: Budget

This is parent category of budgets presented by Pakistan government. Here you will find year-wise federal and provincial budgets.

  • Hafeez Shaikh assures business community of presenting relief budget

    Hafeez Shaikh assures business community of presenting relief budget

    KARACHI: Dr. Abdul Hafeez Shaikh, Advisor to Prime Minister on Finance and Revenue, has said that the upcoming budget 2020/2021 will be a relief budget and most of the recommendations of business community will be adopted in the budgetary measures to be announced by the government on June 12, 2020.

    These assurance was given in a meeting held on Monday via video link between the KCCI’s team led by Chairman Businessmen Group & Former President KCCI Siraj Kassam Teli with the advisor to deliberate on the proposals of KCCI for the Federal Budget 2020-21.

    On KCCI’s side, Siraj Teli was accompanied by President KCCI Agha Shahab Ahmed Khan and Former Senior Vice President Ibrahim Kasumbi.

    Officials of the Finance Ministry and Chairperson Federal Board of Revenue Ms. Nausheen Jawed were also present at the meeting which lasted for more than 40 minutes.

    In his opening remarks, President KCCI Agha Shahab Ahmed Khan stated that the budget for the year 2020-2021 is being prepared at a time when the country is facing an unprecedented crisis due to Covid-19 pandemic and every business and industry has been badly affected.

    In these extraordinary circumstances, people of Pakistan in general and the business community in particular are looking forward to a budget which provides substantial relief measures to rescue the economy from the brink of disaster.

    Chairman BMG Siraj Teli highlighted major macroeconomic issues during the meeting and elaborated on the measures which KCCI has recommended to rescue the trade and industry from devastating impact of a global economic meltdown caused by the spread of Covid-19 pandemic.

    He reiterated that today the Name of the Game is survival of trade and industry which should be on top priority in the budget rather than the revenues.

    Revenues can be recovered later only if the trade and industry survives hence the budget should focus on relief through these macroeconomic measures.

    He said that the domestic economy, which contributes 92 percent to the GDP and provides bulk of employment and revenues, has not received the much needed relief and financial assistance.

    He appreciated the reduction in prices of Petroleum products which was earlier proposed by KCCI and also the financial assistance given to the poor segment of population through Ehsaas program which provided much needed relief to the people.

    Siraj Teli proposed that an across the board reduction of 50 percent in the rates of all Taxes including Income Tax, Sales Tax, FED and Customs duties on capital goods and raw materials should be announced in the Budget for one year.

    Further, he suggested that rates of Electricity and Gas should also be reduced to half for at least one year to help revive the domestic economy. These measures may be reviewed when the economy shows improvement.

    Commenting on the incentive scheme announced by the government for Construction Industry, Siraj Teli urged the Advisor Finance that similar incentives should be announced across the board for all sectors.

    He stated that undocumented economy in Pakistan is twice the size of documented economy and a very large amount of capital is blocked in unproductive investments.

    He said that it would immensely benefit the economy to release the blocked capital and encourage investments into all sectors of industry and business.

    The unregistered persons in undocumented economy must be encouraged and allowed to get registered and become part of the documented economy.

    As an incentive, a policy be adopted that no questions will be asked for all such investments. In the present global crisis due to Covid-19 pandemic, no objections are likely to be raised by IMF, World Bank, G20 and FATF etc.

    It is therefore a good opportunity for Pakistan to unlock a huge untapped pool of capital.

    Siraj Teli further added that although the interest rates have been revised downward by the SBP from 13.25 percent to 8.0 percent, it is still not sufficient to stimulate the growth. Reduction in interest rates in piecemeal and installments does not provide the desired impetus to growth.

    To provide thrust the policy rate should be reduced to 4 percent in one go to stimulate growth and reduce cost of doing business.

    All major economies are taking extra-ordinary measures to reverse the decline due to Covid-19 pandemic through quantitative easing and interest rates are down to zero.

    In his presentation, Former Senior Vice President KCCI Ibrahim Kasumbi elaborated on various important proposals of the KCCI for the budget 2020-21.

    These proposals included rationalization of tariff and WHT on industrial raw materials and capital goods, expeditious disbursement on Income Tax Refunds and enhancement of the limit of Rs.5.0 million, prioritizing of refunds on the basis of aging of cases, removal of automobile and motorcycle spare parts from third schedule of Customs Act, reduction in rate of Sales Tax and removal of RD on smuggling prone items.

    In his response to the proposals and suggestions submitted by the KCCI item, Dr. Hafeez Shaikh said that despite the limitations of fiscal space, the Ministry of Finance has approved and adopted a significant number of KCCI’s proposals on the recommendation of the Federal Board of Revenue.

    He emphasized that the government is keen to stand by the business community in these difficult times and maximum relief will be provided in the budget of FY2020-21.  On the question of Income Tax refunds, Dr. Hafeez Shaikh stated that the Ministry of Finance is looking to enhance the amount of refund from Rs5.0 million up to Rs50.0 Million, depending on the available fiscal space.

    In her comments, Ms. Nausheen Jawed, Chairperson FBR informed the KCCI team that their proposals were duly considered and a number of important proposals have been accepted for inclusion in the budgetary measures for FY2020-21.

    Dr. Hafeez Shaikh thanked Siraj Kassam Teli and Agha Shahab Ahmed Khan for a productive meeting and participation of the KCCI team.

    He further assured that he will be available to discuss any issues and remaining anomalies after the budget has been presented in the parliament.

  • Tax officials’ power to select income tax return for audit should be withdrawn

    Tax officials’ power to select income tax return for audit should be withdrawn

    Tax practitioners have called for a significant reform in the income tax audit process, urging that the Federal Board of Revenue (FBR) alone should have the authority to select income tax returns for audit, withdrawing this power from the commissioners.

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  • Online verification of tax withheld should be available

    Online verification of tax withheld should be available

    KARACHI: Tax practitioners have urged the Federal Board of Revenue (FBR) to ensure verification of tax withheld on the IRIS portal in order to facilitate taxpayers in making adjustment or claiming refunds.

    Pakistan Tax Bar Association (PTBA) submitted proposals for budget 2020/2021 saying that withholding tax regime should be simplified by reducing the categories of withholding taxes and the rates thereon.

    It said that the withholding agent should be facilitated through robust IRIS; wherein the visibility of tax deduction should be provided to the taxpayer instead of relying on the withholding agents’ certificates.

    The rates of tax for all withholding taxes under one provision of law should be minimized and the differentiation should be on the basis of Active and Non-Active Taxpayer only.

    Withholding agents should be given incentive in the form of tax credit for facilitating the Government withholding/collecting taxes and in identifying potential tax evaders.

    The withholding tax challans should be made available on the IRIS to every registered person, instead of collecting the same from registered person(s) deducting and depositing the tax.

    The concept of Minimum Tax should be done away with for all the corporate Sector companies, who file their tax returns and pay tax on actual income regular basis.

    The government departments including defence should pay the tax withheld on FBR IRIS instead of book adjustment.

    Sales tax (including provincial sales tax on services) and other government levies should be excluded for the purpose of withholding collection of tax.

    A ‘Small Company’ including company having similar business and turnover should be brought at par with an Individual or AOP having turnover limit up to Rs 50 million.

  • CNIC should be made mandatory for purchase of moveable, immovable properties

    CNIC should be made mandatory for purchase of moveable, immovable properties

    KARACHI: Federal Board of Revenue (FBR) has been proposed to make computerized national identity card (CNIC) mandatory for purchase of movable and immovable properties for bringing potential taxpayers into the tax net.

    A presentation made on behalf of Pakistan Tax Bar Association (PTBA) for submission of proposals for budget 2020/2021, it is highlighted that Pakistan has a lower tax-to-GDP ratio as compared to regional and other countries, which is causing serious disparity between various sectors of the Economy.

    All the segments of the society are not contributing their due share of tax on their income in accordance with their contribution in the GDP.

    The number of Active Taxpayers are substantially low, as such broadening of tax base at fast pace is the needed.

    For broadening the tax base and to improve the tax to GDP ratio following recommendations are made:-

    FBR should extract information from withholding statements, details of government supplies and maintain a database of above third party information. Conduct the data mining and data analysis to generate complete profile for cross verification of data of the existing taxpayers as well as discovery of new taxpayers;

    CNIC/NICOP/Passport should be made mandatory for purchase of any moveable or immovable properties, assets and major expenditure;

    Relevant organizations, departments, institutions including utility companies, banks, NADRA and information obtained related to offshore transactions should submit prescribed information on quarterly basis to the FBR.

    Exemption under Section 111(4) of the Income Tax Ordinance, 2001 may be allowed only to the foreign remittance brought into Pakistan through proper banking channel for investment for Balancing, Modernization and Replacement (BMR) of existing industrial undertakings or for making fresh investment in industrial undertakings;

    Effective enforcement should be ensured for compliance of filing of Return of Income under section 114 of the Ordinance, 2001;

    Atleast for five years jurisdiction (other than LTUs, CRTOs) should be made and fixed on territorial basis to avoid slippages of potential taxpayers.

  • PTBA recommends restoring Rs1.2 million threshold for salaried persons

    PTBA recommends restoring Rs1.2 million threshold for salaried persons

    KARACHI: Pakistan Tax Bar Association (PTBA) has recommended to restore basic threshold of Rs1,200,000 for salaried persons in the budget 2020/2021.

    According to a presentation of Zeeshan Merchant, advocate high court, given on behalf of the PTBA, urged the government to restore the basic threshold of Rs1.2 million that was available for tax year 2019 and the rates applicable for tax year 2019 for salaried persons, individuals and Association of Person (AOPs).

    Alternatively, the tax bar urged the authorities to allow a tax reduction of at least 25 percent of the tax payable to individuals and AOPs, who are subject to tax under Part I of First Schedule to the Income Tax Ordinance, 2001.

    The tax bar highlighted that income under the head ‘salary’ is currently taxed on the gross amount. This policy was introduced by bringing down the corresponding rates of tax for each income slab. However, gradually the income slabs as well as rates of tax were enhanced without restoring the deductible allowances when income from salary was taxed at higher rates.

    The PTBA proposed that either rationalize the rates of tax or restore the deductible allowances on account of house rent, utilities, conveyance etc. to minimize the tax burden of salaried individuals.

    Giving rationale, the PTBA said that it is not justified to tax the salaried individuals (particularly in high income slabs) at such a high rate when other taxpayers are subject to tax on their net profits at much lower rates.

    The limit of Rs1,000,000 for loan to employees below benchmark rate provided under Section 13(7) of the ordinance should be increased to Rs3,000,000.

  • COVID levy on wealth of individuals, AOPs under consideration

    COVID levy on wealth of individuals, AOPs under consideration

    ISLAMABAD: In order to generate revenue in the wake of coronavirus pandemic the government is considering to impose COVID levy, which may be on the wealth of individuals and Association of Persons (AOPs), sources said.

    The sources said that the levy may be collected up to one percent of Rs100 million wealth declared by individuals / AOPs.

    The government may introduce this levy through Finance Bill, 2020.

    However, in case the income tax liability is more than the proposed levy then the chargeability of tax may under normal tax regime.

    Further, this levy may not be imposed on corporate entities.

    The COVID tax may be imposed as was introduced through Income Support Levy in 2013.

    The sources said that the revenue collection of the Federal Board of Revenue (FBR) was adversely affected due to coronaviurs. They said that in the present scenario the government was not intending to burden the taxpayers, especially business concerns, through introduction of new taxes.

    However, through this levy may be utilities for the support the efforts to combat against the pandemic.

    The sources said that the estimated amount to be generated through this levy was may be around Rs30 billion.

  • FBR urged to allow tax holiday on import of industrial raw material

    FBR urged to allow tax holiday on import of industrial raw material

    KARACHI: Federal Board of Revenue (FBR) has been urged to allow tax holiday to import of industrial raw material in order to help the country to fetch much needed foreign exchange through enhanced exports.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2020/2021 submitted to the FBR, said that Pakistan’s exports are limited to very few sectors.

    Payment of cash subsidies and multiple currency depreciation failed to improve exports. As per Fifth Schedule to the Customs Act, 1969 Imports of Textile Machinery and equipment for textile sector is exempted from custom duty and rate of withholding tax is one percent by the textile manufacturing units registered with Ministry of Textiles whereas for other industries Customs Duty is levied at 5.5 percent which is discriminatory and an anomaly.

    The exports of non-traditional items have not been promoted due to such discriminatory treatment.

    Pakistan could not achieve true export potential which exists in many sectors.

    The KCCI proposed that there is a need to go beyond textile and agriculture products.

    Export diversification is important. For this all industrial machineries and equipment not locally manufactured may be exempted from Customs Duty, Additional Customs Duty/Sales Taxand Additional Sales Tax.

    Withholding Income Tax may be charged at 1 percent, which may be Adjustable/Refundable.

    Machineries with latest technology will be imported production will increase for local consumption and for global exports.

    Employment and government revenue will increase.

  • Budget 2020/2021 preview: Ambitious tax collection target likely with less weight on documentation

    Budget 2020/2021 preview: Ambitious tax collection target likely with less weight on documentation

    KARACHI: The government likely to set an ambitious revenue collection target for budget 2020/2021 with less focus on documentation of economy in order to promote business.

    According to Budget 2020/2021 preview released by Topline Securities on Thursday, the government is expected to announce the Federal Budget for FY21 on June 12, 2020.

    The budget is likely to take into account the implications of COVID-19 outbreak, where it will try to ease the pain of the masses due to the pandemic by focusing on job creations and relief for the businesses.

    The analysts at Topline Securities expect IMF to show some leniency with the government in setting targets for next year, taking into account the impact of COVID-19 outbreak.

    The key challenge for the govt. will be restricting the fiscal deficit for the upcoming year as not only the govt. will have to factor in higher expenditures relating to COVID-19 outbreak, but also take hit on revenues because of the slowdown in overall economy.

    The government is already facing the prospect of registering a huge fiscal deficit of 8.0-9.0 percent of GDP in FY20 (primary deficit 3-4 percent).

    They believe the government will try to restrict the fiscal deficit in the budget to 8.5-9.0 percent of GDP for FY21 (6.5-7.0 percent excluding COVID-19 expenses), where expenditures relating to COVID-19 are likely to be marked separately.

    Recall that IMF had agreed to not include the expenses incurred on combating COVID-19 as part of budget deficit for FY20.

    They believe the same relief can be extended for 2020/2021 as well.

    They said the government is likely to earmark Rs1 trillion for dealing with COVID-19 pandemic and for providing relief to the business community.

    Considering the recession, the government may try to boost the economy through providing incentives to the agriculture sector.

    The government may give shape to earlier announced subsidy on fertilizers, tractors etc., which was part of the Rs50 billion Agriculture package along with few more steps.

    The government is also likely to focus on the construction industry in the Budget 2020/2021, where the government believes such relief measures can provide ease for the daily wagers.

    One of the measures is likely to include reduction in Federal Excise Duty (FED) on Cements. The government has already announced a construction package to support the economy.

    The analysts believe the government is likely to be less vocal about the documentation of the economy (unlike in recent previous budgets), as it may hurt the businesses.

    The analysts further said FBR is reportedly considering increasing the limit for providing Computerized National Identity Card (CNIC) on purchases of Rs50,000 to Rs100,000 in the upcoming budget.

    The government may announce relief measures with respect to reduction in import duties, taxes on essential food items etc.

    The government last year had increased these duties to curb the Current Account Deficit, which as desired resulted in contraction of imports but also led to a lower collection of import duties as quantity of imports fell.

    The government is in talks with the IMF to set the revenue collection target for the next year. The government wants to keep the FBR revenue collection target at around Rs4,800 billion, whereas IMF wants the same to be close to Rs5,100 billion (vs. Rs3,900-4,100 billion likely to be collected in 2019/2020).

    The analysts believe the government will once again set an ambitious FBR revenue collection target of Rs4,800-5,100 billion, which we believe will be difficult to achieve.

    Assuming nominal GDP growth, the government is likely to achieve FBR Revenue collection of Rs4,400-4,600 billion in the upcoming year, assuming smart lockdown ends by Jul-Aug 2020.

    The government can look to generate additional Rs75-100 billion in the form of Petroleum Levy in 2020/2021. Last year the target was set at Rs216 billion. The government can potentially generate Petroleum Levy in the range of Rs300-350 billion in 2020/2021 due to the decline in international oil prices.

    The government may look to increase taxes on beverages and cigarettes to bring them in line with other countries.

    The government may also look to impose/increase taxes on luxury items like farmhouses, passenger cars etc.

    The analysts believe a mini-budget in the later part of the year, especially if (1) the economy recovers slower-than-expected from the COVID-19 pandemic, (2) there are unforeseen developments due to COVID-19 and/or (3) global recession prolongs further.

    The government will try to cut expenses, including (1) Development Expenditures, (2) Current Expenditures and (3) Subsidies while making FY21 estimates.

    The Federal Public Sector Development Program (PSDP) is expected to be around Rs550-600 billion for FY21 compared to last year’s budgeted target of Rs700 billion. The utilization of PSDP this year is likely to be between Rs575 billion -600 billion.

    The Current Expenditure is likely to benefit from lower interest rates, where the govt. is likely to save around Rs600-700 billion in interest savings (from FY20 actual interest cost) and Rs800-900 billion from last year’s budgeted amount of Rs2.9 trillion.

    The government is reportedly also likely to reduce the Power Sector subsidy by Rs30-50 billion (vs. FY20 target of Rs272 billion), aided by lower international oil prices and interest rates.

    In total, the government can potentially save Rs600 billion -700 billion from the above without trimming down its Current Expenditures and Defense Expenditure.

    Government is likely to allocate Rs1,000 billion separately for COVID-19 pandemic for providing relief to the masses and the business community. The government can further extend relief to the daily wagers through cash payments, suspension of utility payments for small consumers etc.

    The government may make the Agriculture package part of the Federal budget with a few more additions. The package already includes a subsidy of Rs37 billion to farmers on fertilizers in the form of Rs925/bag on DAP and Rs243/bag on Urea.

    It also includes a subsidy of Rs2.5 billion on Sales Tax on locally-manufactured tractors for a period of one year, and Rs8.8 billion subsidy is for mark-up on loans.

    The government may provide some relief for the construction industry as well, in the shape of lower taxes and/or other measures to support the economy, Naya Pakistan Housing Program and construction of dams.

    Salaries and pensions of government employees may be increased.

    Tax rate on essential food items is likely to be reduced.

    Likely introduction of a centralized loyalty program to provide more incentives to overseas Pakistanis sending remittances. Under this loyalty program, children of overseas Pakistanis will be given 50 percent discount in the Overseas Pakistanis Foundation (OPF) schools and colleges.

    Regulatory and additional customs duties are also likely to be reduced by up to 2 percent. Currently, these duties range between from 2-7 percent.

    Minimum tax exemption limit on salaried class may be increased.

    As per news reports, government is also prioritizing higher allocation to safety net programs like Ehsaas and Kamyab Jawan Program.

  • FBR officials treat taxpayers as criminal using search powers

    FBR officials treat taxpayers as criminal using search powers

    KARACHI: Business community has resented the use of powers related to search by Inland Revenue officers and treating registered taxpayers as criminal.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2020/2021 demanded amending such provisions to avoid such misuse of powers.

    The KCCI while highlighting provision Section 40 of Sales Tax Act, 1990, said that the officers of Inland Revenue at their discretion and opinion may obtain a warrant from the magistrate and conduct searches of the premises of registered persons at any time.

    The search made under sub-section (1) shall be carried out in accordance with the relevant provisions of the Code of Criminal Procedure, 1898 (V of 1898).

    The chamber said that the officials are treating registered persons as criminals.

    Powers to enter and search any place gives immense powers to officers of Inland Revenue. Such powers can be misused for harassment and extortion of tax payers.

    The law also does not define the “place” which can be search, therefore it may include homes and personal residences of tax payers.

    The chamber proposed that the provisions should be amended to prevent misuse.

    “No searches should be made without prior notice in writing to the registered person. No searches may be conducted outside the working hours and holidays or immediately prior to holidays.”

    The proposed amendment shall alleviate fears of the business persons and it will also encourage new tax-payers and curtail discretionary powers.

  • Proposed powers for reopening past 10 years tax cases rejected

    Proposed powers for reopening past 10 years tax cases rejected

    KARACHI: Karachi Chamber of Commerce and Industry (KCCI) on Wednesday said it will oppose any move to grant powers to tax officials regarding opening cases of past 10 years.

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