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Tag: Economic Survey 2019/2020

  • Income tax exemptions surge by 166pc to Rs378bn

    Income tax exemptions surge by 166pc to Rs378bn

    ISLAMABAD: Despite massive shortfall in revenue collection the Federal Board of Revenue (FBR) granted Rs378 billion as income tax exemption during current fiscal year, which is 166.2 percent higher than the last fiscal year.

    According to Pakistan Economic Survey 2019/2020 released on Thursday the FBR granted provisionally Rs378 billion as income tax exemption and concession during the outgoing fiscal year as compared with Rs142 billion in the last fiscal year.

    The FBR granted around Rs212 billion as exemption from total income during the outgoing fiscal year. While another Rs104.5 billion concessions were granted as tax credit. An amount of Rs36.43 billion was exempted for allowances.

    It is pertinent to mention here that the FBR was assigned Rs5.55 trillion as collection target for the current fiscal year. However, slowdown in economy and COVID-19 outbreak the target was revised downward to Rs3.9 trillion.

    However, grant of exemption and concession fell 13.21 percent to Rs519 billion under the head of sales tax during current fiscal year as compared with Rs598 billion in the last fiscal year.

    The FBR granted sales tax exemption of Rs255.84 billion on imports. An amount of Rs74 billion granted exemption/concession as reduced rates of two percent under Eight Schedule of Sales Tax Act, 1990.

    Further, an amount of Rs35 billion has been granted as exemption/concession as reduced rates of 10 percent under Eight Schedule.

    The authorities granted Rs23.15 billion sales tax concession on cellular mobile phones under Ninth Schedule.

    The FBR granted exemption of Rs54.87 billion on local supplies during the fiscal year 2019/2020.

    The exemption and concessions under customs duty cost an amount of Rs253 billion to the revenue authority during outgoing fiscal year, which is 8.58 percent higher when compared with Rs233 billion the last fiscal year.

    Around Rs95 billion has been granted as duty exemption / concession to automobile sector, E&P companies and projects under CPEC. While an amount of Rs87 billion granted as exemption and concessions under Fifth Schedule of Customs Act, 1969.

    The concessions granted under Free Trade Agreement (FTA) and Preferential Trade Agreement (PTA) was around Rs45 billion during the current fiscal year.

    The FBR allowed exemption and concession an aggregate amount of Rs1150 billion during fiscal year 2019/2020 as compared with Rs972 billion in the last fiscal year.

  • Pakistan to face greater challenges in next fiscal due to COVID

    Pakistan to face greater challenges in next fiscal due to COVID

    ISLAMABAD: Pakistan is likely to face greater challenges in the next fiscal year starting July 2020 due to COVID-19, said Economic Survey 2019/2020 released on Thursday.

    “After recording its first contractionary year due to the COVID crisis since 1952, Pakistan is likely to face greater challenges in the 2020/2021 starting July 2020,” according to the survey.

    Under normal circumstances, after recording over 3 percent growth, Pakistan could have been reaping the benefits of macroeconomic stability achieved over the last year and would have embarked on a higher growth trajectory of over 4 percent.

    However, the pervasive and lasting effects of COVID-19 pose serious challenges to the economy which remains susceptible to its aftermath, despite efforts towards the outbreak’s curtailment.

    With an expected 2 percent growth for next year which is even lower than the population growth rate, challenges such as unemployment and poverty are expected to persist and amplify.

    A second round of the outbreak could further threaten macroeconomic stability and socioeconomic outcomes.

    Businesses will face liquidity issues, and many more may experience insolvency. They will require different kinds of support, for instance bailouts and provision of cheap funding, among others.

    Global trade will further dampen thereby constricting exports and remittances inflow, while domestic fiscal adjustment will become even more challenging. Higher debt accumulation will be problematic, financing for development projects may become scarce, revenues might be difficult to increase while expenditure demand may be immense.

    Synthesizing all this in an intricate policy mix has to ultimately be in place to smoothen this transition from crisis to stabilization.

  • SBP adopts flexible monetary policy stance on adverse impact of COVID-19

    SBP adopts flexible monetary policy stance on adverse impact of COVID-19

    ISLAMABAD:  The adverse impact on the economy due to COVID-19 has forced the State Bank of Pakistan (SBP) to adopt flexible monetary policy stance, according to Pakistan Economic Survey 2019/2020 released on Thursday.

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  • Zero-rating elimination provides impetus to FBR collection

    Zero-rating elimination provides impetus to FBR collection

    ISLAMABAD: Elimination of zero-rating regime on five export oriented sectors has provided impetus to tax collection during current fiscal year, said Pakistan Economic Survey 2019/2020 issued on Thursday.

    The survey said that tax collection of Federal Board of Revenue (FBR) has witnessed a remarkable turnaround during the current fiscal year after posting negative growth of 0.4 percent in FY2019.

    The overall FBR tax collection grew by 10.8 percent to Rs3,300.6 billion during July-April, FY2020 against Rs 2,980.0 billion in the comparable period last year.

    Within the total, the domestic component of tax revenue collected by the FBR grew by 14.7 percent to stand at Rs 2,777.7 billion in first ten months of the current fiscal year against Rs 2,421.1 billion in the comparable period last year.

    “The rise in tax collection is attributed to various policy initiatives implemented at the start of FY2020 such as charging sales tax on more items at the retail price under 3rd Schedule, reinstatement of taxes on telecom services and an upward revision of tax rates on various salary slabs.

    “In addition, an upward revision in the federal excise duty (FED) rates and the abolishment of the zero-rating regime on five export-oriented sectors provided further impetus to FBR tax collection.”

    Direct Taxes

    The net collection of direct taxes has registered a growth of 14.1 percent during the first ten months of FY2020. The net collection has increased from Rs 1,071.7 billion to Rs 1,223.2 billion.

    The bulk of the tax revenues of direct taxes is realized from income tax. The major contributors of income tax are withholding tax, voluntary payments and collection on demand.

    Indirect Taxes

    The gross and net collections of indirect taxes have witnessed a growth of 11.4 percent and 8.9 percent respectively. It is accounted for 62.9 percent of the total FBR tax revenues.

    Sales Tax

    Within indirect taxes, net collection of sales tax increased by 15.7 percent. The gross and net sales tax collection during July-April, FY2020 has been Rs 1,424.8 billion and Rs 1,348.4 billion respectively, showing a growth of 20.1 percent and 15.7 percent respectively.

    In fact, around 55.0 percent of total sales tax was contributed by a sales tax on import during July-April, FY2020, while the rest was contributed by the domestic sector.

    Federal Excise Duty

    The collection of federal excise duties (FED) during July-April, FY2020 has recorded 12.0 percent growth. The net collection has stood at Rs 206.1 billion during July-April, FY2020 as against Rs 184.0 billion during the same period last year.

    The major revenue spinners of FED are cigarettes, cement, services and beverages.

    Customs Duty

    Customs duty has registered a negative growth of 6.8 percent and 6.5 percent in gross andnet revenues respectively.

    The net collection has decreased from Rs 558.9 billion duringJuly-April, FY2019 to Rs 522.8 billion during July-April, FY2020.

    The major revenuespinners of customs duty have been vehicles, mineral fuels, iron and steel, electricalmachinery, plastic, edible fruits etc.

    Impact of COVID-19 on FBR Tax Collection

    COVID-19 pandemic has casted a significant impact on revenue collection efforts of FBR.

    During the first eight months of FY2020, FBR recorded total revenue collection of Rs 2,738 billion with a growth rate of 17.5 percent over last fiscal year. FBR was able to achieve 91.4 percent of its (first revised) target for the period.

    However, after the outbreak of COVID-19 pandemic, an average negative growth rate of 13.4 percent was recorded during March 2020 and April 2020 as compared to last year as well as compared to the projected collection.

    The situation is likely to exacerbate further during the month of May and slight recovery is expected in the last month of the financial year because of usual lumped government spending.

    Assessment of the full impact of COVID-19 on FBR’s tax collection merits analysis of the various expected and projected revenue figures prior to the time of crisis emergence.

    FBR’s target which stood at Rs 4,807 billion was revised downwards to Rs 3,908 billion keeping in view the economic slowdown consequent to the pandemic.

    The aforementioned revision had thus forecasted a revenue loss of Rs 899 billion. Nevertheless, the actual shortfall is expected to be higher than what has been projected.

    The Federal Government has recently announced an incentive package for the construction sector, fulfilling the longstanding demand of builders and developers for fixed income tax and declaration of the construction sector as an industry.

    The package would not only revive the construction industry but also serve as a catalyst to enhance business activity in forty different economic sectors. Furthermore, FBR is also striving for simplification of laws and procedures to reduce the cost of doing business and lower administrative burden.

    The total impact of COVID-19 pandemic is yet to be determined. The dynamic and challenging nature of the crisis necessitates an equally dynamic and vigorous strategy that is capable of being evolved in response to the demands made on it.

  • LSM may fall massively on constrained economic environment

    LSM may fall massively on constrained economic environment

    ISLAMABAD: The production of large scale manufacturing (LSM) may fall massively during the current fiscal year as it already registered a decline of 5.4 percent during July – March 2019/2020.

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  • Agriculture sector grows by 2.67pc despite lower production of cotton, sugarcane

    Agriculture sector grows by 2.67pc despite lower production of cotton, sugarcane

    ISLAMABAD: The agriculture sector provisionally grew by 2.67 percent in 2019/2020 despite fall in production of cotton and sugarcane, revealed by Economic Survey 2019/2020 released on Thursday.

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  • Outlook is not promising: Economic Survey 2019/2020

    Outlook is not promising: Economic Survey 2019/2020

    ISLAMABAD: The economic outlook is not very clear as well as doesn’t seem promising as COVID may dampen exports demand besides expectations of capital flight, according to the Pakistan Economic Survey 2019/2020 released on Thursday.

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  • Economic Survey: GDP growth projected at negative 0.38 percent

    Economic Survey: GDP growth projected at negative 0.38 percent

    ISLAMABAD: The GDP growth for current fiscal year has been estimated negative 0.38 percent, according to Pakistan Economic Survey for 2019/2020 released on Thursday.

    The survey stated that although, provisional GDP growth rate for FY2020 is estimated at negative 0.38 percent, however, macroeconomic stabilization measures undertaken by the government over the past year resulted in significant reduction in Saving-Investment Gap which was mainly driven by reduction in trade deficit and increase in workers’ remittances.

    It is also mentionable that fiscal deficit remained contained in first three quarters of FY2020.

    Historically, Private Consumption had significantly contributed in Pakistan’s economic growth.

    The pattern was likely to continue, however, due to COVID-19, private consumption suffered significantly.

    In percentage of GDP, it dropped to 78.5 percent in FY2020 compared to 82.9 percent in FY2019.

    Private Investment as a percentage of GDP dropped to 9.98 percent from 10.29 percent in FY2019 while Public Investment (including General Government investment) has shown improvement as it remained 3.8 percent compared to 3.7 percent last year.

    However, there was 13.2 percent growth in Public Investment (including General Government investment) during FY2020, while it declined by 21.6 percent last year.

    The economy of Pakistan like other economies has a diverse structure with three main sectors -agriculture, industry and services.

    The agriculture sector, as mentioned earlier, grew by 2.67 percent.

    The crops sector has witnessed positive growth of 2.98 percent during FY2020 mainly due to positive growth of 2.90 percent in important crops.

    According to Pakistan Bureau of Statistics, fourth quarter has been estimated by keeping in view the lockdown situation faced by the industrial sector due to COVID-19.

    Significant impact has been observed in the manufacturing sector, particularly Large-Scale manufacturing and Small-Scale Manufacturing.

    The provisional growth in industrial sector has been estimated at -2.64 percent mainly due to a negative growth of 8.82 percent in mining and quarrying sector and decline of 7.78 percent in large-scale manufacturing sector.

    Due to lock down situation in the country, the growth estimates of Small-Scale Industry for FY2020 are 1.52 percent.

    Similar to the industrial sector, services sector of the economy has also witnessed significant impact of the lock down situation in the country due to COVID-19, particularly in Wholesale and Retail Trade and Transport Sectors.

    The services sector has declined provisionally at 0.59 percent mainly due to 3.42 percent decline in Wholesale and Retail Trade sector and 7.13 percent decline in Transport, Storage and Communication sectors.

    Finance and insurance sector witnessed a slight increase of 0.79 percent.

    The Housing Services, General Government Services and Other private services have contributed positively at 4.02, 3.92 and 5.39 percent respectively.