Finance Minister unveils Rs9.5 trillion budget for FY23

The Shahbaz Sharif-led coalition government has unveiled the federal budget for the next fiscal year 2022-23 in the National Assembly with an outlay of Rs9.5 trillion on fiscal consolidation to contain a budget deficit.

In the National Assembly sitting chaired by Speaker Raja Pervez Ashraf, Finance Minister Miftah Ismail started presenting the budget. The PTI boycotted the proceedings of the House.

Introducing the budget speech, the finance minister said that all the federal units were represented in this government and therefore the decisions taken on the national economy had the broad support of the nation.

He said that the government was facing a difficult challenge to rectify the deteriorating economic situation created due to poor performance of last four and a half years. During this period economic mismanagement was on the rise due to which the common man was badly affected and the rupee depreciated sharply due to which inflation raises.

Criticizing the PTI government, the finance minister said that an inexperienced team had brought the country to the brink of disaster during the last four and a half years. Different ministers presented the budget every year presenting different policies have hurt investors’ confidence.

Budget 2022-23 targets

Miftah Ismail said that the revenue of the Federal Board of Revenue (FBR) will be Rs6 trillion in the current financial year 2022-23 and the share of the provinces in the revenue will be Rs3512 billion. The non-tax revenue of the federation is expected to be Rs1315 billion this year while the total outlay of the federation will be Rs9118 billion for the current financial year. Rs3144 billion will be spent on repaying loans this financial year.

The finance minister said in his budget speech that the current financial year, Rs1450 billion will spent on defense, Rs530 billion on federal government expenditure, Rs525 billion on pensions and Rs1515 billion on subsidies.

• Rs800 billion has been allocated for the Public Service Development Program.
• Rs1.523 trillion has been allocated for defense.
• Rs550 billion has been earmarked for civil administration expenditure.
• Rs530 billion has been allocated for pensions.
• Rs699 billion allocated for targeted subsidies.            
• Rs1.242 trillion has been earmarked for the grant, which includes grants from Benazir Income Support Program, Bait-ul-Mal and other departments.
• The allocation for Benazir Income Support Program (BISP) has been increased from Rs364 billion in 2023 to Rs250 billion in 2021.
• Under BISP, Rs266 billion has been allocated to 9 million families under Benazir Cash Transfer.
• Rs35 billion has been earmarked to increase the Benazir Scholarship Program to 10 million children.
• Rs9 billion has been allocated for Benazir Undergraduate Scholarship to 10,000 students.
• Rs12 billion has been allocated for subsidy on Utility Store Corporation.
• Rs5 billion has been set aside for Ramadan package.
• Rs570 billion has been earmarked for industry and trade energy.
• Rs71 billion has been provided for payment of arrears of petroleum sector.

Education

• Rs65 billion has been allocated for Higher Education (HEC).
• Rs44 billion has been set aside for HEC development schemes.
• The HEC budget includes 5,000 benefits for Balochistan and the amalgamated districts.
• 1 lacs laptops will be provided to the students in easy installments.

Agriculture and food security

• Rs21 billion has been allocated to increase crop and livestock production.

Steps for Youth:

• Under the ‘Youth Employment Policy’, 2 million youth will be provided access to employment opportunities.
• Interest free loans of up to Rs. 500,000 will be provided to the youth for the promotion of business.
• To promote business, a scheme will be launched to provide loans to the youth on easy terms up to Rs. 25 million.
• 25% quota for women in loan scheme.
• Youth development centers for women with high tech and other skills will be set up.
• 250 mini sports stadiums will be built.

Industry and trade

Miftah Ismail said that all the claims of DLTL would be paid to the exporters immediately, Rs40.5 billion certified by the Central Bank of Pakistan was due while the industrialists would be given exemption from load shedding for uninterrupted power supply.

He said that 9 special economic zones would be created on China-Pakistan Economic Corridor (CPEC).

He further said that investors from China and other countries would be facilitated to set up factories, adding that the previous government had put obstacles in the way of this work and so far not a single special economic zone has been activated.

Promotion of culture and film industry

The Federal Minister of Finance said that the first ‘Film and Culture Policy’ in the history of the country was approved by the Cabinet in our time in 2018. Unfortunately, it has not been implemented for previous four years.

He said that the film has been given industry status and a ‘Binding Film Finance Fund’ has been set up at an annual cost of Rs1 billion and a medical insurance policy will be introduced for the artists.

He further said that five years tax holiday, tax rebate for five years will be given on income tax on establishment of new cinemas, production houses, film museums and on export of film and drama for ten years.

Income of cinema and producers was being exempted from income tax.

Apart from ‘National Film Institute’ and ‘Post Film Production Facility’, National Film Studio is being set up at a cost of Rs1 billion.

Foreign filmmakers were being given rebates on joint film and drama projects at the local level but 70 per cent of the material would have to be shot in Pakistan.

8% ‘holding tax’ imposed on distributors and producers was being abolished.

Import of machinery, equipment and supplies for films, dramas was being exempted from customs duty for five years while sales tax was being reduced to zero and internet duty was being abolished.

Public Sector Development Program

Miftah Ismail said that Rs800 billion has been earmarked for the Public Sector Development Program (PSDP) for the next financial year.

“We will focus on completing the ongoing projects so that the money spent on them is not wasted,” he said, further adding that, more money would be spent on the development of Balochistan so that Balochistan could be brought on par with the rest of the country.

The Finance Minister said that Rs136 billion has been increased in PSDP for Special Provinces (Azad Kashmir and Gilgit-Baltistan).

Additional funds have been allocated for early completion of Dams specially Diamir-Bhasha Dam.

Highways connecting the two ports with the Chinese border would be completed.

Under CPEC, the focus has been on accelerating growth and increasing exports by accelerating infrastructure and economic zones projects and Rs. 395 billion has been earmarked for infrastructure.

He further said that improving energy/power transmission and distribution is the priority of the government, Rs73 billion would be provided for power sector out of which Rs12 billion would be spent for speedy completion of Mohmand Dam.

Miftah Ismail said that Rs100 billion has been earmarked in the budget for major dams for water resources, Diamir-Bhasha, Mohmand, Davos, Nai Gaj Dam and Command Area projects.

He said that Rs183 billion has been earmarked for small dams, drainage schemes, energy and water resources projects.

Transport and communication

The federal budget has set aside Rs 202 billion for highways and ports.

Climate change

The federal government has allocated about Rs10 billion to tackle climate change, including planting tree and other projects to improve the natural environment.

Science Technology and IT

The government has allocated Rs17 billion for training in IT sector, provision of laptops to youth, network improvement and promotion of IT exports.

Inland Revenue

Following are the basic principles of tax policy this year.

• Relying more on direct tax ie income tax and capital value tax.
• Imposition of tax on non-productive assets
• Progressive tax promotion
• Protection of productive assets
• Taxes on wealthy people

Relief measures

• To alleviate the financial woes of the salaried class, tax to be implemented only on individuals earning more than Rs12 lacs instead of Rs6 lacs per year.
• Proposal to increase the basic discount limit for business persons and AOPs from Rs4 lacs to Rs6 lacs
• It is proposed to reduce the tax on profits from investing in welfare savings certificates, pensioners benefit account and martyred family welfare account from 10% to 5%.
• A system of fixed income and sales tax has been proposed for small retailers in which tax of Rs 3,000 to Rs 10,000 will be collected along with electricity bills. After payment of this tax, FBR is not allowed to ask any question.
• 100% Adjustment of Initial Depreciation for Industrial Enterprises and Other Businesses in First Year.
• Proposal to make all taxes levied on industrial enterprises adjustable at the time of import.

Other Measures

• All persons who have more than one immovable property in Pakistan and its value is more than Rs25 million, rate of one per cent of the market value will be effective, however one private home of each will be exempt from this tax.
• It is proposed to levy 15% tax on capital gains of immovable property in Pakistan in case of one year holding period (which will be reduced to zero in case of 6 years holding period with reduction of 2.5% per annum).
• It is proposed to increase the rate of advance tax on sale and purchase of property for filers from the current rate of 1% to 2%.
• To discourage non-filers, it is proposed to increase the advance tax rate for property buyers to 5%.
• It is proposed to pay 2% tax on all persons including companies and AOPs with annual income of Rs300 million or more.
• Proposal to increase advance tax on motor vehicles over 1600cc.
• In case of electric engine, advance tax at the rate of 2% of the price will also be collected.
• The tax rate for non-filers will be increased from the current 100% to 200%.
• It is proposed to increase the existing rate of tax on banking companies (including super tax) from 39% to 42%.

Suggestions for documenting the national economy

• It is suggested that any person of Pakistan who is not a tax resident of another country should be considered as a tax resident of Pakistan.
• Advance withholding tax will be levied at the rate of 1% for filers sending money out of Pakistan through credit, debit and prepaid cards and 2% for non-filers. However, this tax will be adjustable against the tax due.

Facilities for taxpayers

Under the new mechanism, taxpayers can nominate their representative in ADRC voluntarily, the second representative will be an officer of FBR and the third representative will be by mutual consent of the tax peer and FBR, because of this mechanism 2 out of 3 Members will be nominated at the discretion of the taxpayers.

Relief measures for government employees

• 15% increase in salaries of government employees
• The long-standing demand for integration of adhoc relief into basic pay was accepted.

After the budget speech, Miftah Ismail introduced the Finance Bill 2022 in the House.

Following the presentation of Finance Bill by the Finance Minister, Speaker National Assembly Raja Pervez Ashraf adjourned the House till 4pm on Monday, June 13.