Budget 2020-21: PTI govt to focus on relief for people, business

It will be an effort to counter negative impact of coronavirus on economy

Salman Siddiqui May 28, 2020
Representational image. PHOTO: REUTERS

KARACHI: budget

The government is determined to announce a pro-people, pro-business and no-new-tax budget for the next fiscal year starting July 1.

Rather, the FY21 budget would be a continuity of the current policies of facilitating the masses and businesses to win the war against the coronavirus pandemic, officials said.

The Federal Board of Revenue (FBR) is being tasked to collect Rs5,100 billion in revenue, which will be around 30% higher than the estimated collection of Rs3,900 billion in the current fiscal year ending June 30.

The government is expected to announce the budget - its estimated expenditure and revenue collection targets - for fiscal year 2020-21 in the second week of June.

“The government’s prime focus is on providing relief for people and businesses rather than tax generation … till the disease comes under control. The budget will most probably be an effort to counter the negative impact of coronavirus on the economy,” FBR spokesperson Dr Hamid Ateeq said while talking to The Express Tribune.

Prime Minister Imran Khan said that it would be a coronavirus relief budget and Finance Adviser Dr Abdul Hafeez Shaikh stressed that the government was trying to announce a tax-free budget, he said.

The government may increase debt to provide relief for people and businesses, he said.

“We are confident we can collect the targeted amount in taxes (Rs5,100 billion) if the economy continues to operate throughout the year (which is not the case at present under the partial lockdown),” he said.

“We will review the impact of Covid-19 on the economy after three months and redefine the revenue collection target accordingly,” he said.

Ministry of Finance former adviser Dr Khaqan Hassan Najeeb said the government was in need of higher revenues in order to spend more on healthcare in these testing times.

He suggested that the targeted revenue could be collected by plugging tax leakages, curtailing expenditure on sectors other than healthcare, such as no increase in government employees’ salary this year and shifting focus to increasing the savings rate to finance the budget deficit rather than increasing borrowing.

“We may lose around Rs800 billion in revenue collection in the last four months (March-June) of the current fiscal year 2020,” the FBR spokesperson said. However, the FBR is just Rs350-billion short of the revised collection target of Rs3,900 billion.

The disease has made the situation uncertain and impacted tax collection. There are different scenarios one is optimistic that economic activities would get normalised soon and the pessimistic view is nothing would get fixed.

“Businesses are continuously going out of our control as revenues from air, public transports, wedding halls and hotels (hospitality industry) have fallen next to nil,” he said.

Restaurants have been reopened, but with limited function of takeaway only, he added.

“There are so many sectors which remained closed and may not be reopened over the next three-four months.”

Najeeb added that the upcoming budget can demonstrate a principled approach of resource generation through tax compliance; deficit reduction by curtailing expenditures; and finance the deficit by a shift to non-debt creating instruments.

He said it is essential to implement a reform of making tax compliance simple, less document focused and digitised. He further said expenditures can be curtailed. Savings are possible in interest payments, operating expenses cutting untargeted subsidies and moving away from state funded pensions.

He said shifting financing of budget to non-debt creating instruments, can restore the public’s flagging faith in the integrity of the policymakers to break the debt cycle.

He emphasised that multi-rounds of monies for the vulnerable and businesses; and new growth supporting programmes succeeding survival strategy are needed to avoid a recession. Both fiscal and monetary policies working together can ease the pain on the people of Pakistan. 

Published in The Express Tribune, May 28th, 2020.

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