A jacketed budget
The coalition government presented an austerity-driven budget with an outlay of Rs9.5 trillion for the fiscal year 2022-23. While revising downward the GDP growth projection to 5%, it believes that it could help arrest current account deficit, and curtail imports meant for auxiliary needs. This is what the ruling dispensation has in mind as it came up with, what it called, a ‘growth and investment-oriented’ budget enabling it to move towards sustainable growth.
The biggest charge on the ousted government was that it had overheated the economy by soaring growth up to 6%, and thus got trapped in a vicious circle of subsidies in an era of hike in oil and food prices worldwide. This is why the present government has targeted inflation for the upcoming year at 11.5%, and has jotted down a relief map for salaried class and the pensioners, apart from doling away specific subsidies to the downtrodden.
A 15% raise in salaries for government employees has been proposed, and as a gesture of goodwill the tax exemption slab has also been increased from Rs0.6m to Rs1.2 million. Pensions have risen by a mere 5%. Slogging Rs550 billion for civil administration and Rs530 billion for pensions, the government has estimated targeted subsidies of around Rs699 billion, which include a cash-favour of Rs2,000 per month for those with a take-home of below Rs40,000. Likewise, tax brackets for small businesses have been hiked from Rs0.4 million to Rs0.6m.
The biggest pie of the budget expenditure, of course, revolves around debt-servicing followed by defence allocation. Still the finance minister hopes that the fiscal deficit will be brought down to 4.9% of the GDP, which is a litmus test challenge for the beleaguered government. Defence budget with a raise of around 11% stands at Rs1,523 billion, whereas a staggering Rs3,950 billion will go in debt-servicing, which is a whopping 29% climb since last year, apparently owing to the bleeding of the rupee against the dollar. Nonetheless, on the developmental side, the allocation is to the tune of Rs800 billion, which is almost 10% less than previous fiscal disbursal.
The tax collection target has been set at Rs7,004 billion, 20.1% higher than last year, which will solicit an overhaul of FBR on sound professional lines. Similarly, with an estimated budget deficit of Rs3,798 billion, the government will be in rough waters as it will have to counter oil and energy tariffs on a rolling basis as per international dictation.
A number of exemptions, tax-slab adjustments and quick-fix raises are all around in the Finance Bill, including sales tax exemption on import of solar panels and energy distribution; advance withholding tax on sending remittances abroad; making cars above 1600cc expensive as well as a capital gains tax on immovable property held for up to one year at 15%, which will reduce by 2.5% every year to nil after six years. Moreover, an advance tax on sale and purchase of property for non-filers at 5% and for filers at 2% are other propositions.
From cigarettes alone Rs200 billion will be taxed, which is Rs50 billion more than last year. However, exemption of customs duty on pharmaceuticals and generous allocation of Rs51 billion and Rs24 billion to education and health, respectively, are some of the loud thoughts of budgetary statistics. A new fixed income and sales tax system for small retailers ranging from Rs3,000 to Rs10,000 collected through electricity bills is an innovative measure, and remains to be seen how it broadens and pacifies the tax base.
Published in The Express Tribune, June 11th, 2022.
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