Budget approval
The federal budget passed without incident as most of the opposition in the National Assembly was absent. However, the document, as passed, had some significant changes from the one presented earlier, after several amendments were made to meet IMF conditions while attempting to avoid too much backlash from voters. Unfortunately, many of the changes did away with relief for lower and middle-income people offered earlier.
Overall, the Rs9.5 trillion budget Finance Minister Miftah Ismail presented three weeks ago has contracted to about Rs8.7 trillion, which is still about 15.5% higher than last year’s. Debt servicing accounts for over 45% of the total budget. However, Minister of State for Finance and Revenue Dr Aisha Ghous Pasha still tried to play the changes as locally-decided necessities rather than IMF conditions.
Among the biggest changes was the imposition of a Rs50 levy on petroleum products, although Miftah later noted that the amendment was only meant to preemptively seek permission for a levy, adding that the government has no short term plans to actually impose it. Let’s hope this remains as Miftah expects, as the fuel prices have already proven too much for the masses. Another interesting amendment is related to sales tax collection, which would be based on traders’ electricity bills, while another amendment to tax IT and software consultants at a nominal 5% was also approved.
The income tax brackets, initially announced by Miftah, have also been modified, with non-taxable income being reduced to just Rs50,000 per month, while those making between Rs50,000 and Rs100,000 will pay 2.5% on any amount over the non-taxable bracket. The next bracket of Rs100,000 to Rs200,000 has been set at 12.5%, the Rs300,000 bracket at 20%, the Rs500,000 bracket at 25%, the Rs1 million bracket at 32.5%, and the top bracket of over Rs1 million at 35%.
The so-called super tax of between 1% and 4% will be imposed on those earning over Rs150 million a year, or Rs12.5 million per month, along with a corresponding 10% super tax on industries. Cell phones have also become more expensive, but in an interesting change, cinema equipment, including projectors, speakers, and 3D glasses, are now duty-free, perhaps to allow people to truly immerse themselves in movies and forget about the state of the economy.
Published in The Express Tribune, July 1st, 2022.
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