Pakistan Budget 2023-24 Big Relief For People
Amidst a backdrop of political instability and a dire economic situation resulting from the suspension of the IMF bailout program, the government led by the PDM (Pakistan Democratic Movement) is preparing to present a budget with a deficit of Rs14 trillion for the fiscal year 2023-24. The budget, which has received approval from the federal cabinet, includes proposals for new taxes amounting to over Rs700 billion. Finance Minister Ishaq Dar is scheduled to present the budget in the National Assembly at 4 pm today.
The draft budget for the financial year 2023-24, prepared by the federal government, anticipates a deficit of 7.7 percent of GDP or more than Rs6,000 billion, while the country's projected income for the next fiscal year is estimated at Rs9,200 billion. The proposed budget includes a 20% increase in salaries and a 15% hike in pensions. It allocates Rs7,500 billion for debt and interest payments, Rs1,800 billion for defense, and Rs1,150 billion for development projects. Additionally, Rs430 billion will be allocated for the Benazir Income Support Programme.
To generate additional revenue, the budget proposes the implementation of new taxes amounting to Rs700 billion. This would result in increased prices for items such as cigarettes, cosmetics, shaving products, chocolates, cornflakes, and cereals. The budget also suggests higher taxes on imported luxury items, imported mobile phones, and imported vehicles.
The Federal Board of Revenue (FBR) aims to target non-filers as well. Withholding tax will be imposed on cash withdrawals from banks, and air travel will become more expensive for non-filers. On the other hand, the budget includes a subsidy of Rs1,300 billion, with the energy sector receiving the highest allocation of Rs975 billion. Furthermore, funds will be designated for utility stores, a Ramadan package, and the waiver of loans for flood-affected farmers.
In terms of tax revenue, the FBR has set a target of Rs2,800 billion for tax revenue and non-tax revenue, of which over 55% will be transferred to the provinces. The federal government plans to spend Rs950 billion on development projects in the next fiscal year, and Rs200 billion will be allocated to public-private partnership projects. Provinces are expected to spend Rs1,559 billion on development projects, while the FBR aims to collect an additional Rs1,900 billion.
The budget includes proposals to impose taxes on the property sector and companies' profits. The levy rate on petroleum products may also see a further increase, and a standard sales tax rate of 18% will be implemented, with luxury items being subjected to a 25% sales tax. The duty on imported vehicles with a capacity of over 1000 cc is also set to rise. Mutual funds and real investment trusts will face a tax of over 30% for non-filers, and stricter measures will be taken to document real estate transactions.
Regarding proposals for salary and pension increases, three options are under consideration. "The Pay and Pension Commission suggests a 100% increase in medical and conveyance allowances for employees, along with a 10% salary increase in the form of ad-hoc allowance. Pensioners would also receive a 100% increase in medical allowances and a 10% increase in pensions. Alternatively, salaries for government employees from Grade 1 to 22 could be raised by 25% along with increased medical and conveyance allowances, while pensions would see a 15% increase. The third proposal suggests a 30% increase in salaries for Grade 1 to 16 employees and a 20% increase for officers in Grade 17 and above, coupled with a 50% increase in medical and conveyance allowances for employees and a 20% increase in pensions for pensioners." The budget also includes proposals to increase the pension of EOBI employees and the minimum wage of labor.
The federal government aims to collect taxes amounting to Rs9,200 billion and non-tax revenue of Rs2,800 billion in the next fiscal year. Proposed measures include a 0.6% tax on banking transactions exceeding Rs50,000, an increased tax rate on mutual funds and real investment trusts for non-filers, higher withholding taxes on imported luxury goods, and increased withholding taxes on property sector transactions and prize bond sales. The budget also emphasizes the need to document real estate transactions and proposes taxes on unused plots and commercial rent.
Additionally, the budget allocates approximately Rs1,300 billion for subsidies, with the power sector receiving the highest subsidy of Rs975 billion. Tax concessions are being considered for the IT and IT-related services sector to boost exports. Furthermore, the budget suggests an increase in the tax rate on over three dozen imported luxury goods for non-filers, including mobile phones, animal feed, cosmetics, confectioneries, chocolates, and packaged food. Expensive and imported mobile phones are expected to become more costly, and the duty on mobile phones valued above $100 may also rise. The prices of imported energy-saving bulbs, chandeliers, and LEDs are likely to increase as well. Various imported items, such as makeup, pet food, shoes, purses, shampoo, soap, and more, will face a sales tax rate of 25%. The budget estimates that maintaining the sales tax rate on luxury items at 25% will generate an additional revenue of approximately Rs55 billion