ISLAMABAD: The federal cabinet on Monday approved a deficit budget of Rs4.42 trillion which, like proposals in previous years, lacks major policy initiatives to put the country on the path to sustainable economic growth.
The proposals appear to strike a balance between fiscal consolidation, imposed by the International Monetary Fund, and some incentives for the industrial sector. It was approved by the cabinet during a meeting which was presided over by Prime Minister Nawaz Sharif via video link from the Pakistan High Commission in London, a first in the country’s history.
The government expects tax revenues to climb to Rs3.635 trillion, a new historical level, thanks to heavy indirect taxation.
To boost earnings for next year, the budget proposes Rs170 billion in new taxes which will largely overburden existing taxpayers.
Further, the government is proposing to increase defence spending by over one-tenth to Rs860 billion, up by Rs79 billion from last year.
The federal cabinet has also approved measures to further limit tax-free cash withdrawals from banks by linking the Rs50,000 limit to one identity card against the current practice of unlimited banks accounts.
Other measures approved will see tax hikes on a string of consumer items. The super tax has also been extended for another year.
Tax reliefs, albeit for select sectors, include lower rates for Pakistan Cricket Board. Tax benefits will also be extended for industrialists.
While Nawaz specially asked for a special package for farmers including substantial subsidy on urea, budgetary proposal for abolishing sales tax on pesticides has been approved.
After the federal cabinet’s approval, Finance Minister Ishaq Dar will present the budget in the National Assembly on Friday.
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