ISLAMABAD: The federal minister for finance Ishaq Dar presented a growth-oriented and investment friendly budget focusing on public welfare with a total outlay of Rs3960 billion for the next financial year 2014-15 in the National Assembly on Tuesday.
Presenting budgetary proposals before the house on Tuesday afternoon, the finance minister announced a 10 percent ad-hoc relief for the salaried persons of the federal government from July 1. He said that 10 percent increase will be allowed to those employees upto 15 grade drawing fix medical allowance of Rs1,000 per month.
The finance minister said that five percent increase will be allowed in conveyance allowance of the employees working upto 15 grade. He said that post of superintendent is being upgraded from 16 to 17 grade. Similarly one pre-mature increment will be allowed to employees of grade one to four.
Ishaq Dar said that for the welfare of the labour class, the minimum wage is also being increased from Rs10,000 to Rs12,000 per month. He said that an increase of Rs1,000 in minimum pension is being made in view of difficulties being faced by the low pension employees.
While referring to relief measures contained in the new budget, the minister said that the income support levy introduced last year is being abolished because of reservations of some sections of the society.
The minister said that to ensure continued stability in stock market, it is proposed that capital gain tax rate will be 12.5 percent for securities held upto 12 months and 10 percent for securities held for a period of twelve to 24 months. He said that securities held for more than 24 months shall be exempted from this tax.
Ishaq Dar said that to achieve the vision of an industrialized Pakistan in foreseeable future the government wants to attract both the domestic and foreign investment into manufacturing sector. He said that tax rebate will be allowed till 2017 in order to attract foreign direct investment in manufacturing, construction and housing sectors.
The minister said that the government has proposed concessions in the agriculture to encourage farming by removing customs duty on the import of plastic coverings and mulch film etc. He said that corporate tax in the next financial year will be upto 33 percent while withholding tax on marriage functions is being reduced by five percent.
The government feels that disabled persons need special consideration therefore it is being proposed to reduce tax liability of such persons having income upto Rs1 million by 50 percent.
Ishaq Dar announced special initiatives to enhance exports especially of textile. He said that the government has decided to set up export import bank of Pakistan to enhance export and reduce cost of borrowing for exporters on the long term basis with authorised capital of hundred billion rupees having initial paid up capital of Rs10 billion. He said that the government also decided to reduce mark up rate on exports finance from 9.4 to 7.5 percent.
Dar said that it has also been decided to set up Pakistan land port authority to transform land ports into efficient facilitators of trade. He said that the authority will help boost exports.
The finance minister announced various measures to strengthening textile sector for promotion of its exports by increasing cotton yield through various means. He also announced several measures to improve agriculture sector including credit guarantee scheme for small and marganlised farmers and reimbursement of crops insurance scheme.
The minister said that the government is going to introduce livestock insurance scheme for all farmers getting finance for upto 10 cattle. This scheme will cover livestock insurance in case of calamity and diseases and will benefit 100,000 livestock farmers.
The finance minister said that the government has specially designed a programme to provide housing credit to low cost housing units to enable the poor to have their own homes. He said that the banks will provide loans upto Rs1 million for the scheme and the government will guarantee 40 percent of the portfolio amount. The scheme will cover all areas of Pakistan and 25,000 loans worth Rs20 billion will be provided through this innovative method of supporting low and middle income facilities. He said that to expedite construction activities in housing sector, the house building finance corporation will be rehabilitated.
Ishaq Dar said that to ensure prompt health care facilities to the maximum population of the country, the government has decided to introduce health insurance scheme with the involvement of provincial governments which will help protect the poor.
Giving details of tax proposals, the finance minister said that it is proposed that airlines may collect advance tax of three percent on the sale of first class and club class air tickets.
The finance minister said that it is being proposed that advance tax of one percent may be collected on the purchase of immoveable property; however, properties with the value of Rs2 million and schemes introduced by the government for the expatriate Pakistanis will be exempted from this tax.
The finance minister said that to ensure due contribution from the rich and discourage consumption, 7.5 percent adjustable advance tax on monthly bill of Rs 100,000 and above on domestic electricity consumers is being proposed.
The minister said that the government has made a conscious policy decision to enhance the contribution of taxes which are progressive taxes and gradually reduce the burden of indirect taxes which affect the common man.
Therefore, no new tax has been imposed in connection with sales tax and federal excise duty.
The minister said that main objective of the government is to broaden the tax net, increase the cost of noncompliance for those who remain outside the tax net, remove distortion and anomalies and promote automation in order to reduce interaction between tax payers and tax collector.
Ishaq Dar said that to facilitate exporters it has been decided to introduce a consolidate export facilitation scheme which will be implemented after broad based consultations with exporters. He said that accordingly the government has also decided to form tax reforms commission with the objective to review the entire tax policy and tax administration.
The finance minister said that the government has established the Pakistan development fund limited company with resources of Rs157 billion. The company will provide the financing to key infrastructure projects and promote public private partnership.
Dar said that the government has revived its efforts to promote Islamic banking and financial system and a committee comprising ulema, bankers, economists and government officials has been constituted which will finalise its recommendations by December this year.
Ishaq Dar said that the budget strategy is embedded in a three- year medium term macro-economic framework with increase in the GDP growth rate upto seven percent by the end of 2016-17. He said that similarly inflation rate will be maintained in single digit throughout the medium term.
The investment to GDP ratio will rise to 20 percent at end of medium term while fiscal deficit will be brought down to four percent of DGP by 2015-16, he said. He said that tax to GDP ratio will be increased by 13 percent by 2016-17. He said that foreign exchange reserves will go up over $22 billion by the end of this period.
The finance minister said that the government is committed to create new job opportunities for youth and hoped that introduction of 3G and 4G technologies in telecom sector will help create about 900,000 new jobs in next four years.
The finance minister said that the government has planned to increase public sector development programme up-to Rs525 billion in the coming financial year, which shows 24 percent increase as compared to the outgoing year.
Giving details of the Public Sector Development Programme, the finance minister said that special focus will be laid on construction of new water reservoirs to give boost to the agriculture sector besides generating cheap electricity.
The minister said that physical work on Diamer Bhasha Dam will be launched in the next financial year, which will store 4.7 million acre feet water and generate 4500 megawatt electricity. He said that special focus will be laid on completion of small dams and canals in Balochistan particularly delayed project of Kachi Canal.
The minister said that special focus will continue to be laid on the development of power sector by launching and completing hydroelectric power schemes throughout the country. For this purpose Rs205 billion will be invested in this sector during the next fiscal year.
Similarly, a number of coal based project besides wind energy and nuclear projects launched by the sitting government will help provide cheap electricity to the people.
Ishaq Dar said that to encourage establishment of processing units in Gilgit-Baltistan, Swat, Makran and FATA regions, the government is introducing a policy to support processing projects in these areas. These units will have the facility of duty and tax free import of machinery and five years tax holiday. Similarly, the government has also decided 50 percent air freight subsidy for horticulture produce of Gilgit-Baltistan.
The finance minister said that Pakistan and China have agreed to build economic corridor from Kashgar to Gwadar and Karachi Lahor Motorway project which is part of this corridor will be launched by the end of this year. He said that government has also planned to complete 74 ongoing highways and bridges projects including Faisalabad-Multan sector of Motorway besides other roads and bridges in various parts of the country.
The minister said that railway plays a vital role in national economic therefore; the government has embarked on a plan for its revamping and rehabilitation. He said that every possible step will be taken to make Pakistan Railways a profitable organization which could provide better traveling facilities to the people.
On Human Resources Development, the finance minister said that Rs20 billion are being earmarked for 188 projects in the Higher Education Sector.
Similarly, he said that special focus will be laid on expanded programme of immunization and other health schemes for the people. He said thtat funding for the provincial programmes for population welfare has been kept at Rs8.2 billion.
The finance minister while giving budget estimates for the next financial year said that gross revenue receipts are estimated at Rs3945 billion. He said that the government has set an ambitious target of tax collection as without collecting more taxes we cannot hope to increase development spending that is crucial for economic growth.
The minister said that the share of the provincial governments out of these taxes will be Rs1,720 billion as compared to Rs1,413 billion in the outgoing year which shows 22 percent increase.
The finance minister said that total expenditure during the next fiscal year has been estimated at Rs3937 billion showing an increase of two percent comparing the outgoing year.
Ishaq Dar said that the budgetary needs of armed forces as per their needs have been duly provided in the next budget.
The finance minister said that the government has been successful in bringing down budget deficit from 8.2 percent to 5.8 percent during the last one year and is hopeful to further reduce to 4.9 percent in the coming year.
Dar said that the State Bank has decided to enhance overall credit for small growers upto Rs500 billion in the next financial year. Similarly, he said that to encourage the use of tractors by the growers it is proposed that sales tax will continue to be charged at the reduced rates of 10 percent.
The finance minister said that for protection of poor segments of society the government has designed national income support programme which consists of the prime minister’s youth programme and the benazir income support programme. He said that to strengthen these programmes it has been decided to establish a high powered task force to undertake a detailed review of the programme’s performance and assess their effectiveness.
