Post Budget 2019 - a gloomy picture.

• Author: Shaikh, Nazir Ahmed

Byline: Nazir Ahmed Shaikh

Trying to stabilize the uncertain economic conditions of the country, the PTI government has set an ambitious tax revenue targets in the first full-year budget for Rs7,022 billion, for fiscal year 2019-20. Despite a massive Rs1.405 trillion tax plan, the federal budget sees no major change in the overall fiscal deficit during 2019-20, which is set to come in at a record Rs3.15 trillion or 7.2 percent of GDP.

A spiteful range of taxes has been proposed on almost all sectors of the economy, in line with the International Monetary Fund (IMF) for a bailout package, with maximum focus on recoveries from income tax and sales tax. Income tax payers will bear a substantial effect of the new revenue efforts set to unroll for the new fiscal year, starting from July 01, 2019.

The government has increased income tax rates to a maximum 35 percent from 25 percent and reduced by half the taxable income bracket to Rs50,000 per month for salaried and Rs33,333 per month for non-salaried. From the head of income tax alone, the government is aiming to raise Rs258 billion of additional revenue in the forthcoming year.

Another key decision under the budget is the removal of zero-rating facility to five export-oriented sectors, including textiles. Despite strong opposition from the industry, 17 percent General Sales Tax (GST) has been imposed. However, government has promised for speedy refund claims against actual exports. From sales taxes, the government is expecting to raise Rs250 billion incremental revenue, via GST rate adjustments in various areas and elimination of zero-rating.

Also, the budget removed restrictions on sale and purchase of movable and immovable assets of tax non-filers. The tax rates has been increased on sugar, cement, steel and many edible items and facilitation has been offered on import of machinery and equipment for industrialization, including in the tribal region, which has been being merged with Khyber Pakhtunkhwa.

The government is expecting that the difficulties arising out of budgetary measures, including inflation, would subside over six months to a year period as the State Bank of Pakistan acts independently through monetary policy tools that point towards further hikes in interest rates. It will bring long-term benefits to the country through effective documentation of economy and expansion in the tax base.

The budget promised 10% increase in net pensions, 10% ad hoc relief on running basic salaries...