Pakistan austerity budget hikes tax target, ministers to take salary cut

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Hammad Azhar speaks as he presents the budget for the year 2019-20 in the National Assembly in Islamabad. — AFP
Hammad Azhar speaks as he presents the budget for the year 2019-20 in the National Assembly in Islamabad. - AFP

Dubai - As expected, defence budget has been retained at Rs1.15 trillion.

By Waheed Abbas

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Published: Tue 11 Jun 2019, 10:00 PM

Last updated: Wed 12 Jun 2019, 9:46 AM

Pakistan on Tuesday set a federal revenues target of Rs6.717 trillion ($46.22 billion) during 2019-20 fiscal year, an increase of 17 per cent while expenditures have been set at Rs7.022 trillion ($46.5 billion), an increase of 30 per cent over the previous fiscal year.

Pakistan hails UAE's deposit
The UAE's $3 billion deposit with the State Bank of Pakistan has contributed to alleviating the country's financial crisis and easing pressure on foreign exchange reserves, according to Pakistan's State Minister for Revenues.

Hammad Azhar  underlined the importance of the financial aid received by his country from Saudi Arabia, which totaled $6.00 billion, and the UAE, as well as $6.00 billion from the International Monetary Fund, which, he said, have all helped stabilise Pakistan's economy in general and the rupee in particular.
According to budget proposals presented in the National Assembly, the government is aiming to substantially increase its tax revenues and set tax collection target of Rs5.55 trillion for the Federal Board of Revenue. The government's running expenses will be slashed to Rs437 billion from Rs460 billion in the next fiscal year.
The current account deficit will be reduced to 6.5 per cent in financial year 2019-20 while the budget deficit is estimated at Rs3.56 trillion, or 7.1 per cent of GDP.
The government allocated Rs1.8 trillion for federal development programmes, including Rs1 billion for Kartarpur development, Rs45.5 billion for Karachi, Rs70 billion for dam projects and others.
As expected, defence budget has been retained at Rs1.15 trillion. 
"As regards the Federal Bureau of Revenue, taxes will be increased. Our tax to GDP ratio is less than 11 per cent, which is among of the lowest in the world. We will need to change our approach to tax payments otherwise the country will not progress. We are currently at a point where we need to take loans to pay for past loans and salaries," said Hammad Azhar, Pakistan's Minister of State for Revenues.
It was the first budget presented by the Imran Khan-led government, which has been under severe pressure over the last few months due to volatility in rupee, rise in inflation, growing debt and slugging economic growth.
Azhar set Rs17,500 minimum salary in the new budget. Salaries of civilian employees from grade 1-16 have been increased by 10 per cent while grade 21-22 employees remain unchanged. All Cabinet members, including prime minister, will get 10 per cent cut in salaries. While pension for retired employees increased by 10 per cent.
General Sales Tax remain unchanged at 17 per cent. But food items supplied to bakeries and restaurants will be taxed at 4.5 per cent, he said.
Azhar announced that property can't be registered in the name of non-filers. In addition, withholding tax will be imposed on purchase of properties irrespective of the value of the property.
Lawmakers of Pakistan People's Party and other opposition parties held protests during the budget speech of Minister of State for Revenues Hammad Azhar. They also wore black armbands and were holding placards to record protest. They also tore down the copies of the budget.
The budget came in the wake of arrest of former president Asif Zardari, Punjab Opposition Leader Hamza Shahbaz and MQM leader Altaf Hussain in London.
Maryam Nawaz, vice-president of the PML-N, criticised the government for raising the prices of food and other commodities which will put additional burden on the poor.
While tax on CNG will also be increased while tax on sugar will be also be doubled from eight per cent to 17 per cent.
The government also announced one per cent federal excise duty on the imports of silver and gold.
Salient features
>10% cut in salary of Cabinet members
>10% increment for grade 1-16 employees
>5% increment for grade 17-20 employees
>No increase in salaries for grade 21-22 employees
>Rs17,500 minimum wage
>GST unchanged at 17%
>Rs70 billion for dam projects
waheedabbas@khaleejtimes.com


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