Pakistan budget 2021-22: Will government introduce new taxes?

Pakistan government is likely to introduce direct and indirect taxes in the next year budget which will be announced today (June 11).

The budget will be presented by Federal Minister for Finance and Revenue, Shaukat Tarin.

Quoting sources, Dawn reported that contrary to the government’s claim that it would be tax-free budget, Imran Khan-led PTI government is expected to announce substantial direct and indirect taxes in the upcoming budget by withdrawing exemptions in sales tax, income tax and by minimising concessionary tax rates.

In a meeting with the business community, Tarin assured rationalization of taxes and duties to increase the tax payer base.

Associated Press of Pakistan said though no new taxes would be introduced, but the government would introduce measures for bringing improvements in the system of tax collection, broadening the tax base, and facilitation to tax payers.

The government is likely to set the revenue collection target at Rs5.8 trillion for the fiscal year 2021-22.

The Federal Board of Revenues (FBR) is expected to reach closer to its target of Rs4.7 trillion revenue collection in current fiscal year. But the government has increased FBR’s tax collection target for 2021-22 by Rs1 trillion.

The International Monetary Fund has also set Rs5.8 trillion revenue collection target for Islamabad and it wants the government to go for withdrawal of maximum exemptions. Negotiations between Islamabad and IMF are continuing and the two parties are likely to reach an understanding on taxes.

The English daily The News earlier reported that PTI government plans to increase tax by 30 per cent on cigarettes through tobacco firms had proposed no increase in the upcoming budget. The country collected Rs134 billion from tobacco tax during 2020-21 fiscal year.

The government is also looking in to bringing up to 70,000 big retailers under the point of sales. In addition, bringing e-commerce under the tax net is also proposed

Meanwhile, the pre-budget document presenting state of country’s economy, ‘the Economic Survey of Pakistan’ will be launched today (June 10).

Where taxes are going down or not hiked

Dawn reported that the government could lower rates on textile industry to boost textile exports. In addition, reduction in raw material duty is also under consideration for the next budget.

Importantly, the daily said that IMF and Islamabad have reached an understanding that tax rates will not be hiked on key items such as food, health and education due to fear of rise in inflation.

Development budget

Asad Umar, Minister for Planning, Development and Special Initiatives, has said the National Economic Council (NEC) had approved the proposal of overall development outlay of Rs2.1 trillion for the year 2021-22, an increase of 36.4 per cent as compared to the development budget of Rs1.527 trillion in the outgoing year.

Out of the total, Rs900 billion have been proposed to be earmarked for federal Public Sector Development Programme (PSDP) 2021-22, while Rs1.202 trillion have been proposed for provinces, he said.

Asad Umar said the allocation of Rs244 billion had been made for motorways, highways, interprovincial/districts roads, airport, railway projects as 3,261km length of new roads will be added to the network.

• Pakistan