All conditions for IMF agreement met: Dar

F.P. Report

ISLAMABAD: Minister for Finance and Revenue Senator Mohammad Ishaq Dar on Saturday informed the National Assembly that Pakistan had agreed on Rs 215 billion taxes after three-day parleys with the officials of the International Monetary Fund (IMF) to complete the 9th review under the Extended Fund Facility (EFF), pending due to the country’s external financing gap.

“As a result of the talks with IMF, for the fiscal year 2023-24, the final taxes of only Rs 215 have been agreed, ensuring that it will not burden the poor and middle segments of the society,” he said while winding-up general discussion on the budget for the year 2023-24. Similarly, he said Pakistan would bring down the running expenditure by Rs 85 billion, which would have no impact on the proposed development budget, the raise in salaries and pensions of the federal government employees.

He said Pakistan held talks with the IMF with complete sincerity and assured the House that once the things with the international lender were settled; all details would be made public by placing the agreement on the official website of the Ministry of Finance. Resultantly, he said the proposed tax collection target of Federal Board of Revenue (FBR) had been increased from Rs 9200 billion to Rs 9415 billion, with the provincial share going up from Rs5276 billion to Rs 5390 billion, the federal government total expenditure estimate from Rs 14460 billion to Rs 14480 billion and pension estimate from Rs 761 billion to Rs 801 billion. Similarly, he said the subsidy estimate would be at Rs 1064 billion and grants at Rs 1405 billion, adding as a result of all these measures, the overall budget deficit would come down with a cushion of Rs 300 billion [Rs 215 billion taxes and Rs85 billion reduction in running expenditures].

Finance Minister Ishaq Dar expressed gratitude to members of the National Assembly, coalition partners, Foreign Minister Bilawal Bhutto Zardari and Leader of Opposition in the National Assembly leader Raja Riaz Ahmed for giving valuable suggestions to improve the federal budget. He also acknowledged the role of the NA and Senate Standing Committee for Finance and Revenue, and the Senate for giving input to finalize the budget and subsequently strengthening the national economy.

Highlighting the prevailing economic conditions, he explained that in December last the import restrictions were imposed to ensure timely external payments and address the country’s debt situation. However, now considering the impact on traders, businesspersons, and industries, the government had decided to lift all import restrictions following a circular issued by the State Bank of Pakistan (SBP), adding the decision was aimed at redressing the issues faced by traders and business communities, contributing to the foreign exchange reserves.

“Yesterday evening, the SBP issued a circular to lift all restrictions on import, which has now come into effect. This decision will resolve the issues faced by traders, businesspersons, and industries, and it will also contribute to an increase in foreign exchange reserves.” In a recent development, the minister said the government had incorporated changes to the super tax system, increasing the slabs and introducing new tax rates based on recommendations.

Introduced last year, Ishaq Dar said the super tax structure had been made more progressive and for effective enforcement of the 10 per cent tax, the income tax slab had been increased from Rs 300 million to Rs 500 million. Similarly, he said the tax ratio had been made progressive, like 1-4% and 6, 8 and 10%, which was earlier straight 10%, using the ‘progressive canon of taxation.’

The purpose of the super tax is to target individuals with higher incomes and ensure a fair contribution to the country’s economy. Furthermore, in an effort to document the economy, non-filers will be subjected to a 0.6% withholding tax on cash withdrawals from banks. “It is an important step towards documentation of the national economy and bringing the maximum number of taxpayers on the net,” he said. Addressing concerns raised by the lawmakers, the finance minister acknowledged opposition to the tax on bonus shares.

Historically, companies have rewarded their shareholders through cash dividends and bonus shares, while cash dividends were subject to a 15% tax, and there was no tax on bonus shares. However, as part of the federal budget for the new fiscal year, the government has proposed a 10% tax on bonus shares and 15% on cash dividends. “The tax on bonus shares will not be paid by the companies but the shareholders,” he added.

“These measures aim to promote equity and ensure that individuals and companies contribute their fair share to national development.” In an effort to address excessive electricity consumption and promote energy conservation, the government imposed an additional duty on fans that consumed excessive electricity.

On recommendations of the stakeholders, he said the government has revised the timeline for tax implementation and provided a relaxation period of six months, allowing manufacturers sufficient time to comply with it. The proposed tax on fans would now be implemented from January 1, 2024, instead of the previously scheduled date of July 1, 2023.

In an effort to resolve tax-related disputes, the finance minister expressed regret over the existence of tax-related cases worth Rs 3.2 trillion at various levels. To tackle this issue, the government has decided to strengthen the Alternate Dispute Resolution Committees (ADRCs). A committee headed by a retired judge from the High Court or Supreme Court, along with representation from tax authorities and taxpayers would be established to swiftly resolve tax-related cases, given the current backlog of more than 62,000 cases pending in different courts.

Ishaq Dar said the budget focused on public welfare and combating inflation, with a strong emphasis on addressing the needs of the common man and curbing excessive spending. A significant allocation of Rs 24 billion had been made for essential food items in utility stores for the fiscal year ending on June 30, 2023.

For the fiscal year 2023-24, he said, a Rs 5 billion Ramazan package and a Rs 30 billion Prime Minister’s package, utilizing scorecards, had been introduced to further support public welfare initiatives. He said the Benazir Income Support Programme was aimed at providing financial assistance to low-income individuals and had received an increased budget allocation of Rs 466 billion for the upcoming fiscal year, considering recommendations of the lawmakers.

“The government takes pride in the performance of the armed forces and prioritizes defense. As recommended by the Senate, funds will be released in a timely manner to fulfill all the requirements of the Pakistani armed forces,” he added. In light of climate change concerns, he said the federal government had allocated Rs 30 billion and planned to collaborate with provinces to formulate better policies.

Other measures included an increase in the minimum pension fixing it at Rs12,000 and a minimum monthly wage from Rs 25,000 to Rs 32,000 within the Islamabad Capital Territory (ICT). He said the deposit limit of the Pensioners Benefit Account had been suggested to increase from Rs5 million to Rs 7.5 million. The minister said the government had passed on the maximum benefit of the reduced petroleum prices in the international market to the consumers and it would continue with the same spirit in the coming days. To encourage overseas Pakistanis to send maximum foreign remittances to the country, the minister said the government had devised a scheme amounting to Rs 80 billion to reward them and extend maximum facilities. He said sufficient funds had been allocated for the development of merged districts in Khyber Pakhtunkhwa.

He said funds amounting to Rs30 billion had been earmarked for the conversion of agricultural tube wells to solar energy, following the directives of Prime Minister Shehbaz Sharif. He said the government intended to implement the Contributory Biometric Fund for federal employees, ensuring that government employees from grades 17 to 22 were eligible for only one pension, besides outlining certain provisions for pension allowances.

He expressed confidence in Pakistan’s economy and its ability to cope with difficult situations, citing past achievements. “In 2017, Pakistan was the 24th largest economy in the world, and the country will regain that position. The time is not far when Pakistan will become part of the G20,” he concluded. (APP)