Dar presents pro-growth, relief-oriented budget for 2016-17 worth over Rs 4.8 trillion outlay

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ISLAMABAD, June 3 (APP): Finance Minister Senator Ishaq Dar Friday, presented Rs 4.8 trillion pro-growth, relief-oriented federal budget for financial year 2016-17, and announced special package for agriculture, measures to improve economic growth and overcome
challenges in energy sector by maintaining fiscal discipline and
reducing non-development expenditure.
The Minister while announcing the budget in the Parliament
House Friday announced relief for the masses, particularly the
farmers, besides promoting investment forjobs creation and
people-friendly policies for the socio-economic prosperity of
the country.
The main focus in his budget speech was on the development
of energy, infrastructure and human resource sectors, besides
prioritising the China-Pakistan Economic Corridor (CPEC) projects.
The Finance Minister also announced relief for the
government employees , besides announcing relief to the elderly
people in the country.
Highlighting key economic indicators, based on 9 or 1
0 months data, he said the economic growth remained at 4.71
% which was the highest in the previous eight years.
The performance could have been better, had cotton crop
not witnessed a loss of 28% due to which national economic
growth was reduced by 0.5%, he added.
The minister said per capita income, which stood at $1334
in FY 2012-13, was projected to increase to $ 1561 in FY 2015-16,
showing a growth of 17% in dollar terms while it increased by
24% in terms of rupee.
He pointed out that the average inflation was recorded
at 2.82% from July 2015-May 2016, the lowest in a decade.
Ishaq Dar said for the current FY 2015-16, the target
of Rs 3,104 billion was fixed and considering the collections
till date, it would be achieved.
Likewise, tax revenues would be increased by 60%, an
historic and record increase, he added.
The minister said the fiscal deficit this year was
being brought down to 4.3% of DGP.
Credit to private sector that was negative Rs 19 billion
in FY 2012-13, had reached Rs 312 billion till May of the current
fiscal year, he noted.
The Policy Rate of SBP, he said, was brought down to
5.75% as in May, 2016, which was the lowest during the last
four decades.
The exports were recorded at $ 18.2 during Jul-Apr FY
2012-13, showing a decline of 11%, he added.
He said, imports were recorded at $ 32.7 billion during
Jul-Apr FY 2015-16 while remittances have risen to $ 16 billion
for the year 2015-16, adding, for the current year target is
$ 19 billion.
Ishaq Dar said exchange rate had shown remarkable stability
in the last three years which was currently at 104.70/$.
About foreign exchange reserves, he said, the level of $
21 billion had been achieved, which was a historic record.
Ishaq Dar said the government kept average current deficit
to a very low level of 1% of GDP.
He said, Stock Exchange Index stood at 19,916 on May 11,2013,
has now surged to above 36,000, adding, in the same period, market
capitalization has increased from Rs 5.2 trillion to Rs 7.391
trillion and from $ 51.3 billion to $ 70.5 billion.
The merger of Lahore, Karachi and Islamabad stock exchanges,
which was pending for the past 15 years, was completed this year.
Ishaq Dar said reduction of fiscal deficit, raising tax
revenues, continued focus on energy, exports promotion, poverty
and unemployment, income support programme (BISP), Development and
Promotion of ICT Sector, were main elements of government’s budget
strategy.
About medium-term macroeconomic framework, he said, “Our
budget strategy is embedded in a three-year medium term
macroeconomic framework, spanning the period 2016-19.”
He said increase in GDP growth, investment to GDP ratio,
decrease inflation, cut in fiscal deficit, increase in tax-to-
GDP ratio besides enhancing foreign exchange reserves to $ 30
billion, are the main features of the framework.
Regarding development plan, he said the government would
focus on water, power, highways, railways and human development
sectors which contribute most to economic development.
The minister said a special development programme has
been devised for Temporary Displaced Persons (TDPs) and
Security Enhancement.
To cater for the needs of hosting, rehabilitation and the
return of TDPs and security enhancement, a special development
programme of Rs 100 billion has been provided in the budget.
About China-Pakistan Economic Corridor (CPEC), he said,
$46 billion investment will result in improvement of economies
of the four provinces and special areas of the country.
He said keeping in view significant role Gwadar has to
play for strengthening the economy, the government has taken
development of this area very seriously.
In order to strengthen exports and remove bottlenecks, he
announced a number of measures to increase exports.
Ishaq Dar said to further enhance the export competitiveness
of textile sector, measures including setting up of technology
upgradation fund, duty-free import machinery, withdrawal of customs
duty on manmade fibers, plant breeders right act, have been
announced.
He said agriculture is the backbone of country’s economy and
keeping in view difficulties faced by this sector, special steps
have been taken which include concessions of taxes and duties,
reduction in prices of fertilizer, enhancement in the target of
agriculture credit, reduction of cost of credit, credit guarantee
scheme, concessional electricity tariff for agriculture tube wells, concession of customs duty for dairy, livestock and poultry sectors, concessions of customs duty for fish farming, relief on cool-chain machinery, exemption of sales tax on pesticides and exemption to
silos.
He said for industrial development the special measures
included enhancing tax credit on employment generation, tax credit
for making sales to registered persons, tax credit for balancing,
modernization and replacement of plant and machinery, tax credit
for establishing new industry, tax credit for expansion of existing
plant or new project, exemption on investment in green-field
industrial undertakings, reduction in customs duty on raw materials
and machinery, abolishing regulatory duty on bead wire and
protection of local industry.

Ishaq Dar highlighted various tax relief and revenue rationalization
measures proposed in Income Tax, Withholding Tax, Sales Tax, Federal Excise Duty and Customs Duty regimes to achieve higher economic growth and development.
He said in order to encourage corporatization, the
corporate tax has been reduced to 31% for Tax Year 2017 and will
further come down to 30 % in Tax Year 2018.
He said in order to encourage the organized sector, tax
credit, which is 20% at present on tax payable for enlistment in
stock exchange and available for one year, is proposed to be made
available for two years instead of one year.
The minister said in order to promote activity in the
housing sector and meet the deficiency of available housing units,
a current deductible allowance upto Rs one million on payment of
profit on debt for construction of a new house or acquisition of
house, is proposed to be increased to Rs two million.
In order to promote relief on education expenses, which are
unbearable for low income groups, it is proposed that individuals
having taxable income less than Rs one million should be given tax
relief equal to 5% of school fee upto Rs 60,000 per child per
annum, he added.
The Finance Minister said at present a tax credit is available
for contribution in an approved Pension Fund with a maximum of 20%
taxable income. An additional contribution of 2% for persons
above 41 years of age to a maximum of 50% of taxable income is
available upto June 30, 2016, he added.
It is proposed that the period may be extended upto June 30, 2019
with the condition that the maximum tax credit be restricted to 30%
of taxable income of the preceding year, he added.
The Finance Minister said to facilitate the low income group,
it is proposed that the final tax on Commission Income of Life
Insurance Agents may be reduced from the current 12% to 8% for the
filers on commission receipts utpo Rs 0.5 million.
Dar said several measures have been proposed in the budget
to save energy and promote alternative sources of energy.
He said these include concessions of customs duty on local
manufacturing of LED lights, incentivizing import of items used
in renewable sources of energy technologies, extension in relief
on import of solar panels and exemption to dumper trucks for Thar
Coal field.
To further strengthen the financial sector, the measures —
financial institutions secured transaction bill 2016 through which
loans related charge on moveable assets can be created and deposit
protection Bill 2016 through which small depositors will be protected
— are being taken, he said.
He said for the Prime Minister’s Health Insurance Scheme, the
government would provide insurance cover for tertiary healthcare
and hospitalization for several ailments.
During 2015-18, around Rs 9 billion premium will be paid
through this scheme, he added.
About Prime Minister’s special schemes, he said, for the
next financial year, an outlay of Rs 20 billion has been allocated
for these schemes.
He said the federal government has started the implementation
of Gender Responsive Budgeting at the federal level. “We are
inviting the provincial governments to be part of this reforms.”
Shedding light on estimates of revenues and expenditures of
the next budget, he said gross revenues receipts for 2016-17 are
estimated at Rs 4,915 billion, compared to the revised figures of
Rs 4,332 billion for 2015-16.
He said the share of provincial governments, out of these taxes,
will be Rs 2,136 billion. For the year 2016-17, net resources left with
the federal government will be Rs 2,781 billion compared to the
revised estimates of Rs 2,481 billion for 2015-16 showing an
increase of 12.1%.
Total expenditure for 2016-17, is budgeted at Rs 4,395 billion
compared to the revised estimates of Rs 4,095 billion for 2015-16,
showing an increase of 7.3 %, he added.
He said the current expenditure is estimated at Rs 3,400
billion for 2016-17 against a revised estimate of Rs 3,282 billion
for 2015-16 showing an increase of 3.6%.
Ishaq Dar said the defence budget is being increased from
Rs 776 billion for 2015-16 to Rs.860 billion for 2016-17, which is an
increase of about 11%.
About development budget, he said against a revised estimate
of Rs 661 billion for PSDP during 2015-16, the federal government
budgeted Rs 800 billion for 2016-17, showing an increase of nearly
21%.
This also includes the Special Development Programme for
security enhancement as well as for rehabilitation and resettlement
of TDPs, he added.
The Finance Minister said to provide relief to salaried
taxpayers, the current limit of Rs. 100,000 on employer’s annual
contribution in the Provident Fund is proposed to be enhanced to
Rs 150,000.
He said the exemption from payment of minimum tax at 1% during
the first 10 years of commencement of business operations, which
shall expire in June 2016, is proposed to be gradually withdrawn and
minimum tax is proposed to be reduced to 0.5% of the entire turnover
upto Tax Year 2019.
The Finance Minister said for distributors of Fast Moving
Consumer Goods (FMCGs), it is proposed to reduce Witholding Tax
rate on supplies from 4% to 3% for companies and from 4.5% to
3.5% for others. However, no reduction would be available for
non-filers, he added.
He said it is proposed that reduced tax rate of 2% allowed to
low profit margin corporate service providers for Tax Year 2016 may
be extended for Tax Year 2017. In order to promote IT sector, it is
proposed that this concession may also be provided to providers of
IT and IT enabled services.
The Finance Minister said in order to facilitate persons
deriving income from renting of property, including widows and senior
citizens taxation of property income in the case of individuals and
associations of persons, is proposed to be simplified.
It is proposed that for such persons the property income may
not be clubbed with income under other heads and may be taxed as a
separate block of income, he said.
Ishaq Dar, however, added that income upto Rs 200,000 shall
be exempted and income upto Rs 2,000,000 shall be taxed in slabs of
5%, 10% and 15%. Income above Rs 2,000,000 shall be taxed at 20%, he
added.
He said it is proposed that advance tax may also be paid on
the basis of ACT (Alternate Corporate Tax) paid for tax year 2015.
This will not create any additional liability for the
taxpayers and only represents a change in collection methodology.
The Finance Minister said in order to discourage avoidance of
tax and to bring uniformity in application of law, it is proposed to
withdraw exemption from minimum tax at the rate of 1% to companies
declaring gross loss.
He also announced special measures for enhancing performance of agriculture sector and income of rural population.
He said due to higher inventories, declining commodity prices and unfavourable weather conditions, this sector has suffered very badly.
He said to enhance agriculture productivity, Prime Minister
Muhammad Nawaz Sharif announced a historic package in September last for
Rs 341 billion for providing less expensive fertilizer, seeds, loans and
availability of water to famers.
Keeping in view difficulties faced by the agriculture sector, he
said the government decided to take further special steps in current financial year.
He said tax and duty concessions announced in the last year’s
budget will continue in the budget 2016-17.
“These concessions amount to Rs 15 billion and are expected to
promote agriculture sector development,” he added.
Ishaq Dar said fertilizer is a major input cost in the
agriculture sector. The government decided to further reduce
price of urea to Rs 1,400 per bag from July 2016. The federal
and provincial governments will pay the cost of subsidy which will be
Rs 36 billion, in equal shares.
Similarly, the current price of DAP is Rs 2,800 per bag which
has been cut down to Rs 2,500 per bag from July 1, 2016 while the
federal and provincial governments will pay cost of subsidy which
will be Rs 10 billion.
He said the agriculture credit is being increased from Rs 336
billion to Rs 600 billion over the last three years.
For 2016-17, volume of agriculture credit target is being
increased to Rs 700 billion, he added.
The minister said the government through SBP has
developed a framework to reduce mark up rates of ZTBL, NBP, Bank of
Punjab and Punjab Cooperative by 2%.
Under the credit guarantee scheme, he said the federal government
is sharing risk of non-payment of credit by small farmers by
guaranteering up to 50% of the financing by participating financial
institutions.
The government is allocating Rs 1 billion in 2016-17, he
added.
He said current rate of off-peak rate of Rs 8.85 per unit for
agriculture tube wells is being reduced to Rs 5.35 per unit, adding
the government will bear expenses of around Rs 27 billion.
Ishaq Dar said concession of customs duty for dairy,
livestock and poultry sectors, concession of customs duty for fish
farming, relief on cool chain machinery, exemption of sales tax on
pesticides and exemption to Silos will also help a lot in revival of agriculture sector.

Finance Minister Ishaq Dar said it is proposed that the
maximum taxable holding period for capital on securities may
be extended from 4 to 5 years.
In order to encourage compliance with tax laws, it
is also proposed that, for non-filers, higher tax rates of
18%, 16% and 11% for holding period of upto 1 year, 2 years
and 5 years, respectively, may be introduced, he added.
Ishaq Dar said, as investment in real estate is a
means of earning huge gains, it is proposed that capital
gain on disposal of immoveable properties be taxed at a
rate of 10% if the property is sold within five years
of acquisition.
He said it is proposed that in view of the peculiar
nature of the business of print and electronic media
withholding tax for providing or rendering services by
print and electronic media be enhanced from 1% to 1.5% and
the withheld tax may be treated as the final tax in respect
of the income from these receipts.
Concessionary rate of customs duty on import of
newsprint by newspapers and exemption from sales tax on
newsprint shall remain intact, he added.
The Finance Minister said profit on Term Finance
Certificates is exempt from withholding tax if paid to
a company whereas the companies are required to pay tax
on their income at the time of filing of their return.
It is proposed to withdraw this exemption in order
to streamline the collection of tax from this source,
he added.
He said to provide a level playing field it is proposed that
manufacturers availing the facility of exemption certificate may
be subjected to compulsory audit of consumption, production and
sales.
The Finance Minister said in the budget for the financial year
2015-16, a tax on the income of the affluent and rich individuals,
association of persons and companies, earning income above
Rs. 500 million in tax year 2015 at a rate of 4% of income
for banking companies and 3% of income for all others, was levied.
Since the circumstances that necessitated this measure
are still continuing, it is proposed to extend this measure by
one year for Tax Year 2016, he added.
Ishaq Dar said a large number of persons are filing
sales tax returns with the provincial revenue authorities
but are not filing income tax returns.
It is proposed that such non-filers may be required to
pay advance income tax monthly, to be collected by provincial
revenue authorities along with sales tax returns, at the
rate of 3% of turnover, he added.
The Finance Minister said in order to broaden the tax
base and document transactions, withholding tax is collected
on sale of property and also from the purchaser of property
if the value of property is more than Rs. 3 million.
However, the withholding tax on sale and purchase is
based on DC rates which are far lower than the actual market
prices and are not revised frequently to reflect increasing
property prices. It is proposed to increase the rate in case
of sale of property from 0.5% and 1% to 1% and 2% for
filers and non-filers respectively and in case of purchase
of property, from 1% and 2% to 2% and 4% for filers and
non-filers respectively, he added.
The Finance Minister said various minerals are being
extracted in all four provinces through licenses granted by
the provincial governments. Most of the non-corporate persons
engaged in extracting minerals, are non filers.
To broaden the tax net, it is proposed that Provincial
Government authorities collecting royalties at the time of
dispatch may also collect withholding tax at the rate of 5%
of the value of mineral, he added.
The Finance Minister said in most of the countries
dividend was taxed at normal rates so that there was no
adverse impact on the aggregate tax payable on the income of
the company.
To narrow this gap in Pakistan and to encourage
compliance with tax laws it was proposed that, the rate of tax
on dividend in the case of non-filers might be increased from
17.5% to 20%. The tax withheld in excess of 12.5% shall remain
adjustable, he added.
The minister said for rationalization of Withholding
Tax on electricity, it was proposed to increase the rate of
WHT for commercial bills above Rs 20,000 from 10% to 12%.
There would be no change for industrial consumers, he
added.
He said non-filers tried to avoid higher rate of tax at
the time of purchase and registration of vehicle by getting
vehicles leased from various banks, leasing companies etc and
the vehicles are registered in the name of the leasing company
or bank.
To avoid this misuse, it was proposed that an adjustable
withholding tax at the rate of 3% of the value of vehicle be
collected by every bank/leasing company etc from non-filers at
the time of lease, he added.
Ishaq Dar said in line with the one basket approach for
banking companies introduced last year, it was proposed that
income of insurance companies from all sources might also be
subjected to same corporate tax rate.
He said compared to high profit margins of stock
brokers, the withholding tax rate of 0.01% withholding tax on
commission of members of Stock Exchange was quite low. It was
proposed that it might be enhanced to 0.02%.
The minister said since prize bonds were bearer
instruments, they were often used by tax evaders and
non-compliant persons to whiten their income.
Therefore, it was proposed to increase the withholding
tax rate for non-filers from 15% to 20% on winning of prize
bonds, he added.
He said it was proposed to introduce higher tax rates of
15% for non-filers receiving dividend from Mutual Funds. The
rate for filers would remain unchanged at 10% and the excess
tax at 5% for non- filers would be adjustable, he added.
The minister said through Finance Act, 2015 a
transaction tax was levied on trading of commodity futures
contracts on Pakistan Mercantile Exchange (PMEX).
It was proposed that instead of tax on transaction, tax
be levied at the rate of 5% on actual capital gain as was
being done for securities traded on Stock Exchange, he added.
The Finance Minister said the undocumented sectors of
the economy, including retailers and small businesses,
under-reported their income. In many cases declared income was
below taxable limit.
Consequently, he said their contribution to revenue was
much lower than their share in GDP. Currently minimum tax at
the rate of 1% of turnover in case of AOP and individuals was
applicable only where turnover was above Rs 50 M. It was
proposed that this limit might be reduced to Rs 10 M, he added.
Ishaq Dar said bulk of the public savings were parked in
housing sector and heavy investments were made in real estate,
yet tax collection from this sector did not match with level
of investment and the profits earned.
A final tax scheme on the basis of fixed tax per unit
area basis was proposed to be prescribed for builders and
developers, he added.
The Finance Minister said through Finance Act 2013,
withholding tax was imposed on airing of foreign produced TV
plays and serials only on landing rights channels.
In order to encourage locally produced plays and to
enable the local production houses to compete with the foreign
productions, this withholding tax is now proposed to be
collected from all TV channels airing such foreign produced
content, he added.
He said it is also proposed that any person making
payment fora foreign produced advertisement shall collect
withholding tax at the rate of 20% of the payment.
The Finance Minister said in order to promote
information technology it is proposed that sales tax may be
exempted on the import of Laptops and PCs.
This step will also promote genuine imports and will
render informal and illegal imports as uncompetitive, he added.
Ishaq Dar said in order to provide some relief in the
prices of second hand clothing which are used by the common
citizens, it is proposed to reduce the tax rate to from 10% to
8%.
He said it is proposed to withdraw Federal Excise Duty
of 16% on services such as advertisement on CCTV / Cable TV,
Shipping Agents, Banking Companies, Insurance Companies,
Cooperative Financing Societies, Modarbas, Musharikas,
Franchise Services, Stevedores, Stock Brokers, Forex Dealers
etc., where Provincial Sales Tax is payable.
The Finance Minister said in order to prevent the misuse
of zero-rating in stationery items, it is proposed that
zero-rating on these items may be converted to exemption.
He said milk, fat-filled milk and preparations for
infant use have been enjoying zero-rating facility on supplies
for the last so many years. As a result, huge amounts of
refunds are claimed by the dairy sector.
Ishaq Dar said it is proposed that zero-rating on
preparations for infant use may be retained, while the
zero-rating on milk and fat-filled milk sold in retail packing
is proposed to be withdrawn.
The exemption on milk and fat-filled milk will remain
intact,he added.
The Finance Minister said cement is currently chargeable
to Federal Excise Duty at the rate of 5% of the retail price.
It is proposed to replace the current regime with fixed rate
basis at the rate of Rs. 1 per kg, he added.
He said in order to stop mis-declaration and to bring the
tax structure in line with market prices, the rates of sales
tax on mobile phones are being rationalized.
The existing sales tax rates of Rs 500 and Rs 1,000 are
proposed to be increased to Rs 1,000 and Rs 1,500 for medium
and high category mobile phones respectively. The rate of tax
on low category mobiles will remain unchanged at Rs 300, he
added.
The Finance Minister said in order to enhance revenue
from this non-essential sector, and to keep pace with
inflation and discourage cigarette smoking amongst the public
the rates of FED on cigarettes are proposed to be increased in
two stages with first stage ending on 30th November 2016.
The increase in tax rate will be about 23 paisa per
cigarette for lower tier cigarettes and about 55 paisa per
cigarette for higher tier cigarettes, he added.
The Finance Minister said the current rate of Federal
Excise Duty (FED) on aerated waters is 10.5%, which is lower
than the standard rate of FED. In order to generate additional
revenues from this growing sector, it is proposed that the
rate of FED on aerated water may be increased to 11.5%, he
added.
He said in order to simplify the procedure of payment of
sales tax by Tier-1 retailers and to address their grievances,
it is proposed that in addition to existing regime, the retailers
may have option of a simplified regime of payment of sales tax at
the rate of 2% of their total turnover.
Ishaq Dar said concessionary rates of Customs Duty and
sales tax on major poultry feed ingredients like soybean meal and
vitamin premixes shall remain intact.
However, other ingredients that are subject to sales tax
at the rate of 5% are proposed to be subjected to sales tax at
10%, he added.
He said currently, Marble Industry is mostly unregistered and
is not paying sales tax. The industry has agreed to pay its share if
the tax is collected through electricity bills.
In order to bring this sector in the ambit of sales tax
and encourage registration, it is proposed to introduce sales tax
on electricity consumption basis at the rate of Rs. 1.25 per
Kilo Watt Hour, he added.
The Finance Minister said two years back, on the
instructions of the Prime Minister, tariff reforms process was
initiated. As a result of the efforts of the government, maximum
tariff slab of 30% was brought down to 25%, and the number of
tariff slabs was reduced from 7 to 6 in the budget for financial
year 2014-15.
Last year, the highest tariff rate was further slashed
to 20%, and the number of slabs was reduced from 6 to 5, he said,
adding this year the tariff slabs are being reduced from 5 to 4.
The Finance Minister said the new general slabs will be
3%, 11%, 16% and 20%. From next financial year, the 2% and 5% slabs will be merged in the new slab of 3%.
This, he said, will reduce the cost of import of more
than 2,000 items mostly machinery and raw material and will pass on the benefit of Rs. 18 billion to the industrial sector of the country.
However, other items will continue to be subjected to
Customs Duty at the rate of 5% by shifting these items to the fifth schedule, he added.
The Finance Minister said the government was endeavoring
to encourage the use of energy efficient technology in the
country.
It is, therefore, proposed that Customs Duty may be
withdrawn on the import of essential raw material for the
manufacturers of LED lights in the country. The scope of duty
free import of renewable energy technologies is also being
expanded and streamlined, he added.
Ishaq Dar said keeping in view the importance of
automobile sector in the economic development of the country, a new Auto Development Policy 2016-21 has already been announced by the government.
In this budget, measures are being taken to initiate the
implementation of the policy. This will help encourage the
prospective investors to invest in this vital sector of the
economy, he added.
The Finance Minister said where the government is
providing incentives and relief to the agriculture and
industrial sectors and taking measures to protect the children
from malnourishment, it is also striving to discourage the use
of those items, which are considered health hazard.
It is therefore, proposed that Customs Duty may be
enhanced from the current 10% to 20% and from Rs. 300/kg to Rs. 600/kg on the import of betel nuts and betel leaves respectively, he added.