On evening of Wednesday 23rd Jan 2019, Finance Minister Asad Umar presented the 3rd finance bill for the current fiscal year on the National Assembly floor. This budget is termed as “MINI-BUDGET”, which in my opinion is not “MINI” as it looks. It’s the Finance Supplementary (2nd Amendment) Bill of 2019.
FM Asad Umar said this bill would be a measuring yard to address the financial needs and problems of Pakistani nation. In between the chanting of slogans and loud jeering by opposition Asad Umar mentioned loud and clear that “this is in fact not a budget but it’s a corrective package which will address issues of various economic sectors of Pakistan”.
FM Asad Umar said our government's aim is to minimize the elements which would force us to return to IMF for bailout package. As this was a norm of all the previous regimes to get bail out from IMF and that too on the terms and conditions laid down by the said IMF officials. He further added that it’s the duty of the Pakistani Government and Parliament to ensure the rights of underprivileged segment of the society and also to reduce the gulf between rich and poor, but sorry to say this gulf had never been filled by our so called politicians and law makers.
“Liar, Liar!” was shouted out from the opposition side, Asad Umar responded this by saying that people on my right side had nothing when they were ousted from the government, they should have made reforms but sad to say they tried to buy the election. The budget deficit as presented by the last regime should have been 4.1 but in actual it was more than this. These deficit numbers are so high for example; the last regime destroyed the electricity system leaving a deficit of Rs. 450b, Gas which had never faced the word deficit had recorded Rs. 150bn and for the railways the numbers are of Rs. 30bn. Last government also left Pakistan with a debt of Rs. 2500bn to Rs. 3000bn and these numbers were never shown in the books. He further added that PTI had to take some difficult decisions and he also appreciated the people, that they have realized these decisions are necessary for the takeoff of economic boom in Pakistan.
Asad Umar emphasized on increasing exports and there is a drastic need in agricultural reforms and sectors associated with the same. He added that the difficult decisions would be yielding ones, the deficit would reduce, exports will increase and imports would gradually decrease. There is a balance required in revenue and expenditure for vital growth. We have turned into an import based economy. The relying on imported goods is increasing day by day. We should buy Pakistani stuff. He added we are in process of making policies which would encourage people to make Pakistani stuff at reasonable prices so that people will lessen their dependency on imported goods. He requested that opposition should guide us in efforts to bring reforms in the economy. He also said Youth is given the utmost preference, as they are the back bone of the country.
PM Imran Khan returning back to Parliament after a gap of more or less than 3 months was looking amused over the chanting slogans and noisy show of the opposition. Asad Umar's voice had been lost in the nonstop heckling, chanting and ferocious thumping of the desks from the opposition benches. The diligent Pervaiz Khattak and Shah Mehmood Qureshi’s efforts managed to calm the situation but not for too long. The Code of Conduct seemed to be ceased or looked abolished for the said day.
Some of the salient features of the bill of 2019 are ::
1. Withholding tax on bank transactions waived off for tax filers
2. Introduction of interest free revolving credit of Rs. 5bn (Qarz e Husna)
3. Ban on purchase of vehicles for non-filers lifted for newly locally manufactured cars up till 1300 CC.
4. Tax on income generated from loans to small businesses, agricultural sector and low income housing to be reduce from 39% to 20%.
5. Rs. 20,000 fixed tax on marriage halls reduced to Rs. 5,000.
6. Reduction and abolishment (in some cases) of duties on raw materials to support export industries.
7. Machinery for greenfield projects (including renewables) to be exempt of customs duty, sales tax and income tax (for five years)
8. Taxes and duties on mobile phones rationalized: taxes on budget sets to be reduced, high-end sets to become more expensive.
These were some of the salient features of the said mini budget.
Last time Asad Umar had said there were some restrictions which were interfering in the ability of overseas Pakistanis to do business and invest in Pakistan. A curious insertion 1A in the finance act related to an amendment to section 123 of the income tax ordinance attracted a great deal of attention. The insertion says that “[w]here an offshore asset of any person, not declared earlier, is discovered by the Commissioner…the Commissioner may at any time before issuing any assessment order…issue to the person a provisional assessment order…for the last completed tax year of the person taking into account the offshore asset discovered.”
Opposition said the amendment of specific clause by the government has been introduced as an “unannounced amnesty scheme”. For which the minister of state for revenue Hammad Azhar had to clarify the situation with the help of social media. He said, “Now the demand and recovery of tax can be executed immediately after receipt of information in suitable cases. This will enable the FBR to recover tax provisionally and the regular proceedings (which take about a year or two) will follow. This will also ensure that that we can request for freezing offshore accounts from other countries by conveying our tax demand to them.”
Asad Umar said that present government has reduced duty rates or has totally removed the regulatory duties which include import of raw material/inputs meant for plastic, footwear, tanning, leather, home appliances, diapers and some chemical sectors. Most of these rates would come into implementation on 31st March 2019. Regulatory duties were also announced for removal of input materials of around 200 tariff lines for manufacturing of automobile parts by local vendors.
Well on top of all this, Asad Umar said that adequate foreign financing from bilateral, multilaterals, launch of Pakistan Banao Certificates, Panda Bonds, Sukuk and Eurobond and commercial financing would keep flowing to help build foreign exchange reserves to a comfortable zone of import in the medium term range.
He mentioned that previous regime alleged move to tax investments as “Cruelty”. PTI have made promises to bring investments to special economic zones which are being setup as a part of CPEC, he further added that all the equipment brought to SEZ’s would be duty free. He also added that our Trade deficits larger part consists of energy imports, for now which PTI is making a change in the dependency of renewable electricity to solar panels and wind tribunes which will locally produce electricity on a cheaper rate. So whosoever will invest in this sector will enjoy a 5 year relaxation in duties and taxes.
In the end Asad Umar said, “I hope that the country’s new journey of self-dependence continues with the difficult decisions we have taken for the betterment of the people of Pakistan”. He said this bill would be a package of investments and exports promotions for industrial and economic revival which will address all the key challenges Pakistan is facing now. This would be a foundation for macroeconomic stability and growth which we as Pakistani nation would experience in the year to come. He said Growth will come through expanding domestic supply and financed largely from domestic resources. Reliance on imported goods have to be reduced as time passes. We need to focus on domestic products.
In my opinion, now is the right time for the said slogan to get into action::
“BE PAKISTANI, BUY PAKISTANI”
