economic budjet of pakistan.docx

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Economic Budget of Pakistan

Presentation

Farid Ahmed Haroon

Umar Naseer

M. Junaid

Umar Pervaiz

Macro Economics

3 rd semester – HU



Objective of budget 2010-11

1.Economic recovery Waste will be eliminated, expenditures tightly controlled, and the policy mixcarefully managed for a strong and stable recovery.2. Inflation Control The best relief package we can offer is to do whatever we can to reduceinflation.3.Employment generation Employment generation will be an important test of our policies. Our youth,

the largest segment of our population will expect this.4. Enhancing investment In order to achieve growth, we must make Pakistan attractive for investment.Surveys of competitiveness and cost of doing business suggest that reformsneed to be undertaken to improve governance and markets in Pakistan. Inorder to attract investment we also need to emphasize productivity andefficiency, given our limited resource availability.5. Energy Supply

a. In order to secure private sector investment in the power sector in atransparent manner, an Energy Development Fund is being established inconsultation with Asian Development Bank. The proposed fund is likely to

be started with seed money of Rs. 20 billion.

b. In FY 2010-11, an allocation of Rs.131 billion has been made for hydel,thermal and nuclear energy projects to augment generation and improvetransmission.

6. Food Security

1. Our special programme for food security and productivityenhancement for smaller farmers , covering 13,000 villages starting



with 1,012 villages in all provinces, has commenced successfully and isexpected to gather momentum.

2. I would like to draw your attention to the raising of Mangla Dam,

Gomal Zam Dam and Satpara Dam, which would be completed in FY2010-11. This will substantially add to the availability of water.

3. Diamir-Basha Dam shall be launched as a mega project in FY 2010-11which would generate 4500 MW electricity and store 6,450 MAFwater. It is gratifying to share that the “resettlement chapter” has beenconclusively settled by the Government which would now enable us tofast track this project.

7. Social protection program

a. Benazir Income Support Fund: Rs 46 billion would be disbursed in theoutgoing year, and we will increase the outlays to Rs 50 billion next year to

benefit four million families.

b. Waseela e sehat: The Government will develop innovative schemes for benefitting the poor. In this connection, a health insurance scheme (Waseela-e-Sehet) has been introduced on a pilot basis to provide health insurancecover of Rs 25,000/- per family per year for hospitalization.

c. Waseela e Haq: The government is fully conscious that beneficiaries ofBISP need to graduate into income earning individuals. We are designing acomprehensive exit strategy based on international best practices. Several

initiatives have already been taken. For example, Waseela-e-Haq providesself employment through setting up of small businesses. Vocational trainingto one person of a beneficiary family is also been launched.

d. Pakistan baitul maal’s program: Pakistan Baitul Maal shall continue torun pro-poor programmes with an allocation of Rs 2 billion.



Key point of budjet 2010-11

Total outlay of the national budget for new fiscal year 2010-11, presented atthe National Assembly here Saturday is to the tune of Rs 2764 billion, 12.3

percent higher than the size of the budget estimates for outgoing fiscal 2009-10.

Following are cardinal features of the national budget for FY 2010-11:-

· The total outlay of budget 2010-11 is Rs 2764 billion. The size is 12.3 per higher than the size of budget estimates 2009-10.

· The resource availability during 2010-11 has been estimated at Rs 2598 billion against Rs 2299 billion in the budget estimates of the outgoing fiscalyear.

· Net revenue receipts for 2010-11 have been estimated at Rs 1377 billion indicating an increase of 1.9 percent over the budget estimates forcurrent fiscal year 2009-10.

· The provincial share in federal revenue receipts is estimated at Rs 1034 billion during 2010-11 which is 57.9 per cent higher than the budgetestimates for 2009-10.

· The capital receipts (net) for 2010-11 have been estimated at Rs 325 billion against the budget estimates of Rs 191 billion in 2009-10 indicating anincrease of 70.2 per cent.

· The external receipts in 2010-11 are estimated at Rs 387 billion. Thisshows a decrease of 24 per cent over the budget estimates for 2009-10.



· The overall expenditure during 2010-11 has been estimated at Rs 2764 billion of which the current expenditure is Rs 1998 billion and developmentexpenditure at Rs 787 billion. Current expenditure shows decline of less thanone per cent over the revised estimates of 2009-10, while developmentexpenditure will increase by 25.3 per cent in 2010-11 over the revisedestimates of 2009-10.

· The share of current expenditure in total budgetary outlay for 2010-11is 72 per cent as compared to 78 per cent in revised estimates for 2009-10.

· The expenditure on General Public Services (inclusive of debt servicingtransfer payments and superannuation allowance) is estimated at Rs 1388

billion which is 69.5 per cent of the current expenditure.· The size of Public Sector Development Programme (PSDP) for 2010-11 is Rs 663 billion. While for Other Development Expenditure an amount ofRs 124 billion has been allocated. The PSDP shows an increase of 30 per centover the revised estimates.

· The provinces have been allocated an amount of Rs 373 billion for budget estimates 2010-11 in their PSDP as against Rs 300 billion in 2009-10.

· An amount of Rs 10 billion has been allocation to EarthquakeReconstruction and Rehabilitation Authority (ERA) in the PSDP 2010-11.

PSDP 2010-11

Following are the highlights of Public Sector Development Programme(PSDP) 2010-11, released here on Saturday: Total amount of Rs. 663 billionhas been allocated in PSDP-2010-11 for various ongoing and new schemes.Out of total PSDP, the federal share is Rs. 280 billion, provincial shareRs.373 billion where as Rs.10 billion would be spent for Reconstruction andRehabilitation of Earthquake-hit areas.



Main Allocations :-

These are the main allocation of the budjet 2010-11 of Pakistan

— Rs.28423.8 million for Water and Power Division (Water Sector)

— Rs.15227.5 million for Pakistan Atomic Energy Commission.

— Rs.14565.7 million for Finance Division.

— Rs.13629.6 million for Railways Division.

— Rs.9395.7 million for Planning and Development Division.

— Rs.15762.5 million for Higher Education Commission.

— Rs.16944.5 million for Health Division.

— Rs.10873.7 million for Food and Agriculture Division.

— Rs.3220.1 million for Industries and Proudction division.

— Rs.5140.9 million for Education Division.

— Rs.5584 million for Interior Division.

— Rs.3887.1 million for Defence Division.

— Rs.3618.3 million for Housing and Works Division.

— Rs.3618.7 million for Cabinet Division.

— Rs.4115.5 million for Population Welfare Division. — Rs.1646.2 million for Science andTechnological research Division.

— Rs.885.6 million for Livestock and Dairy Development Division. — Rs.1000 million for Law and Justice Division.

— Rs.1000 million for Environment Division.

— Rs.1000 million for Special Initiatives Division.

— Rs.1234.7 million for Revenue Division.



— Rs.623.4 million for Petroleum and Natural Resources Division. — Rs.718.3 million for InformationTechnology and Telecom Division.

— Rs.1229.7 million for Defence Production Division.

— Rs.474.1 million for Commerce Division.

— Rs.149.1 million for Communication Division (other than NHA).

— Rs.518.6 million for Ports and Shipping Division.

— Rs.246.9 million for Pakistan Nuclear Regulatory Authority.

— Rs.152.9 million for Women Development Division. — Rs.107.6 million for Social Welfare andSpecial Education Division.

— Rs.65.8 million for Labour and Manpower Division. — Rs.82.3 million for Local government andRural Development Division.

— Rs.125 million for Tourism Division.

— Rs.140.8 million for ministry of Foreign Affairs.

— Rs.549.8 million for Narcotics Control division.

— Rs.114.4 million for Establishment Division.

— Rs.353.9 million for Culture Division.

— Rs.229.6 million for Sports Division.

— Rs.74.5 for Youth Affairs Division.

— Rs.509.9 million for Information and Broadcasting Division.

— Rs.164.6 million for Textile Industry Division.

— Rs.82.3 million for Statistics Division.

— Rs.81.1 million for Ministry of Postal Services.

— Rs.15 million for Economic Affairs Division.

— Rs.12029.7 million for WAPDA (Water)

— Rs. 44637 million for National Highway Authority — Rs.10523.5 million for Azad Jammu andKashmir (Block and other projects)

— Rs.6584.9 million for Gilgit-Baltistan (Block and other projects)

— Rs.8642.6 million for FATA.



— Rs. 5000 million for People‟s Works Programme -I

— Rs.25000 million for People‟s Works Pro gramme-II

Fiscal policy

The budgetary measures pertaining to Sales Tax & Federal Excise are primarily aimed at:-

Enhancing the federal excise and sales tax revenues without inducing

any additional burden on the common man and poor segments ofsociety.

Distributing the burden of extra taxation measures on all sectors of theeconomy.

Enhancing tax incidence on cigarettes which are injurious to health.



BRIEF POINTS ON MAJOR FISCAL MEASURES:

RELIEF MEASURES

o Withdrawal of restriction on adjustment of Federal Excise Duty paid on beverage concentrate.

concentrate is aimed at attracting new investment in beverage industry and

reducing the prices of aerated waters in the country.

REVENUE MEASURES

o Increase in the rate of sales tax from 16% to 17%.

the burden of extra tax measures on all sectors of the economy.

o Increase in rate of Federal Excise Duty on Natural Gas from Rs. 5.09per MMBTu to Rs. 10/- per MMBTu.

implementation of the NFC recommendations.



INCOME TAX

RELIEF MEASURES

1. In order to provide relief to large number of taxpayers deriving theirincomes from Salary and business, the limit of Basic Exemption is proposed

to be enhanced from Rs.200,000/- to Rs.300,000/- in respect of Salariedtaxpayers, while in the respect of Non-Salaried taxpayers it has been

proposed to enhanced from Rs.100,000/- to Rs.300,000/-.

2. For welfare of industrial & commercial consumers of electricity, themaximum rate of advance tax deductible under section 235 on monthly

electricity bills is proposed to be reduced from 10% to 5%, on the amount ofthe bills payable by them;

3. The Senior Citizens of the age of 60 years or more, are proposed to be

eligible for relief of 50% of tax on their income, if their income does notexceed Rs.100,000/- as compared to previous maximum limit of Rs.75,000/-.However this relief shall not be available on income subject to Presumptive

Tax Regime.

4. In pursuance of Prime Minister‟s Relief Package to rehabilitate theeconomy of Khyber Paktunkhwa, FATA and PATA, some amendments are proposed to be introduced in the Income Tax Law. These measures provide

following reliefs to industrial and commercial taxpayers hailing from mostand moderately affected areas, as prescribed:

a) Waiver of entire amount of default surcharge & penalty till 30th June2010;

b) Exemption from advance tax on electricity for tax years 2010 and 2011;



c) Exemption from withholding tax on exports;

d) Recovery of outstanding income tax arrears through easy installments;

e) Enhancement of income tax exemption limit from Rs.0.1 million to Rs.0.3million;

f) Annual Audit with the approval of FBR; and

g) Exemption from advance tax on import of plant and machinery upto 30thJune 2011;

However these concessions shall not be available to manufacturers andsuppliers of cement, sugar, beverages and cigarettes.

5. For the wellbeing of disabled persons, 100% depreciation expense can beclaimed on Ramp built to provide access to disabled persons, is proposed

through a new provision to be inserted in the law.

6. In order to provide relief to employees, exemption from taxation of perquisites on waiver of employees obligation to pay or repay, and amount

owed to employer, is proposed.

7. In order to facilitate the withholding agents, instead of e-filing monthly,quarterly and annual withholding tax statements, the e-filing of only quarterly

withholding tax statements is proposed;



TAX INCENTIVES FOR FOREIGN AND DOMESTICINVESTMENTS

1. For the wellbeing of listed company a Tax credit for BMR costs incurred by such a company is proposed to be provided @ 10% for the tax year of its

incurrence. This concession has been proposed to be admissible for the taxyears 2011 to 2015;

2. With the purpose to encourage enlistment of corporate sector, a 5% taxcredit is proposed to be allowed to a company in the tax year of its

enlistment.

3. In order to align with rest of the scheme, 10% withholding tax deductibleon Government Securities is proposed to be a FINAL tax.

4. Withholding tax deductible on debt instruments is proposed to be a FINALtax, in order to relieve the non-resident taxpayers of statutory requirement for

filing income tax return.

5. For providing incentive to foreign lenders for tax-free repatriation of

profits earned on foreign industrial loans, Clause 72(iii) of Part-IV of SecondSchedule to the Income Tax Ordinance 2001 is proposed to be re-instated.

6. The maximum rate of withholding tax deductible on payments made tonon-resident taxpayers who are not subject to Avoidance of Double Taxation

Treaties

(other than payments made on account of royalty and fee for technicalservices) is proposed to be @ 20% instead of 30%;

7. Honoring wide demand, the rate of withholding tax deductible @ 20% oncross-word puzzles is proposed to be reduced to a rate of 10%;



REVENUE MEASURES

1. In order to strengthen the drive for documentation, a uniform tax rate forsmall companies as well as AOPs is proposed @ 25% of their taxable

income.

2. Advance tax deductible on imports made by commercial importers is proposed to be enhanced to @5% being a FINAL tax.

3. Tax on capital gains accruing on account of holdings ofstocks/shares/securities for six-months or less is proposed @ 10%, whileholdings of stocks/shares/securities exceeding six-months is proposed @

7.5%. However no tax has been proposed on such capital gains arising heldfor a period exceeding 12 months.

4. In order to rationalize and simplify slab-rates provided in respect ofadvance tax deductible on goods transport vehicles under Item (1) of

Division-III of Part-IV of Second Schedule to the Income Tax Ordinance

2001 are proposed to be abolished, and tax is proposed @ Re.1 per kilogramof the laden weight capacity of goods transport vehicle. No change has been

proposed in the rate of tax on goods forwarding contracts, which remaintaxable at the existing rate of 2%.

5. In order to bring clarity on advance tax deductible on Cash Withdrawalsfrom Banks, various banking transactions including modes like withdrawalsthrough Demand Draft, Pay Order, Online Transfer, Telegraphic Transfer,

TDR, CDR, STDR and RTC, are proposed to be subject to 0.3% deduction ofthe advance tax, if such transactions exceed threshold of Rs.25,000/- in a

single day. The advance tax is adjustable.

6. Turnover Tax on Loss Making Companies is proposed to be enhanced to@ 1%.



7. Withholding tax on gross value of Inland Air Ticket has been proposed @5%. Under the scheme the Inland Air-Ticketing persons shall withholding thetax, which will be adjustable against the tax liability of the purchaser of such

ticket;

TECHNICAL MEASURES

1. Section 4 of the Income Tax Ordinance 2001 is proposed to be amended toinclude a reference regarding tax credit on account of share of profits

received by a company from an AOP.2. In order to bring clarity, expression „CD‟ appearing in Division-V of Part-

IV of First Schedule to the Income Tax Ordinance 2001 is proposed to bereplaced by „any electronic medium‟.

3. The mandatory requirement of Filing of Wealth Statement by theTaxpayers in FTR cases with yearly tax amounting to Rs.35, 000/- is

proposed to be included in section 116 of the Income Tax Ordinance 2001.

4. For enforcing checks on non-compliant taxpayers, and to encouragecompliant-taxpayers, a new section 181A is proposed to be inserted in the

Ordinance.

5. In order to streamline accounting of Advance Tax payments, certainamendments are proposed in section 147 of the Ordinance, so that quarterlyadvance tax payments are paid by 25th of last month, as compared to earlier

requirement of such payments by 15th of every month after the end of aquarter.

6. Through an editorial amendment, the reference of „minimum tax‟ onimporter of edible oil and packing materials under section 148, is proposed to

be incorporated in provisions referring to final tax on the income of animporter.



7. For the purposes of clarity, through an editorial amendment the referenceof sub-section (1AA) of section 152 is proposed to be inserted in sub-section

(2) of section 152.

8. In order to rationalize the definition of „Prescribed Persons‟ a s given insub-section (9) of section 153, an individual with turnover of Rs.50 millions

or above is proposed to be added.

9. In order to perceive better audit of withholding taxes, the withholdingagents shall be required to e-file quarterly statements even in the cases whereno-tax was deducted. For the purpose of alignment and uniformity, the words

„a person collecting tax‟ are proposed to be replaced with the words „a

withholding agent‟ in sub -section (2) of section 165.10. Editorial amendments in Section 236A of the Ordinance are proposed inorder to bring clarity and remove confusion about the charge of advance taxon public auction of all kind of property including confiscated or attached

goods.

11. On merger of Investment Corporation of Pakistan with IndustrialDevelopment Bank, the exemption available to ICP on dividend received

from any other company is proposed to be withdrawn.

12. Exemption under clause (52) of Part-IV of the Second Schedule to theIncome Tax Ordinance 2001 available to Vanaspati Ghee or Oil is proposed

to be withdrawn, in view of demise of SRO. 593(I) 1991 Dated 30th June1991.



Role of Islamic state

There is a lot to learn in the way Hazrat Umar, the rightly-guidedsecond caliph, ruled more than 14 hundred years ago.

The total area of his caliphate was around 23 lakh square miles withcontinuously expanding its frontiers. To rule over such a big caliphatestretched from Libya to Makran and from Yemen to Armenia, HazratUmar had to establish an entirely new administrative system. For theArabs, in fact, it was for the first time that such a central governmentwas established.

Hazrat Umar believed in shura and what today we call the devolutionof power. He would take no decision without the consultation of theassembly of the great Companions. Common people were alsoconsulted on matters of special significance.

He used to say: "There is no concept of caliphate without consultation".The roots of modern democracy can be clearly seen in the

administration of Hazrat Umar at a time when the whole world wasruled by despotic kings and emperors

Hazrat Umar divided the whole country into provinces and smallerunits. He followed a very strict standard for the appointment ofgovernors, and took particular care to appoint men of approvedintegrity to high offices under the state.

He kept a watch over them like a hawk, and as soon as any lapse on

their part came to his notice, immediate action was taken. Beforeassuming his responsibility, a governor was required to declare hisassets and a complete inventory of his possessions was prepared andkept in record.



He was the first ruler in history to separate judiciary from theexecutive. Qazis/judges were appointed in sufficient numbers at alladministrative levels for the administration of justice. They werechosen for their integrity and learning in Islamic law. High salarieswere fixed for them and they were not allowed to engage in trade

Under his wise and courageous leadership, the Islamic caliphate grewat an unprecedented rate, taking Iraq and parts of Iran from theSassanid‟s, and thereby ending that empire, and taking Egypt,Palestine, Syria, North Africa and Armenia from the Byzantines. Hewas assassinated by a Persian free slave, Abu Lulu Fairoz, andembraced shahadat on first of Muharram, 24 Hijri.

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