ISLAMABAD: Terming the budget as a corrective package aimed at addressing various sectors of the economy, Finance Minister Asad Umar, presented The Finance Supplementary (Second Amendment Bill), 2019 before the National Assembly here today.
Salient features:
1) Duty on newsprint abolished;
2) Five-year tax exemption on investment in solar panels and wind turbines;
3) Reduction/abolishment of duties on raw materials for manufacturing industries;
4) Super-tax on non-banking companies to be abolished;
5) Continuation of 1pc per annum reduction in corporate income tax;
6) Capital loss carry-over to be allowed for 3 years (stock trading);
7) Taxes on cars with engine capacity of 1800CC and above to be increased;
8) Taxes and duties on cheaper mobiles to be reduced while expensive one will become further dearer;
9) Tax refunds to be worked out; promissory notes to be issued by mid-February;
10) Fertilizer Production: Gas Infrastructure Development Cess to be removed;
11) Duty on diesel engines for agricultural applications to be reduced to 5pc from current 17pc.
12) SMEs: 49 % tax reduced to 20%;
13) Agriculture: Interest on loans reduced from 49pc to 29pc;
14) Introduction of interest-free revolving credit of Rs5 billion;
15) Filers: Withholding tax on bank transactions waived off;
16) Non-filers can buy locally made cars up till 1300cc (paying higher taxes);
17) Small businesses will submit withholding tax returns twice a year instead of every month;
18) Rs. 20,000 fixed tax on marriage halls reduced to Rs. 5,000.
_______________________________________________________________________
He announced to reduce the tax for the small and medium enterprises sector from 39 percent to twenty percent to encourage business activity by low-income investors especially the youth. He also announced to cut the interest rate at the agricultural loans from 39 percent to 20 percent to bolster the agriculture sector. Asad Umar told that Agri-loans have witnessed 22% boost during the PTI governments’ first 6 months.
Finance Minister informed about a reduction in income tax on housing schemes for low-income people from 39 percent to 20 percent to encourage housing sector under Prime Minister’s project for construction of five million Houses for the middle and lower middle classes of the society. He announced that a revolving fund with an amount of five billion rupees will be provided as interest-free loans for the construction of small houses.
Finance Minister proposed to abolish withholding tax on banking deposits and transactions for the filers. Moreover, non-filers would now be allowed to purchase automobiles up to 1300cc. However, their tax rate will be enhanced to generate more revenue and encourage the people to become filers. The Minister said taxes on cars with an engine capacity of 1800CC and above will be increased. He said Gas Infrastructure Development Cess will be removed from fertilizer production.
To promote ease of doing business, Asad Umar declared that the business community will now be required to file their statements about withholding tax only twice in a year from the previous practice of filling twelve statements in a year. He said the tax on marriage halls in Islamabad will be reduced from 20,000 to 5,000 rupees. He announced a transparent and simplified tax payment scheme is being introduced on the long-standing demand of traders. This scheme will initially be launched in the Federal Capital and then replicated in the entire country.
In order to support free Media duty on the import of media industry related material and equipment is being abolished. Asad Umar observed the growth of the manufacturing sector had witnessed a sharp decline over the last ten years as a result of flawed policies of previous governments. He announced a reduction of duties on import of raw material to support the manufacturing industry. In some cases, these duties are completely being abolished.
Finance Minister told that super tax was totally being abolished for non-banking companies from 1st July. Corporate tax will be reduced by one percent every year. Noticing that the ratio of savings has reduced to ten percent, Asad Umar said that the government was proposing abolishment of tax on the savings schemes.
Abolishment of zero point two percent withholding tax on trading of shares has been announced to support the bourses. Asad Umar said that the tax refunds have soared to two hundred billion rupees and the government is introducing a scheme in consultations with the business community to address the issue. He said the government was bringing a promissory note to address the liquidity issue of the entrepreneurs.
Legislation apropos Gas Infrastructure Development Cess is also being pondered upon. He said the passage of the bill will help reduce the prices of Urea by two hundred rupees per bag. Minister pointed out that there was a production index on the loans of farmers. He said this production index was being reduced from six thousand units to four thousand units. He said regulatory duty on the component of the diesel engine is being reduced from 17 to five percent. A Medium-Term Economic FrameWork is expected to be announced next week.
Lamenting that PTI government found the economy in a bad shape, Asad Umar said the deficit of power sector rose to Rs. 450 billion and that of gas sector Rs. 150 billion. Indicating that Pakistan Railways suffered losses of Rs. 2500 to 3000 billion in the recent past, he pointed out that Pakistan Steel and PIA too suffered from record losses. Minister claimed that exports, during PTI’s government augmented while imports declined. He also said that current account and trade deficits have been reduced.
Relevant I: The minister said tax exemptions were introduced to attract new investment in Specialized Economic Zones (SEZs) under the China Pakistan Economic Corridor (CPEC) and other industrial units. In the Greenfield projects, exemptions were given in sales tax and customs duty for import of plants and machinery, he said and also announced relief in sales and income tax and customs duty on the manufacturing of equipment used for renewable energy, including solar panels and wind turbines, for the next five years. Umar said franchise-based sports would be encouraged with tax relief to promote healthy activities among the youth. He said from 1st July, a super tax of 4 percent on the non-banking companies would be abolished, corporate tax would continue to be reduced by one percent every year and to boost savings and re-investments, tax on savings and re-investments of companies would end from 1st July. The group formation of industries in the private sector would be encouraged with relief on taxes on dividend earnings, Asad added. He recalled that the downfall of stock exchange index had started in May 2017 and in seven months it had dropped from 53,000 to 38,000 points, while during the five months of Pakistan Tehreek-e-Insaf government, it had fallen by 5,000 points. During the last three weeks, the stock index again rose by 3,000 points, he added. The minister said withholding tax of 0.02 percent on stock shares was proposed to be abolished and the stock traders could carry forward the capital losses to offset their deficit. The only increase in tax rate, he said, would be on 1800 CC imported vehicles while three taxes on cheaper phones would be merged into one and there would be no reduction in tax on expensive phones. He said tax refunds of Rs 200 billion were not paid to the exporters by the previous regime, but now the incumbent government would issue promissory notes by mid-February so that businessmen could take credit from banks which would ensure liquidity for their businesses. Additional export facilitation measures and duty drawbacks would be informed the Adviser for Commerce, he said, adding administrative cost on palm oil would be ended to cut down prices. He said the government would introduce legislation to resolve court matters between itself and the business sector to facilitate industry while measures were introduced in the finance bill that would reduce the price of fertilizer by Rs 200 per bag. The productive index unit for farmers would be raised from 4000 to 6000 units and regulatory duty for diesel engines would be cut down from 17 percent to five percent while in line with the order of Supreme Court duties would be reduced to improve health facilities, the minister said. He said support from the International Monetary Institution (IMF) would be availed to save the people from the financial burden. The country’s economic future was bright as it was not in the hands of those who had bought properties in London, Switzerland, and Dubai, he added.The finance minister said the government was launching a scheme of Revolving Fund with seed money of Rs 5 billion under which loans would be provided for building small houses. He said keeping in view its commitment to facilitate ease of doing business, the government had proposed that businessmen would not be bound to submit their statements of withholding tax every month, but twice a year. The tax for those, who held marriage ceremonies in hotels or wedding halls of less than 500 square yards, was being reduced from Rs 20,000 to Rs 5,000, he added. Asad Umar said the government was also proposing to exempt import duty on the newsprint, which was aimed at economically strengthening the media industry. He said the so-called business-friendly PML-N regime had broken the back of exporters and industrialists, however, the current government was committed to taking practical steps to promote the sector. He said regulatory duty on import of hundreds of tariff lines was either being reduced or abolished. He said when the Pakistan Tehreek-e-Insaf government took over the charge, the economy was in the worst condition. The government, however, accepted the challenge of putting the economy on the right track. “We will lay the foundation of such economy that will help next governments to move forward and make the country prosperous.” He said if the current government would have to seek a bailout package from the International Monetary Fund (IMF), it would be the last one. The minister said the government was legally bound to help the poorest segments of society in becoming economically self-dependent. He said in the election year, the previous government tried to buy the votes by giving illogical incentives, which increased the budget deficit from 4.1 percent to over 6.6 percent. The last PML-N government, he said, also brought the power sector on the verge of destruction as its deficit reached Rs 450 billion while that of the gas sector to record Rs 150 billion. The minister said the current government had to take hard decisions due to the last rulers’ wrong policies. “The difficult decisions are now yielding positive results as the trade deficit is decreasing with exports showing growth and imports witnessing declining trend,” he added. He hoped that due to the prudent policies of PTI government, the Gross Domestic Product (GDP) growth in 2022-23 (last year of the current government) would be the highest and the budget deficit the lowest in 15 years. He said next week, the federal government would present a medium-term economic framework in which it would set its economic goals. The minister said the PML-N was defeated in the last general election as its last Punjab government had the budget deficit of Rs 40 billion to its credit. On the contrary, the last PTI government in Khyber Pakhtunkhwa fought the election with a surplus budget of Rs 35 billion, he added.
Meanwhile, businessmen and traders hailed the Finance Supplementary Budget 2019 and said that it would provide relief to the business community. President Federation of Pakistan Chamber of Commerce and Industry (FPCCI) Daru Khan Achakzai said it was the first step of Pakistan Tehreek-e-Insaf (PTI) government toward the stable economy. He termed the present government’s economic package a fruitful to provide relief to businessmen and traders. Former President FPCCI Zubair Tufail termed the supplementary budget as business friendly and said the package was need of the hour to provide relief to businessmen and traders. Former Vice President FPCCI Wasim Wahra said the small and medium industry would be promoted and unemployment would be reduced through the budget.
Relevant II: Special Assistant to the Prime Minister on Media Iftikhar Durrani today said that Finance bill would help to fulfill promise the of Pakistan Tehreek-e-Insaf (PTI) of providing a business-friendly environment to the business community. Talking to media outside the Parliament House, he said a comprehensive financial package was announced in Finance Bill for all sectors including industry, agriculture, low-income housing, and media. He said the country’s industry would prosper by this remedial measures besides creating more jobs. He said these measures would also bring economic stability to the country. The special assistant said the opposition had no concern for the poor people and they only were interested in their personal matters while the government wants to provide maximum relief to the poor.
Relevant III: The government has announced an incentive package to boost manufacturing and exports, encourage low-cost housing and facilitate agricultural financing to boost economic activities, besides promoting ease of doing business, simplifying procedures for setting up businesses, and cutting taxes and duties in diverse sectors. Introducing the Finance Supplementary (Second Amendment) Bill, 2019 here in National Assembly, Minister for Finance Asad Umar said it was not a new budget but was an economic reform package aimed at laying a strong foundation for the country’s economy. He said in order to promote local industry and boost exports, import duty on hundreds of raw items used for manufacturing were being reduced or exempted. He said it had also been proposed to reduce the tax rate on interest income on bank loans taken by Small and Medium Enterprises (SMEs) companies from existing 35 percent plus 4 percent super tax to net 20 percent. Similarly, he said, the government was committed to boosting agriculture and construction sectors, as, during the first six months of its tenure, the agriculture loans had increased by 22 percent. It had proposed to reduce the tax rate on the interest income on agriculture loans, he added. Likewise, the minister said, the tax rate on the interest income for loans for building small homes had been cut down to 20 percent from 39 percent. He said a ban on the purchase of small vehicles with engine capacity of up to 1300 CC for non-filers was also being withdrawn, however, the tax rate for non-filers on the purchase of the vehicles was being increased.
Relevant IV: The government here on Wednesday waived off the Withholding Tax on bank transactions for the filers, whereas it would remain intact for the non-filers. The announcement was made by the Finance Minister, Assad Umar while presenting the Economic Reforms Package in the National Assembly. In the existing mechanism, a person withdrawing more than Rs 50,000 is charged with Withholding Tax, which is 0.3 percent for filers and o.6 percent for non-filers. He said that this tax was a burden for those people who are regularly filing tax returns and following the tax laws of the country. In addition, he said that this tax had affected the transaction of money through banks, hence it has been decided that the Withholding Tax on filers will be withdrawn. He expressed the hope that this measure would encourage non-filers to come into the tax net. He said that the non-filers should also file returns to save the money, which they have to pay for being non-filers.
Relevant V: Government today lifted the ban on the purchase of vehicles for non-filers for locally manufactured cars up to 1300CC capacity. The announcement was made by the Finance Minister Asad Umer while presenting the Economic Reforms Package in the National Assembly here. He said that currently, the non-filers had no facility to purchase a car, adding that under the new reforms package, they would be allowed to purchase locally manufactured vehicles up to 1300CC. He said, in addition to facilitating the non-filers, this measure would also boost automobile production and promote businesses of all the sectors linked with the automobile industry. However, the minister announced that for promoting tax culture and encouraging non-filers to come into the tax net, the vehicle registration withholding tax would be enhanced by 50 percent. The minister said that the government was encouraging people to become tax filers and take advantage of various incentives available to tax filers.
Relevant VI: Federal Minister for Finance Asad Umer Wednesday announced a reduction of 75 percent in the taxes on weddings held in small marriage halls to facilitate the low and middle-income people of the country. Presenting the Economic Reforms Package in the National Assembly here, the minister said the government was determined to provide relief to the low and middle-income group of people and had introduced several measures in this regard. He said that currently tax of Rs 20,000 was being imposed on wedding functions held at wedding halls, marriage marquees, and commercial lawns. He said that under the new reforms package it has been suggested that tax on such function at a place under 500 square yard would be decreased to Rs 5000 only to lessen the burden on low-income people.
Relevant VII: Minister for Finance, Revenue and Economic Affairs Asad Umar Wednesday stood firm and kept his calm amid rumpus and hooting by the opposition while presenting the Finance Supplementary (Second Amendment) Bill, 2019 in the National Assembly. As the minister reached the podium to present the bill in the presence of Prime Minister Imran Khan, the opposition members stood up from their seats and started making noise. Some of them threw the copies of the bill in the air after tearing them into pieces. They refused to listen to the budgetary proposals being told by the minister and continued thumping desks and raising slogans. Despite all the distraction created by the opposition, the finance minister remained composed and interspersed his speech with remarks aimed at the conduct of opposition. It seemed that he was enjoying the whole situation. “The opposition members are wasting their time and will hurt their throats by chanting slogans against the Prime Minister. Prime Minister Imran Khan is not going anywhere,” he remarked. “They are thumping the desks because they cannot bear to see the revival of economy ruined by them during their tenures,” he said with a broad smile. The Prime Minister was also composed and relaxed amid all the sloganeering of the opposition. He seemed disinterested in the commotion being created by the opposition, remained focus on the speech and from time to time thumped the desk to express his appreciation for the finance minister. Some opposition members were seen encouraging their colleagues to raise the tempo of their protest. The finance minister ended his speech with the flourish while accusing the opposition of economic mismanagement during their years in government and buying properties abroad.
