Finance Minister Miftah Ismail has said the government has decided to levy a super tax on the affluent class to reduce the budget deficit in order to end reliance on foreign assistance and take the country towards economic sovereignty.
Winding up discussion on the budget for the next fiscal year, he said individuals and companies earning Rs150 million will have to pay one per cent additional tax, two per cent additional tax on 200 million rupees income, three per cent on 250 million rupees income and four per cent additional tax on 300 million rupees income. He also added that this tax will be for a period of one year.
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The minister added that thirteen high-earning sectors including oil and gas, cigarettes, cement, and LNG terminals have also been identified for the imposition of a 10 per cent super tax on income of Rs300 million. He clarified that this will be a one-time tax.
Miftah said that there are nine million retail shops and the government has decided to bring 2.5 million of them in the tax net and a fixed tax will be imposed on them.
He further said that only 22 gold shops out of 30,000 are registered. A fixed tax will be levied on gold shops measuring up to three hundred square feet whilst sales tax on big jewellery shops has been reduced from 17 to three per cent.
The finance minister further said withholding tax on the sale of jewellery has been reduced to one per cent from the current four per cent. He said a fixed tax will also be imposed on car dealers, restaurants and those constructing houses. Miftah add that the tax has been imposed on income and not consumption and therefore, these measures will not cause inflation.
After incorporating various suggestions and measures, the tax revenue target has increased to Rs7,470 billion for the next fiscal year, said Miftah , adding that Rs4,373 billion will be distributed to provinces as their share.
A budget for the people
"The government has tried to reduce the burden on the weak segments of the society," he said while explaining that sugar, flour and ghee will be provided to the people at subsidized rates throughout the year at Utility Stores. He informed the House that one million people have so far registered to avail Sasta Petrol and Sasta Diesel scheme.
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The minister also announced incentives for different sectors. He said the condition of withholding tax and statements for IT companies with a revenue of less than Rs80 million will be exempted. He said a tax being charged from Oil Marketing Companies (OMCs) at the rate of 0.75 per cent has been brought back to 0.5 per cent. Overseas Pakistanis having NICOP cards will be included in the active taxpayers’ list as well. While income on the plots of the families of martyrs and war-injured has been exempted from tax. Relief has also been given to leather and surgical goods.
Terming the budget as "the most pro-farmer budget ever presented", Miftah expressed optimism that the budget will accrue long-term benefits for the country and help bolster agricultural products, besides achieving self-sufficiency in edible oil, and wheat and other crops.
'Government has saved the country'
The minister for finance also stated that "the government has saved the country from default and now it will head towards development". The minister maintained that the previous government took an unprecedented amount of loan in four years.
He questioned how a country can remain economically sovereign by taking massive loans.
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Reiterating the need for revival of the stalled International Monetary Fund (IMF) program, he said difficult decisions were taken in the national interest after consultations with all the allied parties. Noting the current account deficit which will remain at $17.50 billion, he added that the country had no choice but to give in to the IMF's recommendations.
Talking about recommendations made by the Senate, he said most of the suggestions of the Upper House have been incorporated while adding that the Senate’s recommendations on pharmaceutical goods will be entertained in the next budget.
PSX crashes over 'super tax'
The Pakistan Stock Exchange (PSX) on Friday nosedived almost 5% (over 2,000 points), in a duration of approximately 22 minutes, after Prime Minister Shehbaz Sharif announced a new 'super tax' to target large-scale industries.
The PSX plunged to a one-year low at the closure of the first of two sessions today at 40,664 points at noon. The second session started at 2:30 pm.
“The announcement of the imposition of 10% super tax across the corporate sector triggered panic sale,” Arif Habib Limited Head of Research Tahir Abbas said while talking to The Express Tribune.
"The tax would impact 10-12% net profit of each company,” he added. Abbas anticipated that the market may see a partial recovery in the second half today.