September 14, 2018 (MLN): Relevant authorities, on Thursday, briefed the IMF team in Washington DC about the contents of the proposed mini-budget ahead of the IMF visit to Pakistan scheduled for the month end.
Briefings were made regarding slashing the federal Public Sector Development Programme (PSDP), revising current expenditures, imposition of additional customs duty along with increasing regulatory duty on import of luxury items and recommendations under consideration regarding new taxation measures having a net impact Rs 100 to Rs 125 billion through proposed changes in the Finance Act 2018 that are to be discussed in the coming week.
The Pakistani team led by Finance Minister Mr. Asad Umar, Minister for State for Revenues Hammad Azhar and others explained to the IMF team that the budget would be based on realistic assumptions and overall revenue collection targets and expenditures adjustments would be made to bring down the budget deficit at reasonable levels.
With respect to withdrawal of tax exemptions, no final decision has been made so far. The FBR’s tax collection target would also be revised downward from Rs 4435 billion to Rs 4,300 billion – 4,325 billion for the current fiscal year 2018-19 against the collection of Rs 3,842 billion during the last fiscal year 2017-18.
The tax authorities argued that without further taxation measures, the proposed target of Rs. 4435 billion cannot be achieved as it is based on the projection of last year’s collection of Rs. 3935 billion, whereas the actual collection stands at just Rs. 3842 billion. With no additional tax measures, only a maximum of Rs. 4200 billion could be achieved.
The proposal aims to withdraw partial tax incentives by increasing the taxable income ceiling from Rs. 0.4 million to Rs 1.2 million and reducing the maximum tax rate from 30 to 15 percent introduced by the former PML-N government, through amendments into Finance Act 2018 before the National Assembly to be held on coming Tuesday.
To reduce the budgetary deficit, the government has decided to table 200-300 unapproved schemes. This would cut the development expenditure to Rs. 600-650 billion in 2018-19, from the current allocation of Rs. 1030 billion.
The Planning Commission (PC) has presented three different scenarios by slashing down the development outlay to Rs800 billion, Rs700 billion or Rs 600 billion respectively on the basis of which the availability of resources was going to negatively impact the development projects.
It was also decided that all unapproved projects in the PSDP list would be abolished in totality and those projects could be abandoned where spending stood at less than 20 percent.
Although the IMF team will be visiting Islamabad on September 27 for a week to discuss Pakistan's balance of payments crisis, the Pakistani managers have briefed the IMF on the proposed budget in advance through a video conference on Thursday.
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