As per the analysis of some analysts at Arif Habib Limited, the government’s objectives for the budget for the year 2021 have been highlighted as the revival and stabilization of the economy after a huge fall of the economy due to COVID-19 pandemic. And the government may support the business community and masses by providing relief while maintaining the fiscal imbalances along with the fulfillment of IMF’s revenue collection target.
Budget 2020/2021 is scheduled to be presented on June 12, 2020, by the Government.
Some of the expectations regarding measures in the budget are as follows:
- Counter Coronavirus and ensure social security
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Allocation of PKR 1.0 trillion to fight the ongoing COVID-19 contagion that might be allocated as follows:
- Subsidized electricity for lifeline consumers
- Higher allocation for health and food supplies,
- Lowering down taxes on basic essential goods.
- Daily wagers cash allocation,
- Higher allocation to the Ehsaas program (for vulnerable families),
- Enhanced allocation to Utility Stores Corporation (USC),
- Lowering down taxes on basic essential goods.
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To help mitigate the effects of COVID-19 pandemic, State Bank of Pakistan has already introduced the following measures:
- announcement of a relief package for households, industries, and SMEs,
- Relaxation in credit requirement for exports and imports
- 525bps cut in interest rate,
- Refinancing scheme to support employment and avert layoffs,
- Facilitation of new investments via subsidized interest rates for BMR activities.
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social expenditure might be higher allocated under Federal PSDP.
Revive Economic growth, increase PSDP allocation along with incentives for industries.
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The government has set GDP target for FY21 at 2.3 percent (FY20 estimated at -0.38 percent primarily due to the coronavirus pandemic):
- Reduction of custom and excise duty by 3 percent on imports of machinery for agriculture and power sector,
- Allocation of PKR 630 billion under the Federal PSDP along with an additional PKR 200 billion under Public Private Partnership Authority (PPPA),
- Removal of import duty on plant and machinery. Cascading duty structure on import of raw materials, intermediate goods, and finished goods
- Removal of additional customs duty on different products to support local production and revive demand
- Mobilize revenue measures to achieve the additional collection target for next year.
The tall revenue target of the FBR at PKR 5.1 trillion with additional requirement amounting to Rs.575 billion (discussed ahead) could be generated by means of:
- Administrative and enforcement actions were undertaken by FBR.
- The imposition of import duty on 60 luxury imported items including cars, ceramics, and others,
- Amendment in the income tax treatment of bad debts, which could generate Rs.100 billion in revenue from the banking sector,
- The imposition of luxury tax on luxury houses, farmhouses, mansions, and bungalows,
- Higher petroleum development levy during FY21.
7. Certain expenditures (ex-social spending) to remain uncompromised.
The government has set an expenditure target for FY21 at Rs.10.4trn.
- Government is expected to allocate Rs.2.7 trillion for debt servicing in FY21,
- Defense expenditure likely to go up to Rs.1.4 trillion,
- Federal PSDP allocation will be targeted at Rs.630 billion.
8. Scope of documentation drive to be eased and relaxation expected to revive consumer spending:
- Reduction of 3 percent in further sales tax on supplies to undocumented individuals
- Withholding tax on remittances to be abolished,
- New sectors to be added to the tax net.
- Increase the limit of providing CNIC conditions from Rs 50,000 to Rs 100,000
Source:
https://pkrevenue.com/budget-2020-2021-to-focus-on-mitigating-covid-19-impact/