Highlights of Pakistan Budget 2010-2011

SALIENT FEATURES

Total outlay of the national budget for new fiscal year 2010-11, presented at the 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:

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·        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 fiscal year.

·        Net revenue receipts for 2010-11 have been estimated at Rs 1377 billion indicating an increase of 1.9 percent over the budget estimates for current 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 budget estimates 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 an increase of 70.2 per cent.

·        The external receipts in 2010-11 are estimated at Rs 387 billion. This shows 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 development expenditure at Rs 787 billion.  Current expenditure shows decline of less than one per cent over the revised estimates of 2009-10, while development expenditure will increase by 25.3 per cent in 2010-11 over the revised estimates of 2009-10.

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

·        The expenditure on General Public Services (inclusive of debt servicing transfer 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 of Rs 124 billion has been allocated. The PSDP shows an increase of 30 per cent over 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 Earthquake Reconstruction 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 billion has been allocated in PSDP-2010-11 for various ongoing and new schemes. Out of total PSDP, the federal share is Rs. 280 billion, provincial share Rs.373 billion where as Rs.10 billion would be spent for Reconstruction and Rehabilitation of Earthquake-hit areas.

Following are the main allocations:

— 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 and Technological 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 Information Technology 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 and Special Education Division.

— Rs.65.8 million for Labour and Manpower Division.  — Rs.82.3 million for Local government and Rural 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 and Kashmir (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 Programme-II

TAX MEASURES

Following are the highlights of tax measures announced by the government in the National Budget for the financial year 2010-11. ·        Existing system of General Sales Tax would be reformed to eliminate multiple tax rates and replace it with a single lower rate of 15%. ·        The reformed GST will not apply on health, education and food items consumed by the poor. The GST will not apply to turnover less than Rs. 7.5 million per year whereas the current threshold is Rs 5 million per year and would  be automated thus reducing possibilities of corruption and refund delay.

·        It will broaden the tax base instead of burdening the existing tax payer.

·        The proposed GST reform is expected to be in place by October 1, 2010 in consultation with all the provinces and other stakeholders.

·        As an interim measure the GST rates are proposed to be raised by 1 percentage point. Once the reform GST is in place the proposed single lower rate of 15 % will become effective.

·        Current 1% Special Excise Duty levied on most items of imports and local manufacture has been abolished.

·        Federal Excise Duty incidence on all categories of cigarettes has been enhanced and levy FED at Rs. 1 per filter rod of cigarettes has been proposed.

·        The rate of FED on natural gas has been increased to Rs. 10 per MMBTU, while intensive appliances, levy of FED @ 10% ad valorem on air conditioners and deep freezers is proposed.

·        On income tax side, exemption limit for the salaried taxpayers has been enhanced from Rs. 200,000 to Rs.300,000, benefitting approximately 430,000 taxpayers.

·        Exemption limit for non-salary income is also proposed to be raised  from  Rs. 100,000  to  Rs. 300,000  per year benefitting approximately 350,000 taxpayers.

·        Rate of income tax collected along with monthly electricity bill from industrial and commercial consumers is proposed to be reduced from 10% to 5%. This will provide a relief of Rs.4.5 billion to the 66,000 taxpayers

·        Under the Prime Minister’s Fiscal Relief Package to Khyber Pakhtunkhwa, Federally Adminstered Tribal Areas (FATA) & Provincially Adminstered Tribal Areas (PATA) additional tax relief of about Rs.2 Billion have been provided to benefit 300,000 taxpayers of the province.

·        Instead of monthly withholding tax statements, now only quarterly withholding statement will be required to be e-filed.

·        Taxation on interest free / concessionary interest loans provided by an employer is proposed to be waived.

·        Rate of final withholding tax on non-specified payments to nonresidents is to be reduced from 30% to 20%.

·        Tax free payments to non-residents on profits on debt will be allowed 10% tax credit for balancing, modernization and replacement to all companies.

·        A 5% tax credit is proposed to be allowed to a company in the tax year of its enlistment.

·        10% withholding tax has been announced as final charge on profit on debt (in debt instruments) and also for the investment in government securities (treasury bills and PIBs) to allow hassle free compliance by non-residents.

·        It has been proposed that income tax be raised for the Association of Persons (AOPs) at a flat rate of 25% against the existing progressive rate averaging up to 20%.

·        Tax on short-term Capital Gains on stocks/shares will be charged at 10% where shares are held for a period less than six months and at 7.5% where they are held for more than six months and less than 12 months. However, stocks held for over one year will not be subject to CGT.

·        The withholding tax rate payable by commercial importers is proposed to be increased from 4% to 5%.

·        A withholding tax on banking transactions including withdrawal through demand draft, pay order, RTCs, CDRs etc. will be charged at 0.3% where such transaction exceeds Rs.25000 in a day.

·        Turnover tax on loss making companies and AOPs is proposed to be increased from 0.5% to 1%.

·        Withholding tax on domestic air travel is proposed to be charged at 5% on gross value of the ticket.

SALERIES INCREASE

An unprecedented increase of 50 per cent in salaries of government employees and 15 to 20 per cent raise in pension is the hallmark  of the Federal Budget 2010-11. The budget also envisaged some new tax exemptions on food items besides providing relief in health and education sectors. The budget, presented in the National Assembly by Federal Finance Minister Dr. Abdul Hafeez Shaikh had a total outlay of Rs 3.259 trillion—a jump of 10.7 per cent over the last fiscal year. It offered scores of incentives to the working class at a time when the world was constantly in the grip of a sweeping recession.

A sizeable 50 per cent adhoc increase in salaries and 15 to 20 per cent raise in pension of government employees were among a host of people-friendly features of the third budget in row prepared by the PPP-led coalition government.

The budget envisaged employment opportunities for the youth and income-generating measures for laborers, workers and poor segments of the society.

Senator Hafeez Sheikh, who was inducted into the Federal Cabinet just hours before tabling the budget in the lower house of the Parliament, said the total budget deficit of an estimated Rs.  685 billion would be met through internal and external resources.

The total size of the deficit is 4% of the GDP, the Minister said, adding that Rs. 1033 billion would be transferred by the federation to provinces under the recently-adopted National Finance Commission (NFC) award.

In the current year, the provinces had been given an amount of Rs. 655 billion under the same head, Hafeez Sheikh said, adding that according to the 7^th NFC Award, the provinces would be paid their due share on quarterly basis, which would be released by the Federal Government automatically as per schedule.

“No big wig will have to visit finance department for the release of provincial share as now it will be released automatically,” he said.

He said the present government, in its efforts to revive the economy, has to strictly follow the policy of belt-tightening in its expenditures.

Now, he added, the current expenditures of the government had been frozen, with the exception of salaries, to the level of outgoing financial year as a major austerity step.

The Minister said that the recommendations formulated by the Pay and Pension Commission would be implemented during the next three years.APP