Today, Friday 1st June 2012, the Pakistan federal cabinet approved a proposed budget with an outlay of rupees 3.2 -3.5 trillion for the upcoming fiscal year 2012-13, reports DawnNews (A renowned Pakistani news agency). Thursday, May 31st, the finance minister had launched a survey that indicated the government failed to reach her target Gross Domestic Product (GDP) of 4.2% growth after achieving only 3.7%.
Aside from the size, the approval also means that the proposals from various quarters of the population will be met as expected. There are issues to do with taxation and tax incentives as well as government salaries. The finance minister Dr Hafeez Shaikh will definitely be looking to lay them down in detail, in the next year’s government plans, when he delivers the budget in front of cabinet today.
The government will make various key budgetary allocations that will spearhead the next fiscal year development plans. With a projected GDP of Rs 23.7 trillion, the government is expected to allocate Rs825 billion to development, Rs350 billion, set for the federal government while the remainder goes to the provincial government.
The income tax bracket is set to be raised upwards with those earning not more than Rs 4,00,000 approximately $4,293 per year enjoying the exemption benefits. This suggests that the bar goes up by Rs 50,000 from the previous limit.
The introduction of tax payer owner cards, which is set to bring various benefits to the holders, is seen as one major factor why the government is so confident in excluding more people from the tax bracket. Tax evaders will be more motivated to pay their dues hence covering up for the exempted class.
Other tax related expectations include:
- Presumptive tax to be eliminated over the next three years
- 5% tax on imports to be reduced to 3%
- 1% tax on imports to be halved
- The amount subject to withholding tax on withdrawals from banks to be doubled to Rs 50,000
- All sales will be subject to a uniform 16% rate, the rest is history.
- Maximum customs duty to be 30%
Civil servants will be surely expecting something from their employer now that the approval has been granted. The proposed increase in pensions and salaries is one major reason, every one of them will be watching as the minister reads the budget in front of the cabinet. The increment rates will range from 15% to 30% with a 5-point differential sequence throughout. The current proposal also includes a request of 50 to 100 percent increment in house and medical allowance.