: Finance Minister Ishaq Dar Unveils Budget for FY24 Amidst IMF Bailout Prospects
Introduction: Finance Minister Ishaq Dar recently presented the budget for the fiscal year 2023-2024, with a focus on economic growth and unlocking the International Monetary Fund (IMF) bailout funds. The budget, amounting to Rs14.46 trillion, avoids introducing new taxes while targeting a 3.5% GDP growth. The budget numbers have been shared with the IMF, and the finance minister believes they meet the program requirements.
Comparative Analysis: Minister Dar began his budget speech by highlighting the economic performance of the previous Nawaz Sharif-led government, contrasting it with what he termed the "incompetent" government of Pakistan Tehreek-e-Insaf (PTI) from 2018 to 2022. He emphasized the importance of budget deficits and criticized the PTI government for failing to implement tax reforms and increasing expenses, resulting in a significantly higher budget deficit compared to the previous government.
Key Takeaways from the Budget: The budget includes several notable measures and allocations, as outlined below:
- No increase in duties on essential items.
- Exemption of customs duties on raw materials for diapers and sanitary napkins.
- Reduction of customs duty from 10% to 5% on non-localized (CKD) heavy commercial vehicles (HCVs).
- 5% tax on payments made through credit/debit cards to restaurants and resorts.
- Elimination of the requirement to file sales tax returns for availing the concessional fixed tax rate of 0.25% for IT & ITeS exports.
- Five-year tax holiday for agro-based industries established as small and medium enterprises (SMEs) from July 1, 2023, to tax year 2028.
- Exemption of customs duties on specific papers and art cards used for printing the Holy Quran.
- Incentives for exporters of IT and IT-enabled services by allowing duty-free import of IT-related equipment.
- Removal of capping of fixed duties and taxes on the import of old and used vehicles of Asian Makes above 1,300cc.
- Exemption of sales tax on contraceptives and accessories.
- Proposal to withdraw the requirement of shop area for tier-1 retailers.
- Re-imposition of 0.6% advance adjustable withholding tax on cash withdrawal for non-Active Taxpayer List (ATL) persons.
- Increase in the monetary limit of foreign remittances from Rs5 million to $100,000.
- Waiver of 2% final withholding tax on the purchase of immovable property for non-resident individuals.
- Rationalization of Super Tax on income earners above Rs150 million with additional slabs and varying rates.
- Focus on completing 80% of partially completed projects in the Public Sector Development Program (PSDP).
- Allocation of 52% of PSDP funds for attracting foreign direct investment.
- Allocation of funds for balanced growth among cities and special attention to projects in Balochistan.
- Promoting remittances through formal channels, including the abolition of a final tax on property purchase and introduction of a "diamond card" for high-value remittances.
- Establishment of the Pakistan Endowment Fund for the financial aid of the education sector.
- Allocation of funds for the Prime Minister Laptop Scheme to distribute laptops to deserving students.
- Tax concessions and exemptions for the construction sector, including tax credits for self-construction and extension of REIT-related exemptions.
- Measures to meet energy needs, including incentivizing the use of local coal and exemption of duties on solar panel materials.
- Increase in minimum wage
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