Uproar erupted in Islamabad after Pakistan’s parliament passed a controversial budget for the coming year with few amendments, which many say has been problematic from the start, with too many taxes and a total lack of coherent reforms.
This year’s budget is significant not only because it is the first budget presented by the new government, but also because it comes after the country is facing its biggest economic crisis since the government came to power. The motion was tabled by Finance Minister Muhammad Aurangzeb on Friday, but was preceded by fiery speeches from the Opposition. dawn report.
Opposition lawmakers, especially those from the Pakistan Tehreek-e-Insaaf (PTI), termed the budget “unrealistic, anti-people, anti-industry and anti-farmers” and said it was common knowledge that the budget was decided on the basis of demands made by the IMF before the bailout package was agreed upon.
Opposition leader Omar Ayub Khan denounced the budget as “economic terrorism against the people.”
“Economic hitmen have prepared a budget and their target is the Pakistani people,” he said. “This budget will increase inflation. There will be no economic growth in this budget,” he explained, adding that electricity tariffs will go up to 100 Pakistani rupees per unit.
according to dawnThe National Assembly, in its session on Friday, approved 53 requests for additional grants pertaining to ministries and departments for fiscal year 2022-23 and 25 requests for additional grants for fiscal year 2023-24.
Pakistan’s finance minister, while defending the budget, stressed that the country has achieved macroeconomic stability. “With continued stability, we will steer the country towards sustainable economic growth,” he said.
Let’s take a look at why Pakistan’s 2024-2025 budget is so problematic.
What does that entail?
Parliament passed a federal budget totaling PKR 18.9 trillion. Shehbaz Sharif’s government claims to be aiming for 3.6% GDP growth and has set an ambitious target of raising PKR 13 trillion from tax revenues.
Aurangzeb’s budget not only increases taxes for salaried workers but also removes tax exemptions for all income groups. Pakistan has set a non-tax revenue target of 3.5 trillion PKR for this year’s budget and aims to raise 30 billion PKR through privatization.
The situation has become more complicated for the middle class as petroleum taxes have been increased by PKR 20 on petrol and diesel, and PKR 25 on premium kerosene, light diesel and high-octane e-10 petrol. Shehbaz Sharif’s government has also said it will push for digitalisation to ensure thorough recording of the economy.
Aurangazeb said some of the measures may be difficult to accept but they are important to get the country out of the IMF shackles and become self-reliant quickly.
What’s changing?
Before the budget was passed on Friday, the National Assembly tabled several amendments. The following table shows how the passed budget differs from the proposed budget.
| Product/sector | What was proposed | Final correction |
|---|---|---|
| Books and Stationery | Consumption tax is a flat 10% | Tax exemption for books |
| Builders and Developers | No new taxes | 10-20% increase in taxable income |
| Taxes on diesel and petrol | 60 Pakistani rupees per litre | 70 Pakistani rupees per litre |
| Dairy and Produce | Exemption from additional tax | Withdrawal of exemption |
Budget for difficult living and expensive removal
What makes Pakistan’s budget so controversial is the fact that, without providing any relief to the middle class, parliament has increased the effective income tax rate for salaried individuals to 39 percent from last year, the corporate income tax rate to 44 percent, and for non-salaried individuals to 50 percent.
Interestingly, the Shehbaz Sharif government has exempted income tax on the sale of immovable property by serving or retired bureaucrats and serving or retired military personnel.
Taxes are rising on already stressed wage earners at a time when certain segments of society have lost almost half their purchasing power over the past five years.
Many critics consider the budget inflationary in nature. PTI’s Omar Ayub said the budget would lead to a sharp rise in electricity prices, while many pointed to the imposition of sales tax on infant formula and packaged milk.
It is noteworthy that these products are being subject to what the opposition calls “excessive taxation” at a time when 40 percent of the country’s children under the age of five are stunted, and malnutrition is widespread.
- Even leaving the country is difficult
Shehbaz Sharif’s government had already made it difficult to live in Pakistan through tough tax reforms, but it has also made it even more expensive to leave the country.
This is reflected in the fact that the government has significantly increased FED rates on international travel air tickets to generate additional revenue of PKR 55 billion in the next fiscal year.
For economy class, the tax rate has increased by 150 percent to PKR 12,500. For business class, the tax rate has increased by 40 percent, with the new tax amounting to PKR 350,000 per ticket in the Americas, PKR 105,000 in the Middle East and Europe, and PKR 210,000 in Australia, New Zealand and the Pacific.
The government also levies a federal tax of 3 percent on the allocation or transfer of property by tax filers and 5 percent on the allocation or transfer of property by non-tax filers.The situation has become even tougher since the government expanded the scope of the tax law to include non-resident Pakistani nationals who have a “significant economic presence in Pakistan.”
But the lawmakers gave themselves a raise.
Meanwhile, Pakistan’s National Assembly has approved an amendment to the Finance Bill, 2024 regarding an increase in perks and privileges for lawmakers. But what makes this issue outrageous is the fact that this increase will only be applicable to those lawmakers who have a majority of votes in the parliament.
according to dawnThe controversial amendment was brought by Pakistan Peoples Party’s Abdul Qadir Patel and was strongly opposed by the PTI.
This amendment transferred the power of the Federal Government to determine the salaries, perks and privileges of Members of Parliament to the respective Finance Committees of the House of Representatives.
Pakistan’s 2024-2025 budget thus indicates that salaried workers will continue to bear the tax burden while the privileged classes are likely to enjoy all the perks an already crippled economy has to offer.
