Preparations for Budget 2020-21 are in full swing, with Finance Advisor Dr. Hafeez Sheikh and Chairman FBR Noshin Amjad consulting with representatives of the business community on video conference with her team.
Recently, the Federation of Pakistan Chambers of Commerce, Pakistan Business Council, Aptma, Hosiery Manufacturers Association and other chambers and associations submitted budget proposals to the government.
The president of the federation has suggested to the FBR to give 6 months relief to the business community and suspend the notices issued to them for the time being. He also demanded a reduction in the sales tax rate in the current situation.
The federation recommended that the rental income be taxed at a uniform rate of 15 per cent, which would be the final tax payment. The IMF lowered its revenue target for this year from Rs 4,800 billion to Rs 3,900 billion in view of the adverse effects of the corona virus. And the revenue target for 2020-21 is Rs. 5100 billion which is about 30% higher than this year which is unrealistic and difficult to achieve in the current economic crisis.
In the month of April, the country’s exports fell by 54% while imports fell by 32%. In view of this, I have suggested to the government to immediately restore zero-rated sales tax system and SRO-1125 on all five export sectors including textiles in the budget to boost exports. Be done
It may be recalled that in the last budget, the government had abolished sales tax exemption on all five export sectors and imposed 17% sales tax on their exports, which can be claimed later. With the cancellation of export orders due to Corona virus, closure of factories, payment of wages to workers, it is not possible for small exporters to pay 17% sales tax upfront of their exports and wait for refund due to which their cash flow. Badly affected
On this occasion, I commend FBR Chairperson Noshin Amjad for introducing FASTER, an automated sales tax refund system, but due to some complications in the new refund system, exporters are still facing difficulties in getting outstanding sales tax refunds. Has mentioned them.
The UK’s leading Economist Intelligence Unit (EIU), which has been known around the world for its economic forecasting for 60 years, has said that the UK is facing such a severe economic crisis after 300 years. In his report, he reviewed the political and economic situation in Pakistan in the context of the corona virus.
According to the report, Pakistan’s GDP is expected to decline by 1.6 per cent due to economic losses, with negative GDP growth of 1.57 per cent this year and a record fiscal deficit of 9.6 per cent. Concessions in Pakistan’s debt repayment by the IMF, G-20 and other donor agencies will provide relief in Pakistan’s debt repayments in 2020 and in the next few years. According to the EIU report, under the SBP’s exchange mechanism, the value of the dollar is expected to be Rs 160 in 2020 and Rs 178 in 2024.
Unemployment due to record lows in the corona virus and oil prices is expected to significantly reduce remittances from Pakistanis abroad this year. The country’s unemployment rate is expected to reach 14.7 percent and inflation 7.4 percent this fiscal year. According to the EIU, Pakistan’s negative economic growth in 2019-20 could reach 2.9% in 2020-21 and 3.4% in 2021-22.
The report commended the reduction of SBP’s policy rate from 13.25 to 5.25 per cent in March this year to 8 per cent, which would save the government Rs 1,500 billion in annual interest payments. In 2020, exports fell by 10% while imports fell by 20%, mainly due to lower oil prices in the world market. The current account deficit is expected to increase to 1.6% of GDP in 2020 and 2.5% in 2024.
The construction package approved by the Prime Minister’s IMF is expected to accelerate new jobs and economic activity, but along with the supply of houses, the government will also have to increase their demand for which banks will be required to buy houses at the lowest interest rates. Debt will have to be provided or else the demand for new houses will be difficult in the current economic crisis and recession.
The Asian Development Bank (ADB) has highly appreciated the government’s assistance of Rs. 75 billion to the poorest people under the “Ehsas Program”. The government needs more financial resources to deal with the Corona virus crisis, while the shrinking economic activity and lockdown has reduced revenue collection by Rs 900 billion.
According to Federal Minister for Planning Asad Umar, 18 million people in Pakistan are unemployed and 2 to 70 million could fall below the poverty line and 1 million small enterprises could be shut down forever. Economic shutdown is more deadly than Corona. That is why Finance Advisor Dr. Abdul Hafeez Sheikh has termed the forthcoming budget as “Corona Budget” which will definitely be a big challenge for the government in the current situation.