Amid Opposition Protest, Govt Presents Rs18.8Tr 'IMF' Budget For FY2024-25

The budget proposes massive raise for government officers; direct and indirect taxes are being hiked to increase revenue

Amid Opposition Protest, Govt Presents Rs18.8Tr 'IMF' Budget For FY2024-25

The federal government is unveiling a Rs18 trillion fiscal budget for the fiscal year 2024-25.

Federal Finance Minister Senator Muhammad Aurangzeb is presenting the federal budget during the budget session.

Earlier, the government had a heart-in-mouth moment after its key ally, the Pakistan Peoples Party (PPP), decided to boycott the budget session after it claimed it was not consulted on distributing development projects in Balochistan and Sindh under the Public Sector Development Programme (PSDP). But the government later managed to convince parliamentarians from the PPP to join the budget session.

Meanwhile, as the session began, around two hours later than the slated time of 4 p.m., the opposition parties, key among them the Sunni Ittehad Council (including independents of the Pakistan Tehreek-e-Insaf), vociferously protested.

Watch the budget speech

Federal cabinet okays hike in salaries of govt employees

Before presenting the federal budget, the federal government approved a hike in the salaries of government employees of up to 25% for the next fiscal year.

The government said that those working in basic pay scale (BPS) grades 1-16 will see their salaries increased by 25%.

The salaries of government employees working in BPS 16-20 will see a 20% increase in their salaries. 

The decision has been taken in view of the rising cost of living and inflation.

Pensions have also been increased by up to 25%.

Debt retirement budget

The federal government presented a budget of Rs18.877 trillion. However, around 50% of the outlay, around Rs9.7 trillion  would be spent on paying interest and retiring debt. 

The government also aims to collect around 38% more revenue, keeping its collection target at Rs12 trillion.

PIA and airport privatisation

As part of the measures to reduce the liabilities on the government and to raise revenues, the government has decided to privatise the national flag carrier, the Pakistan International Airlines apart from outsourcing operations of major airports.

PIA, the finance minister said during his budget speech, is already undergoing a privatisation process which was started during the tenure of the caretaker setup last year. The process, Aurangzaib said, had been accelerated after the new government took over after the February 2024 general elections. 

A holding company was formed in April 2024 which offset around Rs622 billion in liabilities and then bids were invited. The minister said the government received bids from 12 parties to buy PIA of which the government prequalified six parties. The privatisation process, he explained, is hoped to be completed by August.

Moreover, from July 2024, he said that the government will start the process to outsource the Islamabad International Airport. The process to outsource the airports of Karachi and Lahore after that.

Taxation galore

The government, which has raised minimum wage to Rs37,000, has stated that it will keep last year's income exemption threshold at Rs600,000 per annum.

However, Aurangzeb said that they will widen the tax base in line with global standards and the tax ceiling on income will be 45%. However, he said that there will be some changes in the tax slabs.

Aurangzeb said that the government will be working to bring people into the documented economy, hence incentive for tax filers will be increased and penalty on non-filers will be greatly increased. 

In this regard, the capital gains tax (CGT) on real estate/immoveable property transactions for filers will be 15%. However, for non-filers this will go up in various slabs up to 45%. Moreover, federal excise duty (FED) will be imposed on plots. Separate rates of withholding income tax on transfer of properties will be applicable for timely tax return filers, delayed filers and non-filers.

Aurangzeb hoped this measure would help bring to an end speculation in the property market.

A similar CGT regime will be applicable on securities in capital markets.

On automobiles, Aurangzeb said that the government is reforming how it calculates tax on cars and that it will move from a regime of calculating tax based on engine size and capacity to valuation of the vehicle. 

In this regard, the government said it is withdrawing exemptions provided to hybrid and electric vehicles. 

In sales tax, he said that the government will review and amend the exemption and reduced taxation regime. He said that the exemptions will be removed and some will be moved to a reduced taxation regime while others will be kept at normal rates.

The petroleum development levy on petrol and high speed diesel will be increased from Rs60 to Rs80. The levy on other petroleum products such as Light Diesel Oil has also been increased from Rs50 to Rs75. The PDL on Kerosene will be kept unchanged.

The government has also decided to increase taxes on sale proceeds of exporters from one percent to a normal tax regime of 29%.

The government has also decided to raise sales tax on on tier-1 retailers of cotton and leather from the reduced rate of 15% to 18%. 

Advance income tax will be collected from non-filer distributors, wholesalers, dealers and retailers. The rate of this tax has been increased from one percent previously to 2.25%.

The varying taxation regime on mobile phones has been removed and now mobile phones will be taxed at flat rate of 18%. The government hoped it would provide a level playing field to all players in the mobile phone industry.

To counter the sale of fake cigarettes, which has continued despite the government's efforts to implement a track-and-trace system. Hence, to counter that, the government said they will crackdown on all those retailers who sell cigarettes without tax stamps or are involved in selling fake and illicit cigarettes.

The government, however, has decided to retain exemptions and existing taxation levels for imported solar panels components exemptions will discounts will be offered to those importing machinery to build components or solar systems and batteries locally in addition to machinery and other input for fish farming.

The government has also decided to withdraw exemption from taxes from areas of the erstwhile federally administered tribal areas (FATA) and provincially administered tribal areas (PATA) in Khyber Pakhtunkhwa.

Curiously, the government has decided to extend sales tax exemption to the iron and steel scrap sector even as it pushed ahead with a sales tax withholding regime for bronze, coal, and plastic scrap.

The government has also decided to change the way it charges default surcharge, doing away with the flat rate of 12% to KIBOR+3%.