TC May-Jun 2021 Issue

TRADE CHRONICLE
We begin with the name of Allah the Magnificient
Bird’s eye view on the Federal Budget 2021-22
The Finance Minister, Mr Shaukat Tarin, presented the third budget on behalf of
the government of Pakistan Tehreeke Insaf (PTI) or Pakistan Justice Movement
for Fiscal Year July 1, 2021, to June 30, 2022, amidst the usual uproar by the
opposition parties against budget speech at the Parliament in Islamabad on June
11. The total outlay is set at Pakistani Rupees 8.5 trillion and the growth target
at 4.8% of Gross Domestic Product (GDP). It may not be easy to encompass the
whole budget in a short note, nor we claim to be top economic experts, except
to write on some fundamental matters on the budget, which had already been
debated in media.
FROM THE
EDITOR’S
DESK
Also, renowned experts have challenged a high income envisaged in the budget
to be unrealistic and unachievable, with shortfalls expected in meeting the set
budgetary targets. They may result in a series of deficits in many fields, prompting
a series of undesirable amendments in the budget disagreed by the business
community in general.
For example, the budget shows ‘Tax Revenue (by Federal Bureau of Revenue or
FBR) of Pak Rs 5,829 billion’ whereas, until May 29, 2021, the FBR had collected
Rs 4,143 billion in 11 months. That means the FBR may end up collecting around
Rs4,500 billion this year. How can the FBR collect a wholesome 30 per cent more
next year? If the FBR collects 15 per cent more next year, it will come to Rs5,000
billion or so. That would leave a gap of Rs800 billion – a serious question raised
by economic experts. If the set target could not be achieved, it would either open
the door for levy of new taxes, cut in subsidies and lesser funds for development
projects and soft borrowing of huge loans from friendly countries, etc., we believe.
However, contrary to the above remarks, this budget’s concrete recommendations
this year 2021-22 align with next year’s growth projections. The government rolled
out necessary relief measures for several sectors, observed research houses in
their initial impressions and termed fiscal measures positive for the industries.
ABDUL RAB SIDDIQI
One eye-catching relief proposal in the Finance Bill 2021-22 was a series of
incentives for the auto industry - reducing FED and GST for locally assembled
ICE/regular cars (up to 850cc). Later, the finance minister announced that the
incentives would cover passenger cars up to 1,000cc engine displacement.
First, however, a robust mechanism is required to check and balance car prices
because manufacturers jack up prices in the disguise of dollar vs rupee parity.
On a negative note, some industries published appeals in the local media, pointing
to ignorance of some related budget recommendations they believed went
against their ambitions. The oil refineries, dairy sector, larger steel producers,
tea importers, cement manufacturers and a few more sectors, institutions and
industries were unhappy with the finance bill suggestions. Many demanded
removing anomalies and aggressive tax measures and withdrawal of incentives
given to remote areas. They also demanded the withdrawal of concessions for
setting up industry in Federally Administered Tribal Areas (FATA) and Provincially
Administered Tribal Areas (PATA).
Meanwhile, addressing a post-budget press conference, the Federation of
Pakistan Chambers of Commerce & Industry (FPCCI) and several other chambers
have vehemently rejected section 203A that authorizes a tax officer to arrest a
taxpayer. “This will increase harassment, bribery and blackmail,” the chambers,
constituting the organized economic lifeline of Pakistan, remarked. In addition,
TRADE CHRONICLE - May - Jun - 2021 - Page # 6