Finance Minister Miftah Ismail presented an austerity-driven budget that will cause pain to a large number of people as they pay their gas, electricity and petrol bills. Also when inflation further reduces purchasing power, The budget however also provides a little help to economically vulnerable sections of population that include the bracket with less than Rs 40,000 per month income, government employees and pensioners.
Fat cats will pay more. Super tax will be enhanced on the banking sector, which earned windfall gains due to higher interest rates and risk-free investment in government securities. The tax rate will be increased on banking companies to 45% from the current 39% There will be a two percent tax on earners of above Rs300 million per annum. Taxes on cars over 1,600cc will be increased.
For the secretive and so far defiant small retailers, the budget provides a fixed income and sales tax regime that ranges from Rs3000 to Rs10,000 as per final settlement. This gives one hope that the class comprising tens of thousands of small traders would be tamed in coming days to pay full dues.
Taxing the real estate sector is definitely a positive measure despite the low rate of taxation. The sector comprises a rent-seeking elite that prefers to either stash its wealth in unproductive plots or siphon it offshore. The budget document proposes five percent tax on income on non-productive and unutilized plots and farm houses, 15 percent capital gains tax from four to six years on immovable property as well as advance tax on purchase of immovable property.
The budget spells out important measures to fulfil the IMF’s demands. Having removed the major chunk of the PTI’s fuel subsidy over two instalments ahead of the budget, the government has also re-imposed sales tax and petroleum levy. After bending over backwards the government is confident that it will soon have an agreement with the IMF. A question is being asked however whether there will be a mini-budget soon, in case the Ukraine war lingers on and wheat and petrol prices continue to rise.
