ISLAMABAD - The PTI government in its mini-budget presented on Tuesday slashed the development budget, enhanced taxes on luxury cars and mobiles, imposed taxes on imported commodities, targeted tax evaders and elite class and increased pensions by 10 percent.

Finance Minister Asad Umar presented the ‘Finance Supplementary (Amendment) Bill 2018’ being dubbed as mini-budget in the National Assembly after getting approval from the special cabinet meeting. He informed the lower house that the government aimed to generate revenues worth Rs183 billion through additional measures and to save Rs305 billion by reducing the Public Development Programme (PSDP) in remaining nine months (October to June) of the current fiscal year. The government, in the mini-budget, had made fiscal adjustment worth of 2.1 percent of the GDP to restrict the budget deficit, he said.

Umar said that the government was compelled to introduce amendments to Finance Bill otherwise Pakistan’s budget deficit would have swelled to Rs2.9 trillion (7.2 percent of the GDP) as against the budget estimates of Rs1.89 trillion in current fiscal year, a difference of Rs900 billion. He further said that there was Rs350 billion shortfalls expected in revenue collection and Rs250 billion was more projected in expenditures. Therefore, the government has amended the Finance Bill, he said.

In major revenue measure, he said, the government had proposed that Federal Board of Revenue (FBR) would take action against tax evaders with the help of technology and political support. The government has estimated to fetch Rs92 billion from tax evaders in remaining nine months of year 2018-19. Similarly, the government has recommended enhancing the rate of withholding tax on banking transactions for non-tax filers to 0.6 percent from existing 0.4 percent, he noted.

The PTI led coalition government has also suggested increasing taxes on cigarettes. “We have also decided to increase taxes on cigarettes. This is something that is close to my heart, as my own brother passed away a few months ago from lung cancer,” said the finance minister.

He added that the government had targeted elite class, as it had decided to double the Federal Excise Duty (FED) on cars of 1800cc engine capacity or more from 10 percent to 20 percent. Similarly, Umar said that government had also decided to increase the duty on several imported luxury products. The duty will be increased on expensive phones. The government has imposed 10 percent Regulatory Duty on imported mobile phones costing more than Rs15,000. Similarly, the government has imposed 10 percent RD on imported footwear, furniture, paper, fruits, vegetables, fish and its products and cosmetic products.

The finance minister informed the house that the government had maintained the exemption threshold at Rs1.2 million for the salaried class. There would be zero tax on annual income of Rs0.4 million. However, a nominal tax rate of Rs1,000 and Rs2,000 had been imposed upon taxable income(s) ranging from Rs0.4 million to Rs0.8 million and Rs0.8 million to Rs.1.2 million respectively. Meanwhile, there would be 5 percent tax on annual income ranging from Rs1.2 million to Rs2.5 million. Meanwhile, for those earning from Rs2.5 million to Rs4million, tax will be Rs65,000 plus 15 percent of the amount exceeding Rs2.5 million.

Similarly, for those earning more than Rs4 million to Rs8 million yearly, a fixed tax of Rs290,000 is payable in addition to 20 percent of the salary amount above this limit. For the income exceeding Rs8 million, there will be a fixed tax of Rs1,090,000 plus 25 percent of the salary amount Rs8 million.

As in the case of salaried individuals, a nominal tax rate of Rs1,000 and Rs2,000 has been imposed upon taxable income(s) ranging from Rs.400,001 to Rs.800,000 and Rs800,001 to Rs1,200,000 respectively. In addition, five tax slabs ranging from 5% to a maximum of 29% have been introduced for non-salaried individuals.

He said that government has decided to withdraw tax exemption for prime minister, ministers and governors in respect of accommodation, conveyance and sumptuary allowance. He further announced that non-filers would be able to purchase property and vehicles. The previous government had approved that non-filers would not be able to purchase property and vehicle.

On expenditure side, the government has reduced the volume of PSDP for remaining nine months of the current fiscal year. The government has cut the PSDP to Rs725 billion from Rs1,030 billion set in the budget 2018-19. However, the development budget would be 10 percent higher than the previous year. “Out of this, we will be spending Rs50 billion on development work in Karachi. This is a joint venture between the federal and Sindh governments,” he said.

He clarified that development budget for China Pakistan Economic Corridor (CPEC) projects and dams would not be reduced and instead, additional resources would be mobilised for the construction of water reservoirs.

The finance minister informed the National Assembly that the government had decided to launch ‘Insaf Health Card scheme’ in the Federal Territory and formerly FATA on the pattern of KPK. This scheme would cover the medical expenditures of Rs540,000. He said that Prime Minister Imran Khan had also directed the government of Punjab to launch the same scheme in the province.

He said that the prime minister had directed the Ministry of Finance to release Rs4.5 billion immediately for restarting the construction of 8,276 houses for workers. The government has also given approval to contract additional 10,000 houses for workers in the second phase.

Similarly, he announced to increase the pensions of EOBI pensioners by 10 percent. Umar vowed to further increase the pensions of EOBI pensioners in the upcoming budget. Meanwhile, the PTI-led government has withdrawn the decision taken by previous government to increase the petroleum levy from Rs189 billion to Rs300 billion.

The finance minister said that the government had also decided to withdraw regulatory duty imposed by the previous government in the budget on 82 tariff lines on raw material meant for export related industries. This would involve relief of five billion rupee for the industry. Umar said that the government had given relief worth Rs44 billion to exports oriented sectors by not increasing the gas prices other day.

Earlier, he gave overview of the current economic situation of the country. He said that the country was engulfed in a severe economic crisis, as budget and current account deficits are widening, foreign exchange reserves are depleting and country’s debt is rapidly increasing. The rupee has depreciated by 20 percent due to depleting foreign exchange reserves, he said and added that rupee depreciation had hit the common man the most. Pakistan’s foreign debt had surged to $95 billion in 2018 as against $61 billion in 2013, he added.

“Improvement will not come from merely going to the IMF but it will come when there is employment, improvement in the agriculture sector and increase in exports,” he said. He further said the government had to take a lot of measures to improve governance, electricity and gas issues.

Later, talking to the media, he said that the government had not proposed to impose any extra burden on the middle and lower segments of the society rather all the extra taxes were being levied on the upper class in the supplementary budget.