NA passes budget as economy on life support

Unleashing a tsunami of taxes, the Finance Bill 2024 cruised through the National Assembly on Thursday ahead of talks with the International Monetary Fund (IMF) for a fresh, longer, and larger bailout to save the economy-which is growing at the slowest pace in South Asia-from a sure debt default. The federal government presented the tax-loaded Rs18.877 trillion budget for the fiscal year 2024-25 (FY25) two weeks ago, drawing sharp criticism from opposition parties, which termed it “economic terrorism” against the people. Finance Minister Muhammad Aurangzeb moved the finance bill to the lower house of the parliament, which was endorsed by the ruling alliance, including the Pakistan Peoples Party (PPP). The motion was passed with majority vote which led to the passage of Finance Bill-2024 after clause-by-clause reading and adopting amendments after due process of voting. All the amendments, presented by the opposition members, were rejected. NA Speaker Sardar Ayaz Sadiq announced the passage of the bill in a live TV telecast. Tough revenue target Policymakers have set a challenging tax revenue target of Rs13 trillion rupees for the year starting July 1, up about 40% from the current year, in the national budget presented on July 12 that looked to strengthen the case for a new rescue deal with the IMF. Pakistan is in talks with the IMF for a loan of $6 billion to $8 billion. The rise in the tax target is made up of a 48% increase in direct taxes and a 35% hike in indirect taxes over revised estimates of the current year. Non-tax revenue, including petroleum levies, is seen increasing by a whopping 64%. The tax would increase to 18% on textile and leather products as well as mobile phones besides a hike in the tax on capital gains from real estate. Workers will also get hit with more direct tax on income. Twin deficits Pakistan has projected a sharp drop in its fiscal deficit for the new financial year to 5.9% of gross domestic product (GDP), from an upwardly revised estimate of 7.4% for the current year. The upcoming year’s growth target has been set at 3.6% with inflation projected at 12%. The government has decided to increase the levy on petrol and diesel from Rs60 per litre to Rs70 per litre, which the finance minister maintains would be increased gradually. Rs50 per litre levy would also be imposed on light diesel oil and kerosene oil, while Rs70 per litre levy would be applicable on high-octane. ‘Economy has achieved stability’ Responding to the points of the opposition on the Finance Bill, 2024, Aurangzeb said “the economy has achieved stability”. He expressed the government’s determination to further enhance the stabilisation process to steer the economy towards growth. Sharing the economic indicators, the finance minister pointed out that there was a reduction in the current account deficit and the fiscal deficit was also under control. The minister said the currency had been stable over the last six to seven months, expressing the confidence that this stability would remain in the time ahead. He said the foreign exchange reserves had reached $9 billion and that the inflation was down at 11% from 38%. Aurangzeb said enhancing the tax-to-GDP ratio and reforms in State Owned Enterprises and the energy sector were part of the budget. The finance czar said the tax-to-GDP ratio would be increased to 13% in the next three years. He said the government’s privatisation plan consists of two to three years and it will be executed. Additional taxes on travel Moreover, during the session, it was also announced that starting July 1, an additiona tax of Rs100,000 will be imposed on business class and club class tickets to the United States and Canada. For Europe, an extra tax of Rs60,000 will be levied on business class and club class tickets from the same date. Similarly, an additional tax of Rs60,000 will be applied to business and club class tickets to New Zealand and Australia. Tickets to Dubai, Saudi Arabia, and other Middle Eastern and African countries will see an increase of Rs30,000 for business and club class travel.