GLOBAL RESEARCH INSIGHT FOR DEVELOPMENT (GRID

)

POLICY BRIEF 101 JUNE, 2011

SALIENT FEATURES OF THE BUDGET 2011-12

Total size of budget is Rs 2,767 billion

Reducing federal excise duty & eliminating special excise duty

Budget 14.2% higher as compared to previous year

Withdrawal of exemption of sales tax on defense stores

Total resource availability at Rs. 2.463 trillion

Increase in duty slabs on Cigarettes.

Current expenditure is Rs. 2315 billion

Rationalizing zero-rating regime

Current expenditure share 83.7%

Increase in the income tax limit from Rs 300000 to Rs 350000

General Public Services Rs. 1660 billion

Exemption on 15 out of 40 items from federal excise duty

Total tax collection is Rs1.952 trillion

Decrease in tax on cash withdrawals from 0.3% to 0.2%

The fiscal deficit target at 4% of the GDP

Waiving of zero-rated regime for five top export sectors

Decrease in subsidies to Rs166.5 billion

Amount of Rs495 billion for defense

Provincial share is Rs. 1203 billion

Amount of Rs295 billion for Security expenditure

Capital receipts (net) is Rs. 396 billion

Increase in Salaries by 15% and pension 20-25%

External receipts is Rs. 414 billion

Education to getRs39513 million& health Rs2.646 billion

Size of PSDP is Rs. 730 billion

Rs1, 034 billion for retiring foreign loans & interest payments

Provinces share in PSDP is Rs. 430 billion

Reduction in the rate of Sales Tax from 17% to 16%

Reduction of duty to 5% on pharmaceutical raw materials

Abolishing GST on sugar and imposition of 8% excise duty

Total Public debt to be Rs10, 020 billion

POSITION OF RECEIPTS AND EXPENDITURE Receipts Total Resources Tax Revenue Non-Tax Revenue Gross Revenue Less Provincial Share Net Revenue Net Capital receipts External receipts Surplus for Pay & Pension Bank Borrowing 2767 2074 658 2732 1203 1529 396 414 125 304 Development Expenditure Development Expenditure 16% Expenditure Other Development 22% loan and grants to Provinces 12% Federal PSDP 66% Current Expenditure 84% Running of Civil Government 9% Provision 1% Current Expenditure Subsidies 7% Interest Payments 34% Grants and transfers 13% Defence 21% Repayment of foreign loans 11% Pension 4% .

IMPLICATIONS GOVERNMENT Increasing resource mobilization BUSINESS COMMUNITY Private credit for investment POVERTY Increase of salaries and pensions Boosting economic activity Bank transaction tax decreased No additional tax on education. food & health 392 regulatory duties to be abolished Incentives for equity based projects Increasing tax limit from Rs300.000 Special excise duties to be abolished Increase in capital market growth Decrease in sales tax to help end consumers Additional Rs182 billion via unannounced RGST Increase in Production Exemptions on several items to ease inflation Withdrawal of sales tax exemption on items Removal of duplicity in tax Lower deficit target to decrease expenditure Decrease in tax on raw materials Increased PSDP to boost economic activity Taxing new sectors and items for increasing tax/GDP ratio .000 to Rs350.

(Senior Vice President KCCI. He said the government has presented a speculation based budget. Head of Revenue Advisory Council (RAC)) The relaxation in tax limit from Rs 300.SCCI) . which would not create positive impact on the masses. (President Khalid Mehmood. (Chairman Association of Builders and Developers of Pakistan.000 to 350.BUDGET REACTION FROM STAKEHOLDERS Government has not favored construction sector in the budget to escalate the pace of economic activities. Sukkur Chamber of Commerce and Industry.POST.Babar Chugtai) It is a good effort made to bring 2.3 million new taxpayers in tax net and appreciated reduction of duty on 40 items and withdrawal of special excise duty.000 is a step in the right direction. TalatMehmood) The government has tried to provide relief to the business community and we will continue to play their part in contributing towards the economic recovery of the country. (Dr Hafeez A Pasha. (OICCI President Naved A Khan) “There is zero possibility to revive the proposal to bring the assets of the rich and influential companies into the tax net for increasing tax base.AB.

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