ISLAMABAD: The government has come up with a new approach in the federal budget 2006-07, focussing on maximum relief to the masses, ensuring a sound economic foundation and maintaining sustainable growth.
Dr Salman Shah, Adviser to the the Prime Minister on Finance and Revenue said at his post-budget conference here on Tuesday that this year Pakistan witnessed solid economic growth despite the massive surge in oil prices and ruinous earthquake. “Pakistan’s economy played well and absorbed the two unprecedented shocks and grew to 6.6 per cent this year.”
Shah said that the economy had become diversified and did not depend on some major crops’ growth as it performed well even with a decline in agriculture growth that stood at 2.5 per cent. To make economy further diversified, the government has reduced duty to zero level for promotion of some important industries. “The government has given around Rs 100 billion subsidies to ensure maximum relief to the downtrodden people,” he added.
Shah said the government increased the rate of return on various schemes of the National Savings. The rate of returns was increased to 9.17 per cent from 8.6 per cent on Special Savings Certificates; 9.24 per cent from 8.88 per cent on Regular Income Certificates; 10 per cent from 9.46 per cent on Defence Savings Certificates; 11.52 per cent from 11.04 per cent on Defence Account and Bahbood Savings Certificates; six per cent from five per cent on Saving Accounts and 6.5 per cent from 5.1 per cent on Prize Bonds.
Responding to a question, he said the government has given relief to federal government employees by announcing the dearness allowance at the rate of 15 per cent of the running basic pay. He said that pension for the government servants had also been raised. “Those government employees who retired before May 1977, their pensions are up by 20 per cent and those retired after May 1, 1977, their pensions are up by 15 per cent,” he said.
The overtime of drivers and dispatch riders are up by 50 per cent; conveyance allowance of Grade 1 to Grade-16 government servants is up by 50 per cent and pension under the Employees Old-age Benefits Act-1976 has been increased from Rs 1,000 to Rs 1,300 per month.
Dr Shah said that increase in pensions by 15 to 20 per cent would cost Rs 1 billion, while the overall impact of the dearness allowance, increase in pensions; conveyance allowance on national exchequer will amount to Rs 3.675 billion.
CBR Chairman Abdullah Yousaf said the net impact of new tax measures on revenue would be Rs 8.50 billion. The tax measures will help the CBR collect Rs 25 billion, but relief in taxes will amount to Rs 18 billion. Responding to a question, he said that the CBR would collect Rs 3.8 billion on some services from the provinces.
Dr Shah said the government is determined to build five mega dams, including Diamir-Bhasha. He said Kalabagh dam would also be built after developing census. When asked as to why the government has allocated Rs 10 billion for the acquisition of land for five dams, including Kalabagh when there is no consensus on it, he did not come up with satisfactory answer, saying that the Rs 10 billion amount is too small.
When asked to justify Rs 2.5 billion subsidy to importers of pulses with a view to stabilising the prices of the commodity as it will damage the interest of the farmers, Dr Shah said the government will take care of interests of both the consumers and the farmers. “The government will extend support price for growing pulses to compensate the farm community.”
Senior citizens of 65 years and above with annual income up to Rs 400,000 were exempted from taxation. Citizens of 60 years and above will now receive this facility. He said the government has provided Rs 5 billion subsidy on fertiliser in 2005-06 that has been increased to Rs 12.3 billion to keep fertiliser at affordable prices. He said machinery for agriculture, horticulture and floriculture would remain exempted from customs duty. Machinery for promoting fisheries will also be exempted from this duty.
Dr Shah said that the withholding tax on brokerage commission on sale and purchase of shares increased from 0.005 per cent to 0.01 per cent. “Withholding tax on trading has been increased from 0.005 per cent to 0.01 per cent. The capital value tax on the purchase of share has been increased from 0.01 per cent to 0.02 per cent.
However, Dr Salman Shah said that by June 30, 2007 the government would not levy tax on the capital gains as per understanding with stock exchange leadership. However, the government will impose levy on capital gains from next financial year.
About the income tax from agriculture sector, Dr Shah said the provincial governments would take a decision to this effect. He said that the government has imposed a two per cent CVT on the purchase of 500 square yards and above or one Kanal and above which is less, residential plot in urban areas. He said the two per cent CVT will also be levied on all purchases of commercial property and if there are no determined value a CVT charge of Rs 50 per sq yard would be applied.
He said five per cent income tax on rental income will be treated as dividend income and it will not be included in the whole income. He said Rs 1.2 billion has been earmarked for election commission for 2006-07. However, the allocation for Election Commission was parked at Rs 460 million for outgoing fiscal year.
He said that minimum wages of workers has been increased by 33.3 per cent from Rs 3,000 to Rs 4,000 and it will be ensured by enacting a law to this effect. Dr Shah said the government has allocated 42 per cent of the GDP for social sector in the Public Sector Development Programme.
Agencies add: Dr Salman Shah said some 400,000 jobs will be created under the “Rozgar Scheme” being launched in July with Rs 12 billion. “Educated persons in the age bracket of 18-40 years will get loan for self-employment,” he said, adding that under the scheme, people could establish public call offices, mobile utility stores, get franchise for utility stores and own transport (taxi etc).
Dr Shah said the government will pick up half of the mark-up and other half will be picked up by the individual. “The government will share the risk associated with the loan,” he added. He said the government has allocated Rs 35 billion to the Khushhal Pakistan Programme for the fiscal year 2006-07. “This money will be spent on roads and electrification in rural areas, water supply, gas, health, sanitation and levelling of lands for irrigation purposes.”
Shah said the facilities of dialysis, MRI and angiography would be available for the poor patients free-of-charge at public sector hospitals. A special committee would be constituted to determine eligibility of deserving patients so that they could be provided free treatment, he said, while replying to a question.
He said the government also reduced and exempted duty on life-saving drugs, diagnostic kits and equipment and all medicines for cancer, drugs used for kidney dialysis and kidney transplant, all types of vaccines for hepatitis, interferon and other medicines for hepatitis, all vaccines/anti-sera, cardiac medicine, injection anti-D immunoglobulin, blood bags, all medicines for HIV, all medicines for thalassemia and eye drops and medicinal ointment.
Shah said Rs 10 million has been earmarked in the PSDP for the control and prevention of avian influenza. “The allocation has been made in the new un-approved projects of the Food, Agriculture and Livestock Division and it did not include any foreign loan.
Talking to Online after the press conference, Shah said that no separate allocations had been made for the purchase of F-16s and AWACS aircraft rather the amount would be paid from the defence budget.
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