This will be an effort to counter the negative impact of the coronavirus on the economy
Representational pictures. PHOTOS: REUTERS
The government is determined to announce pro-people, pro-business and no-tax budgets for the next fiscal year starting July 1.
Instead, the FY21 budget will be a continuation of current policies that facilitate the masses and businesses to win the war against the coronavirus pandemic, officials said.
The Federal Board of Revenue (FBR) is tasked with collecting revenue of Rs5,100 billion, which will be around 30% higher than the estimated Rs3,900 billion collection in the current fiscal year ending June 30.
The government is expected to announce budgets – estimated expenditures and revenue collection targets – for fiscal year 2020-21 in the second week of June.
“The main focus of the government is to provide assistance to people and businesses rather than generate taxes … until the disease is controlled. The budget is most likely an attempt to counter the negative impact of coronaviruses on the economy,” said FBR spokesman, Dr. Hamid Ateeq, while speaking with The Express Tribune.
Prime Minister Imran Khan said that it would be a coronavirus aid budget and Financial Adviser Dr. Abdul Hafeez Shaikh stressed that the government was trying to announce a tax-free budget, he said.
The government can increase debt to provide assistance to people and businesses, he said.
“We believe we can collect the targeted amount in tax (Rs5,100 billion) if the economy continues to operate throughout the year (which currently does not occur under partial locking),” he said.
“We will review the impact of Covid-19 on the economy after three months and redefine revenue collection targets,” he said.
Former Ministry of Finance adviser Dr Khaqan Hassan Najeeb said the government needed higher revenues to be able to spend more on health care during these testing periods.
He suggested that targeted income could be collected by including tax leaks, limiting spending on sectors other than health care, such as no increase in government employee salaries this year and shifting focus to increase savings rates to finance budget deficits rather than increasing loans.
“We may lose around Rs800 billion in revenue collection in the last four months (March-June) of the current fiscal year 2020,” a FBR spokesman said. However, FBR is only around Rs350-billion from the revised collection target of Rs3,900 billion.
This disease has made the situation uncertain and influenced tax collection. There are several different scenarios, people are optimistic that economic activity will soon be normalized and pessimistic views nothing can be improved.
“Business continues to go out of our control because revenues from air, public transport, wedding halls and hotels (the hospitality industry) have fallen to zero,” he said.
The restaurant has reopened, but with a limited takeaway function, he added.
“There are so many sectors that remain closed and may not reopen for the next three-four months.”
Najeeb added that the upcoming budget could demonstrate a principled approach to resource generation through tax compliance; deficit reduction by limiting expenditure; and finance deficits by switching to non-debt instruments.
He said it was important to implement reforms making tax compliance simple, lacking document and digital focus. He further said spending could be reduced. Savings are possible in interest payments, operating costs cut non-targeted subsidies and move from state-funded pensions.
He said switching budget financing to non-debt instruments could restore weak public confidence in the integrity of policy makers to break the debt cycle.
He stressed that multi-rounds of money for the vulnerable and business; and new growth support programs that succeed in survival strategies are needed to avoid a recession. Both fiscal and monetary policies that work together can alleviate the suffering of the people of Pakistan.
Published in The Express Tribune, May 28th, 2020.
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