shadow budget for the financial year 2013-2014 by mqm

7/28/2019 Shadow Budget for the financial year 2013-2014 by MQM

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11

June 11, 2013

SHADOW

FEDERAL BUDGET

2013-2014


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SHADOW FEDERAL BUDGET

2013-2014

The ultimate objective and goal of the Shadow Budget is to provide a sustainablegrowth model:

A step toward Poverty Alleviation, improving sustenance level for common

man, Reducing Prices for Essential Items including transportation, petrol,

utilities;

Reducing Unit Cost of Production forimproving Exports Competitiveness;

Resolving Energy Shortages and settling ofCircular Debt for ever;

Incentive forInvestment,Industrialization, that leads to Growth;

Creating further opportunities forEmployment; and

Providing support forFood and Energy.


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2013-2014

MAJOR PROPOSALS:

Income from all sources, above the taxable limit be taxed;

Reduction in sales tax rate from 16% to 10%;

Reduction of maximum duty rate on imports to 10-15% with a minimum of 5%; exceptiononly with the approval of parliament;

No duty or sales tax on machinery and raw materials essential for industries;

Abolition of Petroleum Levy;

Reduction in the basic Discount Rate from 10.5 % to 9%;

Reduction of Federal Government Expenditures;

Improving governance of Public Sector Enterprises [PSE], prevent their hemorrhaging andassign a role to private sector in public private partnership model; and

Reducing the prices of utilities (gas and electricity) for common man also resulting inreduction in cost of doing business.


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2013-2014

MAJOR PROPOSALS:

Reducing corruption and improving efficiency of Federal Board of Revenue [FBR];

Providing Food and Energy Subsidy and settling of the circular debt;

Availability of uninterrupted energy supply for industries;

Diversification of energy sources such as greater use of coal and also including alternates such assolar / wind / ocean;

Reducing abuse of Afghan Transit Trade, Under-invoicing and curbing smuggling Pakistan;

Social sector and human resource development on fast track through big investment;

Infrastructure development in primary and secondary cities on war footing basis to make themengines of growth particularly mass transit programmes for metropolitan city;

Promotion of organized micro-finance sector, venture capital financing, cooperative marketing,agricultural reforms, small medium enterprises, labor intensive and value addition industries etc.


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2013-2014

MAJOR PROPOSALS:

Assigning a greater role to the overseas Pakistanis in the fast and sustainable economic

development of Pakistan, for example creating public private partnership models with overseas

Pakistanis in housing sector including low cost housing schemes, establishment of IT parks,

industrial zones, technology cities etc;

Improvement of security environment through resource mobilization and grater participation of

local governments and communities,

Carving out a greater role of for local governments in the economic development increase the

minimum wages for workers to Rs 15,000; and

Increase the salaries and pension for government employees by 15%.


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2013-2014

EFFECTS OF PROPOSALS

Reduction in prices of petroleum due to decrease in sales tax rate and

abolition of Petroleum levy. Approximate reduction of 20 percent.

Reducing inflationary pressure Inflation is effectively Cost-pushed.

Reduction in petrol price and sale tax will reduce that pressure.

Reduction in cost of government borrowings and cost of Government

borrowings due to increased revenue and decrease discount rate.

Mitigation of Energy Crises because of Special Subsidy for Energy Sector.

Possibility of settling Circular Debt and closing chances of its recurrence.


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2013-2014

EFFECTS OF PROPOSALS

Promotion of Industry due to easy and cheaper availability of credit due toreduction of discount rate from 12 to 10 percent, Availability of energy due

to resolution of Circular debts.

Improving Equity in Taxation System by increasing the direct and indirecttaxes ratio [48:52 from 36:65].

Saving of losses from Public Sector Enterprise.

Availability of basic food to poor people at subsidized rates.


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SHADOW FEDERAL BUDGET 2013-2014

FEDERAL GOVERNMENT RECEIPTS

WHERE THE MONEY COMES FROM WHERE THE MONEY SHOULD COME FROM


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SHADOWFEDERAL BUDGET 2013-2014

FEDERAL GOVERNMENT EXPENDITURE

WHERE THE MONEY GOES WHERE THE MONEY SHOULD GO


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FEDERAL BUDGET

2012-2013 [PROJECTED 2013-2014]

Federal Budget As per Shadow Shadow

Government Budget Budget Budget

of Pakistan Document % Proposed % Proposed %

Revenue Receipt [Note 1] (Table A) 3,234 3,530 3,875

Public account receipt (net) (Table A) 188 200 200

Total receipts 3,422 100% 3,730 100% 4,075 100%

Less: Transfer to Provinces (Table A) (1,459) 43% (1,550) 42% (1,710) 42%

Net revenue receipts 1,963 2,180 2,365

Expenditure [Note 5]

- Current expenditure on revenue account 2,612 2,185 2,370

- Current expenditure on capital account 63 70 70

2,675 78% 2,255 60% 2,440 60%

- Development expenditure [Note 5.2] 591 17% 500 13% 650 16%

(Table B) 3,266 95% 2,755 74% 3090 76%

Deficit (1,303) 38% (575) 15% (725) 18%

- Domestic debts non-bank 353 200 250

- Domestic debts banks 484 300 400

- Foreign debt 387 75 75

- Surplus from provinces 79 - -

(Table A) 1,303 575 725

2013-2014

Rupees in Bil lion

2012-2013 2012-2013


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FEDERAL BUDGET

2012-2013 [PROJECTED 2013-2014]

As per Shadow Shadow

Budget Budget Budget

Document % Puroposed % Puroposed %

Tax Revenues

Direct Taxes

Income Taxes 932 35% 1,255 46% 1450 48%

Indirect Taxes

Custom Duty 248 325 325

Sales Tax 1,077 970 1,050

Federal Excise Duty 125 200 200

Petroleum levy & others 122 - -

1,572 65% 1,495 54% 1,575 52%

2,504 100% 2,750 100% 3,025 100%

Non Tax Revenue

Income from property

& enterprise 179 300 325

Receipts from Civil

administration & others

- SBP Profit 200 180 200

- Others 351 300 325

730 780 850

TOTAL REVENUE CURRENT

ACCOUNT 3,234 3,530 3,875

REVENUE RECEIPTS [NOTE 1] 2012-2013

Rupees in Billion

2012-2013 2013-2014


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NOTE 2

FEDERAL BUDGET Rupees in Billion

2012-2013 [PROJECTED 2013-2014]RECONCILIATION OF 2012-2013 WITH PROJECTED

BUDGETED COLLECTION (NOTE 2.1) 932

Normal Increase due to inflation and expected growth

(Inflation 10.5%; Expected Growth 3%) 118

1,050

ADDITIONAL / UNEXPLORED SOURCES

- Agriculture income tax [collected through Federal mechanism] 100

- Tax on Agricultural Trading (Arthis) 50

- Improvement in Tax Collection due to correction in Afghan

Transit Trade, Under invoicing of other and smuggling 50

-200

400

TOTAL 1,450

Improvement in monitoring, broadening the tax base and elimination oftax evasion due to corruption


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NOTE 2.1

FEDERAL BUDGET2012-2013 [PROJECTED 2013-2014]

RECONCILIATION OF 2012-2013 WITH PROJECTED

Composition of collection of Income Tax (Estimated) Rupees in Billion

2012-2013 2013-2014

Taxes from corporate sector 543 627 Taxes at import stage 233 269

Salaried class 93 107 Agriculture 100 116 286 330

1255 1450

Other sources


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NOTE 3

FEDERAL BUDGET

2012-2013 [PROJECTED 2013-2014]

RECONCILIATION OF 2012-2013 WITH PROJECTED

CUSTOMS DUTY

Abolition of SRO culture, Duty exemptions and abuse of SRO to be curtailed. [In the country inspite of higher rates of duty, the effective rate of duty is5 per cent].

Duty slabs be rationalized with minimum of 5 percent and maximum of 10 to 15 percent [maintaining cascading principle]. Any exception to beapproved by the parliament.

Reconciliation of actual and proposed is as under: Rupees in Billion

Actual 248

Increase @ 15% [Rs 248 + 15 percent] 37

235

Correction in Afghan Transit Trade 30

Correction is under invoicing 30

Curtailment of abuse of DTRE 20

Correction of abuse of zero-rating and SRO culture 10

90

325


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NOTE 4

FEDERAL BUDGET SALES TAX BUDGET

2012-2013 [PROJECTED 2013-2014] 2013-2014 FORECAST

REDUCTION OF SALES TAX RATE TO 12 PERCENT

Rupees in Billion

1 Sales Tax

2 Present Rate 16%

3 Collection 2012-2013 Rs 1,077 billion

4 Proposal

- Reduce Sales Tax Rate from 16 to 10 percent

- Improve Collect ion System

Projected calculation 1,077 x 10 / 16 = 673Add: 15 per cent growth 101

774

Increase in Sales Tax collection on account

of checks on Afghan Transit Trade, under

invoicing, DTRE 60

Curtailment of abuse of input tax on account

of lowering the rate 70

Sales Tax:

(i) on services 45

(ii) retail and wholesale trade 31

70

1050

All essential commodities subject to sales tax; direct burden on common

man;

Improvement in monitoring, broadening the tax

base and elimination of evasion of tax due to

corruption


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NOTE 5FEDERAL BUDGET

2012-2013 [PROJECTED 2013-2014]

EXPENDITURE

As per Shadow Shadow

Budget Budget Budget

Document % Proposed % Proposed %

CURRENT EXPENDITURE ON REVENUE ACCOUNT

(1) Debt Servicing

- Local (Note 6)846 750

800- Foreign:

Interest 80

Repayment of debt 216 250 275

1,142 36% 1,000 36% 1075 35%

(2) Defence Expenditure 545 17% 450 16% 500 16%

(3) S ubsidies / Transfers / Gra nts [note 5.1] 521 17% 500 18% 500 16%

(4) Federa l Government Expenses

- Public Order & Safety:

Police 85 55 69 Others 15 5 6

- Pension 104 100 126

- Education Affairs &Services 45 25 31

- Economic Affairs 65 25 31

- General Public Service

& Others 90 25 31404 13% 235 9% 295 9%

2,612 2,185 2370

CURRENT EXPENDITURE ON CAPITAL ACCOUNT 69 2% 70 3% 70 3%

2,681 2,255 2440

DEVELOPMENT EXPENDITURE [Note 5.2] 451 14% 500 18% 650 21%

3,132 100% 2,755 100% 3,090 100%

2013-20142012-2013

Rupees in Billion

2012-2013


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NOTE 5.1

SUBSIDIES AND GRANTS

Rupees in billion

Proposed 2012-2013 2013-2014

Subsidy: Subsidy:

Energy subsidy 250 Energy subsidy 250

Food and fertilizer support 150 Food and fertilizer support 150

400 400

Grants: Grants:

AJK 20 AJK 20

Gilgit Baltistan 10 Gilgit Baltistan 10

Baluchistan 20 Baluchistan 20

Railway 25 Railway 25Others 25 100 Others 25 100

500 500


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SHADOW FEDERAL BUDGETDEVELOPMENT EXPENDITURE(PSDP & NON PSDP)NOTE 5.2

Rupees in billion

2012-2013 2013-2014

PSDP

Various Federal Ministries or organisations 100 100

(This includes Rs 36 million for Ministry of Water & Power) (Table C)

WAPDA - -

National Highway Authority (NHA) 40 40

Peoples Work Program 1 5

Peoples Work Program 2 28 25 25

Special Areas

AJK 11Gilgit Baltistan 7

FATA 10 25 25

ERRA 10 10

200 200

Outside PSDP

Benazir Income Support Program [BISP] 30 30

Zulfiquar Ali Bhutto Income Generation Program 20 20

50 50

(a)

250 250

(b) Special infrastructure and security development projects for - 150

mega cities e.g. Mass Transit System

500 650

Funds to be utilized for other productive and essential PSDP e.g.

Water, Energy and Higher Eduction


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NOTE 6


RECONCILIATION OF NATIONAL DEBT AND DEBT SERVICING

Rupees in Billion

- Foreign Debt approximate -. US 60 billion @ 98 5,880

- Local debt - bank and non-bank debt (Estimated) 6,500

12,380

Cost of Servicing:

- Foreign debt : Average rate 3% - 60 US$ @ 3% x 98 176

- Local debt servicing 6500 x 9.5% (Average) 624

800


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NOTE 6.1


Total Imports US$ 42 billion

Estimated under invoiced imports US$ 4.2 billion

Afghan Transit Trade US$ 2 billion

Duty and Taxes Evaded

Custom duty 10 %

Sales Tax 16 %Income tax withholding 5 %

31 % US$ 4.2x31%x98 Rs 127 billion

US$ 2x31%x98= 61 billion

188 billion

shadow budget for the financial year 2013-2014 by mqm

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