The main concerns of the average Pakistani today are the availability and affordability of essential foods and livelihood opportunities in an economy affected by Covid. The country also needs to fulfill two more goals: balance the external account and raise funds to invest in socio-economic development. The Finance Minister addressed all of these issues in his speech today.
This is a “Make-in-Pakistan” budget for FY22. “Make-in-Pakistan,” which the Pakistan Business Council has championed, is not just about manufacturing. It encompasses the maximization of farm incomes, now more relevant to food security and accessibility. We are net food importers today and commodity prices are rising, so self-sufficiency is critical. “Make-in-Pakistan” is also about deploying our large population in exportable services, with a special focus on IT.
The budget speech highlights these important facets:
The budget does not propose new taxes on industries. It was also created to stimulate business growth, from which higher taxes will arise. This is a victory for industry and government. This is a victory for industry and government.
However, The remainder of the tax revenue target will come from the use of technology and stricter enforcement in retail and wholesale, and measures to curb smuggling and illicit trade.
Reducing withholding taxes on logistics and storage will also reduce the cost of the supply chain. Exemption from withholding tax on electronic guarantee receipts for agricultural products will help reduce the role of intermediaries and improve farm income.
Moreover, the auto industry will benefit from a relief for small cars. But The final 1% tax regime for the IT industry, in common with that of the export of goods, should allay concerns that existed for the income tax credit.
Fortunately, the increase in the minimum wage, higher salaries for civil servants, and higher PSDP spending will also help to create demand for goods and services. This should have a positive multiplier effect.
The Finance Minister’s agreement that the formation of groups should be encouraged to expand equity participation and investment, the protection previously provided to avoid double taxation of dividends between companies, has not been restored.
Overall this is a positive budget. The litmus test of their success, however, is the speed with which jobs and disposable income increase and the speed with which the cost of essential goods decreases. For the industry, too, inflation remains a threat that could result in a higher borrowing cost. For the external account, the only way to keep the balance is through the growth of exports and the reduction of dependence on imports, that is, “Make-in-Pakistan”.