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economic survey of 2009 of pakistan

please post it now

AERC Alumni Reunion

It was a Sunday evening and what a evening it was. AERC lawn was full of young, aged and old faces who had spent memorable years of their academic life in AERC. They were gathered to celebrate reunion, perhaps first reunion. The event was attended by a large number of old and new AERCians.

Director AERC, Prof. Dr. Nuzhat Ahmed was the key speaker. She highlighted the history and early days of the institute besides appreciating the services of AERCians in the industry. She also promised many new steps, including launching of virtual directory of alumni, new AERC website, arranging visiting lectures and continuation of alumni gathering. Other noted guests include Mansoor Ali (State Bank), Dr. Ayub Mehar (FPCCI), Dr. Naved Ahmed (IBA), Riaz Hussain (AASA), and Amjad Nazeer (MM Securities). Dr. Ayub Mehar ensured the sponsorship for the next alumni reunion. At the end of session, Zia Abbas and Kamran Ali Khan entertained the attendants with their touchy and witty poetry (note, it was the full moon night as well). Later all mingled informally and had dinner.

This Alumni Reunion was the brain child of Minhajuddin Siddiqi, researcher and instructor mathematics, who not only floated the idea but also managed the whole event effectively, albeit did not appear on the stage. So due credit should go to him. Zia Abbas, Tehsin Iqbal, Kamran Naqvi, Khurram Iftikhar, Asghar, Kamran Ali Khan and other young fellows dedicated their time and efforts to make the event successful. But unfortunately, no invitation or press release were forwarded to any newspaper or television. Consequently, the event could not find space in media. But keeping in view the resources, said reunion was indeed a great beginning perhaps first step towards a thousand miles journey.



PS: I'll share the event's pictures soon. Right now they are too heavy to upload.

FEDERAL BUDGET 2009-10

RELIEF MEASURES

The basic limit of exemption from income tax in respect of salaried persons is proposed to be increased from Rs.180,000 to Rs.200,000. In the case of women salaries taxpayers, this limit is proposed to be increased from Rs.240,000 to Rs.260,000.

Presently senior citizens are allowed 50% relief in tax liability provided the taxable income, in a tax year, does not exceed Rs.500,000. In view of inflationary trend, it is proposed to enhance limit of taxable income to Rs.750,000.

In view of the less margin of profit available to cigarettes and pharmaceutical products distributors, withholding tax rate in respect of such taxpayer is being reduced from 3.5% to 1%.

At present, the taxpayers are entitled to compensation @ 6% for the late payment of refunds. Considering the prevailing interest rates on bank loans the rate of compensation is being increased to 10% per annum.

Presently, receipts form accumulated balance of voluntary pension scheme is exempt up to 25% of the available balance. In order to promote the voluntary pension schemes and allow relief to pensioner class the said limit is proposed to be enhanced to 50%.

Under the existing provisions of the Income Tax Ordinance, a person is entitled to tax credit on interest payment of housing loans up to 45% of the taxable income or Rs.500,000 whichever is low. The said limits are proposed to be enhanced to 50% and Rs.700,000 respectively.

Presently, tax collected on monthly electricity bills in respect of non-corporate Commercial and Industrial consumers is treated as final tax. An amendment has been proposed in section 235 of the Income Tax Ordinance by virtue of which the tax deducted on the monthly electricity bills exceeding Rs.30,000 will be adjustable which consequently could be refunded.

Last year amendment was made in the seventh schedule to the Income Tax Ordinance whereby the banks were deprived of the facility to claim deduction on account of provisions of non-performing loans. This facility is being restored. However, the same is proposed to be restricted to 1% of the total advances made by the bank in a tax year.

REVENUE MEASURES

Before amendment made through Finance Act, 2008 withholding tax on imports was collected @ 5% which was reduced to 2%. The benefit of reduction in tax rate could not be passed on to end users therefore, the rate is proposed to be enhanced to 4% across the board.

Presently, advance tax is payable in four quarterly installments on the basis of last assessed income. It is proposed that far working out the advance tax liability the sales should also be taken in to account.

Last year the provision regarding payment of minimum tax on declared turnover by the companies showing losses for one or other reasons was deleted mainly for the reason that the revenue collection was insignificant. Subsequently, it was found that actual collection from this source was much higher, however due to misclassification, the same could not be reported properly. In view of huge revenue loss the provision is being revived.

Presently, the indenting commission is being taxed @ 1% of the gross receipts whereas the general rate for commission and brokerage is 10%. In view of the gross disparity in the rate it is proposed to be enhanced to 5%.

The scope of advance tax collection on purchase of new locally manufactured motorcar/jeep is proposed to be extended to all types of motor vehicles.

In order to raise funds for the rehabilitation of internally displaced persons (IDPs) of Swat, Dir & Bunir it is proposed to charge 5% tax on tax payable by individuals and AOPs whose taxable income exceeds one million rupees.

In order to support IDPs in their habilitation a new tax is being proposed to be charged on bonus income of corporate executives @ 30% of the bonus. This is a one time levy and payable for tax year 2009 only.

At present, additional tax is chargeable @ 12% per annum on late payment of tax. The rate being low as compared to prevailing interest rate on bank loan gives temptation for delaying payment of tax. It is therefore, proposed to increase the rate of additional tax to 15% per annum.

At present, depreciation on passenger transport vehicles is allowed on total cost which has encouraged the purchase of luxury vehicles mainly used for personal purposes at the cost of revenue. It is, therefore, proposed to restrict the value of such vehicle to Rs.1.5 million for the purpose of depreciation.

Presently the large trading houses are exempt from payment of withholding tax on imports as well as sales of goods. The facility of exemption of tax at import stage is being withdrawn. However, the tax so collected will be adjustable against final tax liability.

The exemption regime provided under the second schedule to the Income Tax Ordinance has been reviewed to delete the redundant and unjustified exemptions as per detail given in the Finance Bill.

It has been noticed that the facility of tax exemption available to educational institution is being grossly misused by private universities and medical colleges etc. It is therefore proposed that such facility would only be available to those institutions which have been approved by the concerned Director General of LTU/RTO for this purpose.

At present no tax is collected on export of goods made without form “E” because in this case export proceeds are received in cash. An amendment has been proposed in section 154 whereby the Collectorate of Customs shall collect tax @ 1% at the time of clearing goods for export made without form “E”. Presently such exports are mainly allowed to Afghanistan through land routs.

Source: www.brecorder.com The Daily Business Recorder (June 14, 2009)

Economic Survey of Pakistan released

Tough times, tough decisions ahead; GDP growth 2pc; public debt crosses 7 trillion mark; external debt $51 bn; official inflation 23pc; real poverty 30pc

ISLAMABAD: The government has missed virtually every main macro-economic target set in the budget 2008-09 for the outgoing fiscal. This includes the projected 5.5 per cent GDP growth, 12 per cent inflation, Rs1,250 billion revenue and per capita income of 1,085 dollars, reveals the Economic Survey for 2008-09 released here by Adviser to Prime Minister on Finance Shaukat Tarin.

The survey states that Pakistan ’s GDP growth has been estimated at 2 per cent for the current fiscal as against the original 5.5 per cent target, which was then revised to 3.5 per cent and further clipped to 2.5 per cent as agreed with the IMF. Likewise, the inflation target was fixed at 12 per cent by the government in the budget for the current fiscal, which in reality stood at 22.3 per cent in the first 10 months of 2008-09. “Per capita income in dollar terms rose from the finalised figure of $1,042 last year to $1,046 in 2008-09, showing a marginal increase of 0.3 per cent.” However, in last year’s Economic Survey the target of per capita income was $1,085, which has come down to $1,042.

The revenue target was fixed in the budget at Rs1,250 billion and was irrationally revised upward by the government to Rs1,360 billion, then revised downwards to Rs1,300 billion and yet again reduced to Rs1,180 billion, which also seems impossible to achieve.

However, Adviser to Prime Minister on Finance Shaukat Tarin said during a press conference here on Thursday that the country’s real GDP grew by 2 per cent in 2008-09 against a target of 4.1 per cent.

He said that the 2 per cent economic growth was a result of four shocks, which include macro-economic imbalances, external trade shocks, the global economic crisis and domestic security issues. He mentioned that when the present government took charge, Pakistan ’s balance of payments, current account deficit and trade deficit were in the danger zone, but have now improved after joining the IMF programme. He said that the government had consolidated the economy in the current fiscal and was now ready for a growth-oriented budget to be announced on June 13.

He was also asked why the government has not included the 17.2 per cent poverty figure of 2007-08 worked out by the Centre for the Poverty Reduction and Social Policy Development (CPRSPD) and validated by the World Bank. In response, Tarin said that while the WB has validated the 17.2 per cent poverty figure there are indications that in the last quarter of 2007-08, poverty surged and we have initiated the rapid survey to this effect which would come up with a final poverty figure after a three-month period.

However, he said that estimates are that the poverty figure would stand at over 30 per cent during the last fiscal year. He also argued that people are committing suicide and selling their kids because of poverty, so obviously the poverty figure of 17.2 per cent needed to be closer to reality.

To a question he said that the FBR needs to be reformed in such a way that maximum revenue could be collected in the next fiscal and to this effect structural reforms are being implemented and the World Bank’s team is already in town for talks on this very important issue. He said that the government would not forget the fault lines and put its house in order to increase the revenues of the country.

On the issues of change in methodology in the construction sector and drastic cut in last year’s growth from 5.8 per cent to 4 per cent which was done apparently to bring the reasonable growth of 2 per cent close to the target agreed with the IMF, he said this government is crystal clear in its facts about growth and does not believe in the manipulation of figures. However, he said that Pakistan has asked the World Bank and IFCs to come forward and help the government to make the Federal Bureau of Statistics independent which will report not to the Ministry of Finance, but to the National Assembly.

He said that the country’s debt has increased to over $51 billion by the end of this fiscal and total public debt has increased by Rs1.367 trillion in the first 9 months of 2008-09 to Rs7.3 trillion, up by 23.2 per cent in nominal terms.

The increase in total public debt is shared between rupee and foreign currency in a ratio of 40:60. The rise in debt is mainly because of depreciation in the Pak rupee. The total domestic debt is positive at 3.7 trillion at end-March, 2009 which implies a net addition of Rs484 billion in the nine months of the current fiscal.

Mentioning taxation, he said: “I will not tax the people who are already paying, rather I would tax those who are not in the tax net.” He said that the government would levy taxes on real estate and the services sector. However, two other sectors which include the stock exchanges and the agriculture sector would be included in the tax net the next time. To a question as to why the economic mangers have failed to bring the agriculture sector into the tax net, which grew by 4.7 per cent, he said he is ready to tax this sector, but he will be subjected to martyrdom on the next day. In the last 62 years, no one had dared to impose taxes on the agriculture sector because of the the strong lobbies in the country. However, he assured that in the years to come this sector will be brought under the tax net.

The government would come up with a major allocation for IDPs and will not bank on foreign aid. However, he expects that Pakistan will get over $ 2billion from the Friends of Democratic Pakistan (FODP) in the next fiscal and $550 million for IDPs. He explained that his government remains stuck to the fiscal deficit of 3.4 per cent, but this has been relaxed to 4.6 percent because of the $2 billion inflows from the FODP, which will be spent on social sector. The 6.6 per cent fiscal deficit has been further increased to 4.9 per cent keeping in view the expected inflows for the IDPs. He said that budget deficit financing would no more be a issue as the country would be getting more grants from the FODP and 100% grants for IDPs. He also dispelled the impression that the fiscal deficit’s increase to 4.9 per cent would increase inflation, saying that grants would deflect inflationary pressure.

To a question Tarin said that in case the inflows of $5.28 billion pledged by the FODP get delayed, then Pakistan will move the IMF to fill the gap and whenever the FODP inflows come in, then the same amount would be given back to the IMF. He said that Pakistan has asked the IMF for an additional facility of $ 4 billion for this purpose. He said that $ 4 billion will be part of the stand-by arrangement and it will not be treated as a loan.

The manufacturing sector has contracted by 3.3 per cent in 2008-09 as compared to expansion of 4.8 percent last year. Large-scale manufacturing showed a contraction of 7.7 per cent as against an expansion of 4.0 per cent in the last year and 5.5 per cent target for the year.

The services sector grew by 3.6 per cent as against the target of 6.1 per cent and last year’s actual growth of 6.6 per cent. The finance and insurance sector witnessed a slowdown to 12.9 per cent in 2007-08 but registered negative growth of 1.2 per cent in 2008-09. The Transport, Storage and Communication sub-sector depicted a sharp deceleration in growth to 2.9 percent in 2008-09 as compared to 5.7 per cent of last year. Real private consumption rising by 5.2 per cent as against negative growth of 1.3 percent attained last year. However, gross fixed capital formation could not maintain its strong growth momentum and real fixed investment growth contracted by 6.9 percent as against the expansion of 3.8 percent in the last fiscal year.

However, the survey says that the agriculture sector has shown a stellar growth of 4.7 percent as compared to 1.1 per cent witnessed last year and the target of 3.5 per cent for the year. Major crops accounting for 33.4 percent of agricultural value added registered an impressive growth of 7.7 per cent as against a negative growth of 6.4 per cent last year and a target of 4.5 per cent. The livestock sector grew by 3.7 per cent in 2008-09 as against 4.2 per cent last year. The overall FBR tax collection remained less than satisfactory and actually witnessed deceleration in real term. Resultantly, the FBR tax collection to GDP ratio is likely to deteriorate to around 9 per cent of GDP as against the target of bringing it in the vicinity of 10 per cent of GDP. Tax revenue collected by the FBR amounted to Rs.898.6 billion during the first ten months (July-April) of the current fiscal year, which is 17.7 per cent higher than the net collection of Rs.763.6 billion in the corresponding period of last year. The net direct tax collection was estimated at Rs332.5 billion against the target of Rs496 billion which implies a growth of 16.9 percent during Jul-April 2008-09. Indirect taxes grew by 18.2 per cent during Jul-April 2008-09.

Source: The News (June 12, 2009)

The Economist 11th April 2009

Dear all,  Please find ecnlosed the latest issue of The Economist. kind regards, Afridi