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Mr. Speaker
1. I am grateful that I have the privilege to present the 5th Budget of a democratic government, which is historically an unprecedented event.
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2. As a mater of fact this is the first time that an elected government is completing its five years term and the honour of having achieved this land mark rests with Muslim League and its allied parties. Indeed it is the Muslim League that has guided the Muslims of the Sub-Continent at every critical juncture.
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3. I do not have any soft corner for economic terrorists whose sole purpose is to push society into an economic abyss.
Our elders had categorically stated that some people would be over-affluent while others indigent. We will not let this happen. People who do not have the capacity to listen to criticism should abstain from criticizing others.
Our opponents are afraid that the seeds of prosperity that we have sown will bear fruit; but the nation is destined to develop and prosper.
Trials and tribulations are a part of every nation's history. But those nations who face them with courage and fortitude come off with honour and dignity. Before the coming into power of the present government, we were cut off from the world and had actually defaulted. By the grace of God our government, in the last five years, has amply demonstrated that it is the party which not only created
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4. In the budgetary process, we held extensive consultations with the Prime Minister of
Earthquake of 8th October 2005 devastated houses, hospitals, roads and mosques but it could not undermine our resolve which remained unflinching. We accepted it as a challenge and with the grace of Almighty came off well. Surely, there is no substitute for the precious lives lost but it was our moral duty to provide solace to the survivors of the tragedy. The whole world witnessed that the Pakistani nation played historic role in the rehabilitation work. Places littered with dead bodies and razed habitats have again come to life which speak of the efforts and courage of the nation. Government has disbursed Rs.66 billion for house construction and Rs.40 billion for death/injury compensation. Whatever the government is constructing, it is being done under the principle of "Build Better". After the Earthquake, no one died of hunger or cold.
During the previous year 1500 schools, colleges and hospitals have been built and additional 2500 buildings would be constructed. An amount of Rs.1.5 billion would be spent on agriculture and livestock which will enable people to become self supporting.
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5. Due to our geographic location we had to move with extreme caution lest our enemies inflict damage affecting our future generations. But their dream did not come true.
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6. Besides putting an end to a system of exploitation and misuse of powers, we have transformed the budget from its elitist stance to welfare orientation for the poor. Increase in oil prices in the international market last year posed a new challenge but the government, by giving a subsidy of Rs.111 billion on diesel, kerosene, fertilizer, electricity and food items, stabilized prices. Government did not leave people to the vagaries of high prices, but stood by the people.
Economic Performance
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7. It is my pleasure to announce that our GDP growth rate remained at 7.02 percent. We had promised the nation a growth rate of 7 percent on which we delivered. Then we promised a growth rate of 5 percent in agriculture which we delivered. We had resolved that the manufacturing sector will grow by 8.8 percent which we achieved. We had resolved that the services sector would grow by 8 percent which we delivered. We acted as a shield against rising oil prices and did not transfer the price increase to consumers. We had promised to provide conducive economic environment where people will find jobs. As a result of these policies, during the last 5 years more than 10 million persons were provided livelihood. We had promised to develop investment friendly environment, we fulfilled this promise. Since July of last year to April this year i.e in a 10 month period FDI in
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8. In order to run the country according to Quaid's vision, we have to ensure that our economy and democratic culture not only flourish but are also consolidated. Continuity of policies and single-mindedness are the pre-requisites. This would be possible only when people are prosperous, they have trust in national institutions, Parliament is supreme beyond any doubt, majority is not held hostage to minority and everyone works according to the given mandate.
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9. Our government would honour the promises it has made. Our priorities include transferring benefits of growth to people, promotion of people's welfare programme, and providing education, health, justice, sewerage, gender equality and safe drinking water.
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10. Our government has taken various measures to increase income of people and put an end to poverty. As a result, there is substantial reduction in rural poverty. Government policies aiming at allocation of greater resources for poverty alleviation and creating employment opportunities have resulted in reduction of incidence of poverty from 34.4 percent in 2001 to 23.9 percent in 2005. In this way 12,700,000 people came out of poverty. We have decided to further reduce poverty from the country. Our future plans envisage employment opportunities for youth. The amount of money spent on poverty reduction and employment generation during last 5 years is Rs.1,441 billion which is commendable especially in comparison with all previous governments.
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11. By the grace of God the Budget that I am going to announce has an overall size exceeding Rs.1,874 billion. Federal Government expenditure is estimated at Rs.1,353 billion. This is a record budget in the history of
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12. Our government has allocated Rs 520 billion under PSDP which will be spent on development and welfare of people. This is a huge sum which is unprecedented in the history of
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13.
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14. It is the national leadership that determines the direction that the country has to take. If the leadership is true and has a vision it can change the destiny of the nation. But if the perspective is narrow and limited to self aggrandizement, the nation gets stranded in quagmire and succeeding generations pay the penalty. In our recent history many such governments were in power who used borrowed money for non-productive purposes, thereby mortgaging the future.
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15. In the last budget, I paid tribute to the present Parliament for having unanimously passed the Fiscal Responsibility and Debt Limitation Act. This law provided a sound basis for our economic development and for world's confidence in our policies. The credit for this goes to the Prime Minister of Pakistan who was the exponent of this law. It is through promulgation of this law that the executive is accountable to the House. It cannot exceed the borrowing limit of 60 percent of GDP without seeking your approval. It gives me a great pleasure to announce that Debt to GDP ratio has not been allowed to cross 53 percent as against a target of 60 percent set to be attained by the year 2009. Moreover, the loans that we raised were meant for development of the country.
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16. We raised 10 years Euro Bond in the international market which was over subscribed by more than seven and a half times. We raised US $ 750 million through this Bond. This was despite the fact that the rate of interest offered was lower than that of previous periods. Last year this government launched 10 and 30 years bonds in the international market which elicited good response. This is a reflection of confidence of international investors in our policies. Prior to this no one was ready to invest even for 2 to 3 years in
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17. Is it not a proof of our economic development and prosperity that the world is not only acknowledging it, but is ready to invest in the country. By the grace of
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18. It would not be out of place to mention here that the previous government between 1996-99 raised the rate of interest on National Savings Schemes as high as 18 percent because of which our government now has to pay a huge accumulated liability of Rs.163 billion which is more than 4 times of the principal. This proved to be a heavy burden for the nation and due to imprudent policies of previous government the nation was pushed to a dead end. By taking these expensive loans they tried to hide the fact of the country's bankruptcy. But the present leadership not only paid off this heavy debt but put the nation on the road to development. Had the previous government cared for future of the nation and exercised prudence in raising debt, the resultant saving could have been used for more development and welfare of people. But they did not want to do that. The present government adopted such policies that have opened new avenues of development.
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19. Impregnable defence is indispensable for a nation who wants to live with honour and dignity. Our nation is ready to give any sacrifice for defence of their country. Today
Relief Measures
20. Now I am going to present a list of relief measures. My request would be that my those colleagues who are not amenable to any reasoning or logic should listen with patience. I understand their unease and anxiety. They could not provide relief but did create problems for the people. We have provided relief and shall continue doing so.
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21. Government servants are our asset and it is duty of the government to take care of their needs. It goes to the credit of the government, who is the first to have completed its five year term, that salaries of government servants have been raised substantially four times, which is unprecedented. Government is fully conscious of welfare of its employees. Salaries of government employees are being increased by ____ percent in the present budget. This budget has been prepared keeping in view needs of workers, labourers, and government employees. But we cannot forget the role of pensioners in national development. They deserve respect and we feel that it is our moral obligation to take care of their needs. Government has, therefore, decided to increase pension of government pensioners by 15 to 20 percent. Increase in pension is being given in two tiers: old pensioners will get 20 percent raise while new pensioners will get 15 percent raise.
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22. Upgradation of posts was a long standing demand of the clerical staff. It gives me pleasure to announce that government has accepted this demand and employees in BPS 5, BPS 7 and BPS 11 are being promoted to BPS 7, BPS 9 and BPS 14 respectively. A total of 87500 federal employees will benefit from this measure.
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23. Residential accommodation is a major problem for employees in
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24. House is a need of every one. I ask whether any government thought of providing this facility or they were only concerned with amassing wealth. Did they not know that constructing a house is a back breaking experience. Our government realized this need of low income people. Low cost Housing Scheme would be started in collaboration with Provincial and District Governments. Loan from HBFC will be available. Under this scheme an estimated number of 250,000 units would be constructed in the next 5 years.
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25. Railway is an economical means of public transport. It is the duty of Railways to take passengers to their destinations safely. Welfare of Railway employees is responsibility of the government. Government has decided upgradation of Basic Scale by one step for the remaining 62482 staff excluding Secretarial Staff. Long standing demand of Railway employees regarding upgradation of posts has already been accepted alongwith increase in their allowances. A total of 12510 employees have benefited from this increase. In this way, our government has provided relief to 74,992 Railway employees and their long awaited demand has been met.
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26. It is our religious obligation to pay a labourer his wage before his sweat dries. It was the government of Muslim League and its allied parties which fixed minimum wage of Rs.4000/- per month in the last year's budget. Workers are the backbone of a society. Not taking good care of their needs would tantamount to weakening the economy. You ask workers as to whether they did not benefit from the increase in their minimum wage. These who are not ready to acknowledge this fact are people who did not themselves work in their life neither do they know what really hard work is. I would like to give good news to my working class brothers :-
1. Minimum wage of unskilled workers is being increased from Rs.4000/- per month to Rs.4500/- per month.
2. Old Age pension, old and new both, has been increased by 15 percent. Minimum pension has been increased from Rs 1300/- to Rs 1500/- per month.
3. Worker's widow shall now get pension of her deceased husband as per entitlement. Earlier she used to get minimum pension.
4. Earlier husband or wife, both contributing to Old Age Benefit, would not get pension of the deceased partner. Now the surviving partner shall get the pension of the deceased spouse.
5. Under the Workmen Compensation Act 1923 workers receiving more than Rs.6000/- per month were not entitled to compensation on account of disability. This restriction has been removed and now all the workers regardless of their wage level would be entitled to compensation on account of disability caused during the course or as a result of performance of duty.
6. Contract employees have been made entitled to receive companies profit under the Companies Profit (Workers Participation) Act 1968. The limit of profit has been enhanced from Rs.12000/- to Rs.20000/-.
7. Workers Welfare Fund Ordinance 1971 is being amended to allow industrial workers to get medical, education, housing and death grant from Worker Welfare Fund. This facility shall apply to those units having an annual income in excess of Rs.500,000/-
8. Workers Welfare Fund Ordinance 1971 amended to increase the limit of death grant from Rs.200,000 to Rs.300,000/-.
Mr. Speaker
27. Government is determined to protect people from price hike and considers extending benefits to poor segments of society its mission. . Government allocated funds in last year's budget for food subsidy which was given to people through Utility Stores. People even in far flung areas benefited from it. Under this and under the Prime Minister's Ramzan and Eid package, relief of about Rs 5 billion was provided to people by Utility Stores Corporation. In addition, government has allocated subsidy worth billions of rupees in the Financial year 2007-08.
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28. I want to ask why previous governments did not give the relief that our government has announced and the one I shall soon announce? The difference is that of the intentions, policies and way of governance. Pakistani nation had to pay a heavy price for plundering of wealth by rulers of that time. We did not fill our pockets but fill national treasury.
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29. Daal Chana, Moong and Mash which is being sold in market at Rs 38 per kg, Rs 56 per kg and Rs 72 per kg would be sold in Utility Stores at Rs 29, Rs 47 and Rs 57 respectively. From tomorrow there would be a per kg relief of Rs 10, Rs 5 and Rs 5 on tea, sugar and rice respectively. At present the price of cooking oil is increasing rapidly in the international market. On the direction of the Prime Minister it will sell at the utility Stores at Rs.67 as against the market price of Rs.80/- per kg.
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30. People with low income will get this relief which is being given on the directive of the Prime Minister. I will ask my brothers and sisters through this House to go to Utility Stores tomorrow to get the items at lower price.
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31. In view of wishes of the people our government has decided to give relief to people and continue giving it. People wanted that prices of their kitchen items should be reduced. We have done that. With this relief, people would be able to adjust their budget. We have lightened the burden of people by giving subsidy worth billions of rupees. I ask as to why did not the previous governments take these measures. They plundered national wealth and emptied the treasury. We used the national resources for benefit of people so that they get essential items at reduced rates.
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32. Our government has decided to extend the relief measures to every nook and corner of the country. In order to enable all the citizens to benefit from the relief measures it has been decided to increase the number of Utility Stores by additional 5000 and provide a utility store at every Union Council in the next 4 months. It will also result in creation of employment opportunities. In these stores necessities of life like daals, rice, sugar, ghee and basic medicines would be available and due to their close proximity people will save time and money by not going to the distantly located markets.
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33. My question whether some one before has thought of people living in far off areas? They had to travel long distances to get basic medicines. In
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34. Housing in
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35. A question arises as to the source from where the money has come to make the relief measures possible. It is the leadership of President of
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36. Rich people do not go to whole sale markets for purchases. It is the low income people who benefit from such places. Therefore, we are setting up farmer markets at federal, provincial and district level. With this, farmers would be able to bring items directly to the market, thereby circumventing hoarders, middlemen and profiteers. People will be able to buy goods at cheaper price. Moreover, daily bazaars would be set up, besides farmer markets. First daily bazaar would be set up at
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37. It is quite evident that if price of an item increases it never goes down. But we, being public representatives, broke this myth. When sugar prices skyrocketed we took immediate action and brought them down. When cement prices increased we not only arrested the increase but also brought down their prices considerably. Prices of pulses were brought down as well as that of ghee and flour.
We did not do this as a matter of favour to anyone but did it as a part of our duty. We have changed the tendency of government of being a spectator in the event of a profiteer fleecing the public. We would not let it happen again and come to the rescue of people by keeping our eyes and ears open. This is despite the fact that check on prices is the responsibility of the Provincial and District governments.
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38. It gives me great pleasure to state that the recent production of wheat has broken all records. When wheat and flour prices started skyrocketing in the international market there was a sudden acceleration in their export. Prime Minister of Pakistan ordered immediate ban on export of wheat and flour to keep their prices at affordable level. Timely action saved the people from any price increase but due to the existing stocks decline in price is expected. Now
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39. In addition to catering to the daily needs of the nation, it is the duty of the Government to promote national self esteem. Most poor live in small towns and villages and often face hardship. It is the moral responsibility of the government to look after them. For this purpose an allocation of Rs.7.5 billion has been made for
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40. Some of my colleagues in this House have today been hearing the words subsidy, relief , help again and again. They are perhaps tired of this repetition for which I apologize. But the fact remains that our mission is to serve the nation. They may rest assured that I will announce further relief measures. I would like to ask them what promises did they fulfill during their time in government; they increased the budget deficit to 7% of GDP and made the country bankrupt.
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41. For the hardworking farmers of this nation, I today announce a tubewell subsidy of 20% payable on electricity charges for tubewells. This subsidy will be shared by the Centre and Provinces equally; with the Federal Government contributing one half and the Provinces the other half.
42. I wish to announce this good news to our farmers that we are providing further subsidy under DAP. The subsidy will increase from Rs. 400 per bag to Rs. 470 per bag. As a result of this, the price of each bag of DAP will be reduced by 70 Rupees. This is a subsidy of billions of rupees which will directly benefit the farmers. Agriculture produce will increase through use of DAP; incomes of farmers will further increase; it will bring prosperity to their doorstep. I wish to ask as to which government provided its farmers with so much benefit. The previous governments infact believed in taking money away from the nation.
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43. The government wishes that the dreams of its youth come true. We know that the future of the nation is dependent on its youth. If we want to encash the demographic dividend, we will have to use our youth as a powerful force. For this purpose, we have prepared and launched several robust programmes, the results of which will be better than expectation. We feel that our youth are patriotic Pakistanis and our asset.
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44. The President of
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45. As
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46. They say that there is no substitute for experience. Our educated youth possess good degrees but lack of experience prevents them from getting meaningful employment. In order to help our youth, the President of Pakistan General Pervez Musharraf directed that an Internship Programme be started so that our youth can gain valuable experience in different government departments, thereby being able to be gainfully employed in different private and government concerns. For this purpose, each graduate will be provided a stipend of Rs.10,000 per month. As of now 8,000 interns are working and this figure will increase to 30,000 next year. It pains me to state that previous governments, who claimed to serve the masses, did not give any serious thought to helping the youth.
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47. When a low income individual wishes to start a business, where should he go? He has no collateral to offer. The rich easily procure loan but the poors have difficulty in getting even small loans. In order to resolve this problem, Micro-Credit Banking has been started the world over. Our government has instituted a regulatory frame work which is one of the best in the world. So far, one million households have benefited from Micro-Credit. The target for the next three years is 3 million households. Please come with me and see for yourself, how the lives of those who have availed Micro-Credit have changed; they are now self-sufficient and prosperous.
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48. As our cities expand rapidly, basic health facilities have difficulty keeping up. The hospitals are there but citizens have difficulty in reaching them which involves expense and travel. Keeping this view point in mind, President Initiative for Urban Clinics has been started. In the cities of
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49. Safe drinking water is the basic need of every human being. Due to non-availability of safe drinking water, people suffer from various diseases. President General Pervez Musharaf gave directions for installation of a water purification plant in each Union Council on emergent basis. A total of 327 plants have been installed and people have started getting safe drinking water and got protection from various diseases.
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50. We are asked as to what development activity we have undertaken other than mega projects. I would like to say that in order to eliminate the differentials between the urban and rural areas it has been decided to undertake Khushal Pakistan Programme along side mega projects. Under this welfare programme, 14,000 villages were provided electricity, at a cost of 1.5 billion rupees; 1207 cities and villages were provided sui gas at a cost of 71 billion rupees; roads were constructed and water supply schemes launched. For the KPP, around 34 billion rupees are being kept in the current budget. In the last 5 years, our government provided electricity, sui gas connections, constructed roads, provided clean drinking water and sanitation facilities at a cost of Rs. 51 billion. Under the KPP, in 25 districts of Balochistan, development work of Rs. 3 billion is being undertaken. Further schemes will be identified by MNAs which will be implemented immediately. Under the directive of the President of Pakistan Rs.5 crores will be paid to each district, Rs.1 crore to each Tehsil and Rs.10 lac to each Union Council for development work.
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51. We can rightfully challenge whether any previous government has spent such a large amount for development activities. Who has benefited from Rs.51 billion spent in the last five years under the KPP programme on the web of roads linking villages and Goths and small cities with large towns? Certainly the poor people of Pakistan who could never imagine that those essential facilities could ever reach their village, Taluka and Goth; that their children would be able to sleep under a fan and air conditioner; that their houses have water motors; that they could make use of basic facilities like sewerage. It is only the dedication and hard work of the present leadership which has provided the development funds necessary to carry out these activities, who promised that they will deliver electricity to each village and link each Goth with a highway. Today they have delivered on this promise.
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52. The nation would be within its right to ask as to which kind of government could provide such large amounts to maintain the self esteem and dignity of the nation. The answer is that only an honest, dutiful and God fearing government can undertake such a challenge.
Agriculture Sector
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53. With your permission, on behalf of the government and this House, I would like to congratulate my brother farmers for their hard work that has made us self-sufficient in food production today. God has listened to our prayers and provided us a bumper crop of wheat that was the largest in the history of
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54.
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55. I would like to ask why the livestock sector was ignored by previous governments when this could have substantially enriched our farmers? Did they not want that there should be a revolution in our rural areas and that farmers should earn extra income or were they waiting for us to prioritize this sector? The Government has formed two companies in the private sector.
(1) Livestock and Dairy Development Board
(2)
Under these companies two big projects have been started worth 2 billion rupees. Under Prime Minister Special Cell livestock produce and allied services will be spread to 1963 Union Councils all over the country benefiting three million poor farmers. As a result of these measures, 12 million litres additional milk will be produced and 2 lac tons additional meat will be produced.
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56. As a result of this government policy, a multinational company, has set up the largest milk processing plant in Asia in
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57. It is our farmers urgent need that they be provided timely loans. Alongwith the subsidy on fertilizer, our government has also increased the availability of agricultural loans. In the financial year 2006-07, agricultural loans of Rs. 160 billion were targeted. Contrary to this, in 1990, agricultural loans of only Rs. 15 billion were disbursed. What will the farmer do with these new loans? He will purchase tractors, harvesters, fertilizers and seeds that are his basic requirements.
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58. With the use of better seeds agriculture production can potentially increase by 20% to 30%. The government has allocated Rs.336 million for production of better seeds. 15 new seed testing laboratories will be set up. For better production of cotton, BT Cotton seeds and Bio-Safety arrangements will be introduced.
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59. Adopting farmer friendly policies, the government has provided the agriculture sector Rs.250 billion which was entirely spent in the rural areas. The farmers spent this amount on their children's education, purchase of motorcycles, televisions, cycles, WLL sets, furniture, tractors, harvesters etc. They set up tubewells, built houses and why not? They tilled day and night on their lands and God helped them with bountiful crops which they sold in agricultural markets at government support prices. This is their right; prosperity of farmers is the prosperity of
Employment Generation
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60. The construction industry in
Mega Projects
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61. Today I hereby announce the construction of Neelam-Jhelum Project which will cost Rs. 84.5 billion. The electricity generated from this unit will contribute to the development of the country.
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62. The next in line is the Bhasha – Diamir Dam, the design of which will be completed in 2008. However, Rs. 500 million have been reserved for this Project in the PSDP. Along side this work, the work on Gomal-Zam Dam, Kurram Tangi Dam, Subak Zai Dam is in full swing.
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63. The work on the up-raising of Mangla Dam started by WAPDA is close to completion. As a result, 2.09 million acre feet additional water will be available for storage and 644 MW electricity will be generated. By construction of these Dams, 2.6 million acres land will be irrigated. Under-developed areas will be transformed into prosperous pieces of land.
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64. The Government has allocated a sizeable amount for the Greater Thal Canal,
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65. The deepest Port of the country is Gwadar. So far an investment of Rs. 13.5 billion has been made on this Project. This amount excludes foreign investment. The
66. In today's world it is difficult for a country to stand up right in the comity of nations without education. Foreseeing future requirements, the Government has decided to increase share of education to 4% of GDP. During the last 2 years, the education budget increased by 36%. It is pointed out that the bulk of the education infrastructure is situated in the Provinces and under their control. The Federal Government has limited educational institutions under its control. However, the Centre provides full support to the Provinces in this regard.
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67. Private Equity and Venture Capital Fund
Private equity is a certain kind of investment which plays an important role in the domestic economy. It aids the expansion of private companies through provision of additional funds and administrative ability bringing out their hidden value. In order to speed up investment in this area, the Private Equity Fund has been made tax exempt till 2014. In case assets or shares of private companies are sold to Private Equity and Venture Capital Funds, the rate of Capital Gains Tax has been reduced from 35% to 10%.
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68. Real Estate Investment Trust (REITs)
Through REITs a new form of investment tool is being introduced for investment in capital markets which will enable small investors to reap profits from investments in real estate, which , so far, was open only to large investors. In order to increase use of REITs their use has been given tax concession. For example, the profit of REITs, will be exempt from taxation upto 90%, upon distribution. The most important tax concession for REITs is that under this scheme sellers of property will be exempt from tax upto 2010.
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69. Amendment in Companies Ordinance
For the benefit of shareholders, any shareholder who has 12.5% shares of any company can call for an election of new Board of Directors in the next AGM. In order to provide protection to minority shareholders, any person or persons with 20% or more than 20% shares of any company, can request SECP for special audit.
Demutualization
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70. In order to bring our capital market upto international standard the demutualization of stock exchange is being implemented. Under this assets of stock exchange transferred to demutualized exchanges will be given special tax treatment.
Industrial Sector
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71. Industry is a basic need and symbol of recognition of a country. No one can think of prosperity without industry, be it a case of a developed or a developing country. This year growth of large scale manufacturing was 8.8 percent. Growth rates of other industries were impressive e.g. sugar (19.6%), beverages (28.4%), shoe (13.2%), paint and varnish (43.8%), motor tyre (17.2%), cement (21%), steel (24%), air conditioning (36.8%), electric transformers (25%) and tractor manufacturing (11.4%).
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72. Did earlier regimes pay any attention to this area? Did they give any useful suggestion? Did they constitute any working group? Did not they know that exports are essential for survival of a nation? But their agenda was not country's economy, public welfare or future of the nation but negative politics, propagation of hatred, and degradation of national institutions. People are not going to accept such an agenda as they are aware of the people who have looted public money and built bank balances in foreign countries.
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73. The reason for Chinese fast paced development is its manufacturing industry. A SEZ near
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74. Many drastic changes have come about in the industrial sector on account of measures taken by government. These have benefited the people. Those days have gone when SRO culture was order of the day: an SRO issued in the morning used to be changed in the evening by vested interests.
Those days have gone when people would approach concerned quarters for issuance of permits.
Those days have gone when people would strike deals with ITO to the detriment of national exchequer.
Today tax payers are free from the fear of victimization.
Today industrial base has expanded
Today new employment opportunities have been created.
Today we are self sufficient in food
Today we have laid extensive road network in the country
Today we have provided safe drinking water
Today we have used national resources on welfare of people
Today families of the people getting employment are praying for us
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75. All this has been made possible on account of continuity of policies, good faith, sincerity, honesty and dedication of the government. International investors have responded to the call of the government for making investment in the country. This has resulted in investment of US $ 6 billion during one year.
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76. People who avoid facing facts shall be held accountable before public. They shall have to explain as to why they did not do adequate development? Why did not they set up the needed industry? Why could not they achieve the required level of investment? Why did not they provide relief to people from national exchequer? They would be unable to answer these questions. During their period of government, precious time of the nation was wasted. Nation has a right to ask them to explain the reasons for the wasted time and lost opportunities.
PART-II
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77. Now I want to draw your kind attention towards the tax policy and tax administration reforms introduced in the tax structure of
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78. The tax administration is a continuous process; therefore, additional taxpayers' friendly reforms are being introduced in the CBR. The future strategy is to co-locate all the domestic taxes under one roof, for which Regional Tax Offices (RTO) are being established in the major cities of the Country. Similarly, the international taxes are to be handled through the Model Customs Collectorates (MCC) which is being established by adopting best international practice. For large taxpayers, three large taxpayers units have been established equipped with modern resources.
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79. Due to introduction of these changes, CBR has been able to achieve its revenue targets. This will be fourth consecutive year when the start-of-the-year revenue target will be met. May I inform you that the revenue target for the first 11 months of current fiscal year has been successfully accomplished and its is expected that the yearly target of Rs 835 billion will also be achieved (inshallah). Similarly, the revenue target of Rs 1025 billion fixed for fiscal year: 2007-2008 will also be successfully achieved (inshallah).
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80. Now I will turn to the tax policy measures being proposed for the coming fiscal year, wherein revisions have been proposed in tax rates taxpayer friendly in nature.
Customs
81. As you are aware, tariff reform is an integral part of tax policy initiatives. For the last many years not only the tariff rates have been gradually reduced, but the number of tariff slabs has also been reduced considerably. The Tariff Rationalization process is an on-going process.
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82. I want to convey to you that the Tariff Reforms process will continue in the coming years as well. Furthermore, in order to reduce cost of raw material, a zero tariff slab has been proposed. This change is expected to accelerate industrial development, promote exports and increase national income.
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83. The guiding principle of our government policy is to increase exports, ensure availability of cheap raw material for industries. To continue with the policy, customs duty is proposed to be withdrawn from the machinery used in horticulture, furniture, marble & granite, surgical and medical instrument-business. Similarly, the customs duty on raw material used in the electrical, capital goods, paper & paper board, chemicals, plastic and rubber industries is proposed to be reduced by 5%. The objective is to keep the momentum of industrialization going so that enough jobs are created for the wellbeing of common citizens.
Mr. Speaker
84. The country is facing acute shortage of electricity. To provide relief to the people and industrial establishments, it is proposed to withdraw customs duty on generators for home consumption. Similarly, reduction in customs duty is proposed on generators for industrial consumption. Likewise, it is also proposed to withdraw customs duty on the components used in alternative energy sources such as solar energy and wind energy. The sales tax at import stages on these items has also been proposed to be waived off. To encourage energy saving lamp, customs duty is proposed to be reduced from 15% to 10%.
Mr. Speaker
85. Presently CVT is levied on imported cars, while the domestically manufactured vehicles are exempt from CVT. In order to remove this the disparity, withdrawal of CVT on imported vehicles is proposed. However, to maintain protection level intact, adjustment in customs duty at the rate of 5%, 10% & 15% for different CCs of cars is proposed. There is a proposal to levy 5% withholding tax on the local vehicles. To facilitate the middle income groups customs duty on 800cc cars is not being charged. Finally, the capping for old and used cars previously for 5 years is being reduced to 3 years so that the domestic industry attains stability. The condition of 3 years will be applicable to TR, Gift Scheme, and Baggage rules.
Mr. Speaker
86. Textile is the back-bone of the economy. Besides export earnings, this sector is a prime source of employment generation. Therefore, more attention is required to be focused on this sector so that to make it internationally competitive. Some time ago R & D facility was provided to this sector. Now the DTRE system is being revamped whereby the import of PSF will be allowed. Through DTRE. R&D facility will also be available to fiber manufacturers @ 3.5%, which will be availed through SBP. The facility of debt/swap to spinning sector is granted. Similarly, for exporter the existing WHT rate of 0.75% to 1% is being rationalized and 1% rate of WHT is being proposed. The textile exporters will also be the beneficiaries. We hope that with these initiatives, the textile sector will flourish further.
Mr. Speaker
87. The imports have increased many folds during the past few years. This phenomenon is not only reflective of industrial development, but also highlights improved consumption expenditure by individuals. However, the growing imports have badly impacted our trade deficit, due to which there is a huge burden on the national resources. Therefore, keeping in view the widening trade deficit and also to restrict the conspicuous consumption, 1% levy special surcharge is levied on all imports with the exception of petroleum product, edible oil, fertilizer, medicine, necessary food items (vegetable & pulses). Furthermore, the already exempted items will continue to remain exempt from this levy.
Sales Tax & Excise
Mr. Speaker
88. Few years back the concept of zero rating was introduced so that the business community may not face liquidity constraints. It is a great pleasure for me to announce that the scope of zero rating is being widened to include sewing machine, bicycle & cotton seed oil.
Mr. Speaker
89. Cable TV is a basic necessity of daily life, therefore, excise duty on cable TV is proposed to be withdrawn.
The traders belong to FATA & PATA are facing difficulties in carrying out their businesses due to unresolved disputes lying pending with the courts. Therefore, in consultation with them, the sales tax already due is proposed to be waived off enabling them to carryout their business.
Mr. Speaker
90. In the country, iron and steel, plastic and paper industries are fast growing but unfortunately majority of them are functioning in the unorganized sectors, resultantly the government as well as the organized sector industry are facing continuous losses. In order to establish equilibrium, the raw material imported for iron and steel plastic and paper industries the sales tax of 15% is proposed to be enhanced 20%. However, the rate of 15% sales tax on final product for these sectors will remain the same.
Income Tax
Mr. Speaker
91. A task force was constituted to bring improvement in the provisions of law relating to holding companies. In view of the recommendations made by the task force, amendments are proposed in legislation relating to Holding Companies; 75% share holding will be required if none of the companies is a listed public company; 55% share holding will be required if one of the group companies is listed public company; Current losses can be surrendered by Holding Company to a subsidiary or between subsidiaries which fulfill the requirements of share holding; inter-corporate dividend shall be liable to 10% adjustable withholding tax.
Mr. Speaker
92. The concept of group taxation is not new. It has however, not prospered in
Mr. Speaker
93. Acquisition and merger is invariably treated as a non-tax event. The existing provisions of law do not expressly provide disposal of an asset under amalgamation/merger to be a tax neutral event. Therefore, there is a need to introduce specific provisions regarding non-taxability of capital gains in the hands of share holders. It is proposed that transfer of shares between companies and share holders in one direction under an approved scheme, (not involving cash) may not be taken as taxable event if the purpose of such transfer is formation of a group. The incentive will be available under scheme of Merger and Acquisition, approved by High Court, SECP or SBP (as the case may be) which does not involve cash payments.
94. For computation of income of the banking companies a separate schedule will be added to the Income Tax Ordinance, 2001. This measure is being taken on the recommendations of the SBP and PBA on the analogy of taxation of Insurance Companies. Inter corporate dividend is proposed to be subjected to adjustable withholding tax @ 10%.
Mr. Speaker
95. I hope that with the introduction of this new system, the revenue generation will increase manifold. It will also provide relief to common citizens and the industrial production will accelerate in the process.
Mr. Speaker
96. This Budget is a budget of relief. This is a Budget of investment. This is the Budget of a fast growing economy. This is a Budget of the people. A Budget that has reduced the price of kitchen items. As a result of this Budget, we want to develop our youth into a skilled force. This a Budget to ensure our self-sufficiency. The question is where did the funds for the welfare programmes initiated by our government in the last 5 years come from? Where did this new zeal in the people come from?
Mr. Speaker
97. This was all made possible because there was continuity and transparency in our policies and good governance.
There are many who will not admit this reality but the fact remains that the country needs intelligent and honest leadership. The people are aware of who brought bankruptcy to the country. The Pakistani nation today can stand on its own two feet with its head held high. They know that there is a strong and powerful country behind them. They know that continuity in policies is essential. They know that there are people who want to thrust Pakistan
Mr. Speaker
98. In the end I would just like to say that
Presently our reserves stand at 14.5 billion US dollars compared to 200 million US dollars some time back. Today we are not a nation with a begging bowl in our hands but a strong and proud nation that helps others also. We are a country where foreign investors want to invest; at no other time was
Mr. Speaker
99. Today with the grace of God, our country can never again be pushed towards the destruction which previous governments wrought upon it and who only devised policies that served their own interest. The whole nation including our youth are now mobilized. We have started the journey towards a prosperous future. It is this path that will lead us to a great
May God protect and help us all, Aameen
ERRATA
1) Page 11 Para 21 Line 6 Read 15 percent in blank space
2) Page 14 Para 26(1) Line 4 Read 4600 instead of 4500
3) Page 20 Para 41 Line 2 Read 25% instead of 20%
4) Page 24 Para 50 Line 5 Read 49000 instead of 14000 and 21.6
Billion instead of 1.5 billion
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