The PML-N-led government is once again going to ruin the real estate sector by imposing a new tax as it did when Ishaq Dar was finance minister “to generate more funds.”
Speaking at a post-budget press conference on Saturday, Finance Minister Miftah Ismail announced that all people who had more than one immovable property in Pakistan with a value of over Rs25 million would be deemed to have received a rent amounting to 5 percent of that immovable property’s fair market value. They would have to pay 1 percent in tax on this deemed rental income. However, one house of every person would be excluded from this tax.
The government has also proposed the imposition of a 15pc tax on capital gains on immovable properties if the holding period was a year or less. The tax would be reduced by 2.5pc every subsequent year, eventually going down to zero once the holding period reached six years.
The advance tax rate on the purchase and sale of property for filers is proposed to be enhanced to 2pc from the current 1pc, while it would be 5pc for non-filers.
Under the budgetary proposal, the government said any citizen of the country who is not a tax resident of any other country would be treated as a tax resident of Pakistan. It said the criterion for a resident person in connection to taxation was being modified as the current regime was being “misused by wealthy individuals”.
Miftah maintained the government presented the budget when the country was going through a difficult time. He criticised the former government for not taking steps to resolve the issues.
The finance minister said they had no other option but to take tough decisions.
During the current fiscal year, the finance minister said the government gave more than Rs1,100 billion subsidy to the power sector. They have to pay Rs500bn for the losses incurred by the power companies.
“It means the government of Pakistan is giving Rs16 per unit subsidy,” he added.
“We are generating Rs30-35 per unit of electricity,” he said and claimed that they have the most efficient power generation plants in the world.
Bad administration, flaws in the system for fixing the rate, transmission and distribution losses and other issues were major reasons behind the high generation rate, he added.
Speaking on the occasion State Minister for Finance Ayesha Ghous Pasha said, the government’s philosophy was to ensure that the common man is not affected by the tough measures that were necessary to stabilise the economy.
Pasha said they are providing a social safety net to provide relief to the masses and that’s why the allocations have been increased in initiatives like Benazir Income Support Programme (BISP).
PETROL PRICE HIKE: Hours after presenting the budget for the fiscal year 2022-23, Finance Minister Miftah Ismail once again indicated a hike in petroleum prices and said the government would end subsidies on fuel soon.
Speaking to a news channel on Friday night, Miftah termed the budget “comprehensive” in light of the current economic situation and indicated a further hike in petroleum prices.
He said no subsidy will be given in the new fiscal year — starting from July 1 — rather, positive taxation will be imposed on petroleum products.
“We don’t want to take the country on the path to bankruptcy like Sri Lanka. Therefore, tough decisions are needed to be taken if you want to move the country towards prosperity,” he added.
The finance minister said as of now the incumbent government has not imposed any tax on petroleum products as “we are still giving subsidies on petrol and diesel.”
“We are still selling petrol at a loss and due to the huge deficit, the country is seeking financial packages and help every day. Therefore, to overcome the challenge we will have to take measures even if it means imposing taxes,” he said.
Ismail stated that they were also hopeful that petroleum prices in the international market would fall and “we will increase the levy, otherwise it will be difficult for us to achieve the target”.
The finance minister said that the previous government had allocated Rs30 in terms of levy and 17 percent sales tax for FY22 and the government has the option of both a levy and a sales tax and “will see which to impose”.
Rejecting the possibility of handling the economic crisis without the help of the IMF, he said: “We don’t have any option left except for dealing with the IMF as the country has to pay a huge sum in terms of debt next year. If the government leaves the IMF programme then Pakistan will be a helpless country and [will likely] default.”
“However, we will not let this happen, we will negotiate with the IMF soon,” he vowed.
Speaking about a projected target of 11.5 percent inflation in the budget for FY 23, the finance minister went on to say that following a price hike in the international market, petrol prices in Pakistan will also increase and no doubt it will increase the rate of inflation in the country too.
“For now, I think the monetary policy is moving towards contraction as an effort to increase the interest rate by State Bank of Pakistan (SBP) and it will help in controlling inflation,” he added.