Despite a challenging economic and geo-strategic environment, the Federal Government on Tuesday announced a realistic budget aimed at meeting expectations and aspirations of the people, balanced growth, strengthening national defence, promoting austerity, and expanding the tax net.
The Federal Budget for the financial year 2025-26 has a total outlay of Rs.17.573 trillion, representing a 6.9% decrease as compared to the budget for the outgoing year.
Presenting the budgetary proposals in the National Assembly, Finance Minister Muhammad Aurangzeb set an ambitious tax collection target for the FBR at Rs14,131 billion, an 8.95pc increase from last years goal as part of the strategy to move towards the goal of increasing the tax collection to fourteen percent of the GDP.
The budget envisages a GDP target of 4.2%, inflation at 7.5% and an allocation of Rs.2250 billion for defence.
The Minister announced a substantial tax relief for the salaried class in line with the oft-repeated commitments made by him as well as the Prime Minister.
The budget, no doubt, contains a series of relief measures for different segments of the society but some of the proposals are likely to trigger a new wave of inflation, putting more burden on the common man.
Apart from relief in the form of reduced rate of income tax for different slabs, the salaries of the government employees are proposed to be increased by 10%, which is surely much less than expectations of the inflation ridden fixed income groups.
Similarly, pensioners have been provided a nominal relief of 7%, which would not suffice to help old age people to lead honourable life during a vulnerable period of their lives.
However, it is appreciable that the Government has resisted the temptation of imposing a tax on all categories of pensioners and instead a 5% tax is proposed to be levied on those receiving annual pension of over ten million rupees.
The Government has listened to the longstanding demand of the corporate sector for reduction of their tax burden by lowering the rate of super tax by 0.5%.
The proposals to reduce the rate of taxes on construction sector and transfer of property in the Federal Capital Territory would surely be welcomed by a sector hit hard by excessive taxation but the relief would become meaningful only if the provinces also follow suit.
The relevant officials have long been claiming that the withholding taxes would be phased out but the budget reinforces them as is evident from the fact that the rate of tax on withdrawal of cash from banks by non-filers has been jacked up from the already excessive 0.
6% to 1%, which would be an undesirable burden especially on those whose income is not taxable.
Again, the rate of 15% tax on bank profits was already on the higher side and it has now been hiked to 20% discouraging savings by the citizens.
However, better sense prevailed as the government has exempted the profit of the National Savings schemes from this increase.
Imposition of normal rate of 18% GST on online purchases and small vehicles would also badly affect the online business and middle class sections of the society.
The proposal to impose a carbon levy on oil and increase it to Rs.5 a litre in the next two years is retrogressive in nature as we are already selling oil at highest rates and the measure would compound the inflationary situation.
It is appreciable that the Government proposes to bring merged districts of KP into the sales tax net in a phased manner over the next five year and to begin with 10% GST would be imposed from the new financial year.
We hope the Government will not succumb to pressure from the vested interests and pursue this plan vigorously as the economy cannot afford serious distortions any more.
The increase in the defence budget is understandable in view of the formidable threats to the security of the country.
Similarly, the plan to exploit water resources on war footings is also the need of the hour in view of the naked designs of India.
