Budget 2020-21: Hotel industry, airlines, poultry sector to be incetivised

ISLAMABAD: While presenting next budget 2020-21 without net revenue measures, the government is considering different options to provide incentives to severely impacted sectors like hotel industry, airlines and poultry sector after outbreak of COVID-19 pandemic.

The government is all set to reduce turnover tax for different sectors of the economy. The government has slashed all heads of non-development expenditure such as procuring vehicles, petrol, filling of vacancies and defence budget was also curtailed by Rs50 billion than its initially envisaged demand. All this exercise has created cushion and the government increased the development budget outlay at federal level from Rs530 billion to Rs650 and to Rs700 billion for the next budget 2020-21.

Without having net revenue impact in the upcoming budget, the FBR will be assigned tax collection target of Rs4.95 trillion during next fiscal year 2020-21. “It will be low inflationary budget,” said one of the participants of budget making exercise while talking to ‘The News’ here on Sunday night.

The official sources said that the government decided in principle that there would be no additional tax burden in the coming budget as some tax measures would be taken but overall there would be no net revenue measures. “It indicates that there will be net relief in the budget,” said the official.

They said that the government would have to generate desired revenue collection to the tune of Rs4.95 trillion in the next budget to align with the macroeconomic framework envisaged by the IMF for reviving Pakistan’s economy back on the track.

“Pakistan cannot afford derailment of IMF programme so all such measures will be taken that can protect the existing Fund programme,” said the official.

They were of the view that the tax incentives would be granted to COVID-19 hit sectors such as hotel industry, airlines, poultry and retailers. The retailers for tier-1 tax is likely to be reduced, as efforts are underway to convince the IMF, said the sources. The cement sector is also under consideration for provision of relief in the next budget.

However, the sources said that the government will have to strike balance in order to generate tax revenues so that the FBR collection can reach to its desired target of over Rs4.92 to Rs4.95 trillion in the next budget.

The withdrawal of zero rating regime for five export-oriented sectors will not be reversed but such measures will be protected in the next budget. The official said that the tariff rationalisation will be done with the major objective to boost industrialisation in the next fiscal year.