Significance of Budget 2023-24 for Business Community and Overseas Pakistanis

The federal government unveiled its budget proposals of over 14 trillion rupees for the fiscal year 2023-24 on Friday. The government said that the budget for the next financial year is without new taxes. Finance Minister Ishaq Dar emphasized that the budget prioritizes safeguarding the more vulnerable segments of society through focused initiatives.

Measure Taken to Benefit Business Sector

Business and industry work as the backbone of any economy. Due to political instability and non-friendly business policies, Pakistan’s economy has suffered for the last many years. However, with time authorities have realized the importance of business-friendly policies to build the country’s economy. In the budget 2023-24, the government has taken certain measures to benefit the small and medium businesses.

Business sectors to be benefitted from these measures are mentioned below:

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Agriculture Sector

Proposed measures include increasing agricultural credit, promoting solar energy use in tube wells, removing taxes on quality seed imports, exempting agricultural machinery from duties, providing concessional loans to the Agro-Industry, granting tax exemptions to rural agro-based industrial units, continuing loan schemes for youth, business, and agriculture, offering subsidies on imported urea fertilizer, and providing low-interest loans for small farmers. These measures aim to boost agricultural growth, improve productivity, and uplift rural economies.

IT Sector

Pakistan’s IT and IT-enabled services sector is experiencing rapid growth, significantly contributing to exports. Measures to overcome challenges include a concessional income tax rate of 0.25%, simplified tax processes for freelancers, tax-free import of software and hardware for IT service providers, an automated exemption certificate for IT exporters, SME status for the sector with concessional tax rates, establishment of a Venture Capital Fund, reduction of sales tax on IT services from 15% to 5%, concessional tax rate for banks to encourage lending, and professional training for 50,000 IT graduates in the upcoming financial year. These initiatives aim to support the sector’s growth and enhance its role as an engine of economic development.

Small and Medium Enterprises

The Pakistani government is implementing measures to support Small and Medium Enterprises (SMEs) in this budget. The turnover threshold for SMEs to avail tax benefits is being increased, and Rs10bn will be allocated for subsidized loans through the PM’s Youth Loan Programme. The government will also assume up to 20% of the risk for new loans and establish a dedicated Credit Rating Agency for SMEs. These initiatives aim to improve access to finance, encourage investment, and promote the growth of small businesses in Pakistan.

Industrial and Export Sectors

The Pakistani government has established the Export Council of Pakistan, led by the Prime Minister, to make decisions and strategize on export-related matters. The government is offering sales tax exemptions for online purchases of Minerals and Metals, aiming to encourage their export. Additionally, they have introduced the Export Facilitation Scheme, reducing minimum tax for Listed Companies and eliminating regulatory duty on non-locally produced synthetic filament yarn, benefiting the textile industry.

Education Sector

The proposed budget has implemented various measures to support education in the country. These include a significant allocation of funds for the Higher Education Commission, the establishment of the Pakistan Endowment Fund for scholarships, the distribution of laptops to deserving students, and funds for sports development in educational institutions. These initiatives aim to ensure access to higher education, support talented students, and promote sports in the education system.

Real Estate Sector

The real estate sector contributes greatly to the economy of Pakistan, generating multiple business and job opportunities. Recognizing the significant contribution of the real estate sector to the country’s economic progress, the government has decided to offer incentives to builders and individuals engaged in constructing new houses and buildings.

These include tax relief measures for builders and individuals involved in construction projects. Builders will receive a tax relief of either 10 percent of their business income or Rs. 5 million, while individuals will benefit from a tax relief of either 10 percent or Rs. 1 million. This tax incentive will be applicable for the next three years, specifically on construction projects initiated after July 1, 2023.

Incentives for Overseas Pakistanis

Remittances play a crucial role in our foreign exchange reserves, with their significance evident in their contribution to 90% of our exports.

To encourage remittances through formal channels, the budget offers the following incentives:

The elimination of the existing 2% final tax on the purchase of Immovable Property by Overseas Pakistanis through Foreign Remittance.

Introduction of a new remittance card called the “Diamond Card” specifically designed for individuals who send remittances exceeding $50,000 annually.

The “Diamond Card” holders will enjoy the following privileges:

• Provision of a Non-Prohibited Bore License.
• Gratis Passport issuance.
• Preferential access to Pakistani Embassies and Consulates.
• Fast Track Immigration Facility at Pakistani Airports.
• Participation in raffles with the chance to win substantial prizes exclusively for Remittance Card Holders.

No New Taxes

This year, the government is focused on providing relief to the country’s people by refraining from imposing new taxes. The aim is to boost employment opportunities and support business growth, leading to an increase in foreign exchange reserves.