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    Fiscal Policy of Pakistan: Presented By: Sumair Malik Umer Mukhtar

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    Fiscal policy in Pakistan aims to achieve economic stability and growth through tax collection, government expenditures, and public debt management. The objectives include self-reliance, export expansion, and reducing income disparity. In 2007-08, total revenue exceeded targets due to higher non-tax revenues. Projections for 2008-09 forecast lower fiscal deficit and higher tax collection. However, Pakistan faces budget shortfalls due to increasing non-development spending, especially on subsidies, defense, and interest payments. Expanding the tax base and improving tax administration are needed to close the revenue-expenditure gap.

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    Fiscal Policy of Pakistan: Presented By: Sumair Malik Umer Mukhtar

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    umermukhtar31
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    Fiscal policy in Pakistan aims to achieve economic stability and growth through tax collection, government expenditures, and public debt management. The objectives include self-reliance, export expansion, and reducing income disparity. In 2007-08, total revenue exceeded targets due to higher non-tax revenues. Projections for 2008-09 forecast lower fiscal deficit and higher tax collection. However, Pakistan faces budget shortfalls due to increasing non-development spending, especially on subsidies, defense, and interest payments. Expanding the tax base and improving tax administration are needed to close the revenue-expenditure gap.

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    Fiscal policy in Pakistan aims to achieve economic stability and growth through tax collection, government expenditures, and public debt management. The objectives include self-reliance, export expansion, and reducing income disparity. In 2007-08, total revenue exceeded targets due to higher non-tax revenues. Projections for 2008-09 forecast lower fiscal deficit and higher tax collection. However, Pakistan faces budget shortfalls due to increasing non-development spending, especially on subsidies, defense, and interest payments. Expanding the tax base and improving tax administration are needed to close the revenue-expenditure gap.

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    40 views30 pages

    Fiscal Policy of Pakistan: Presented By: Sumair Malik Umer Mukhtar

    Uploaded by

    umermukhtar31
    Fiscal policy in Pakistan aims to achieve economic stability and growth through tax collection, government expenditures, and public debt management. The objectives include self-reliance, export expansion, and reducing income disparity. In 2007-08, total revenue exceeded targets due to higher non-tax revenues. Projections for 2008-09 forecast lower fiscal deficit and higher tax collection. However, Pakistan faces budget shortfalls due to increasing non-development spending, especially on subsidies, defense, and interest payments. Expanding the tax base and improving tax administration are needed to close the revenue-expenditure gap.

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    Download as PPT, PDF, TXT or read online from Scribd
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    Fiscal Policy of Pakistan

    Presented by: Sumair Malik Umer Mukhtar

    Introduction
    The term fiscal policy refers to the expenditure a government undertakes to provide goods and services and to the way in which the government finances these expenditures.

    Definition
    What is a Fiscal Policy?
    According to Samuelson, Fiscal Policy is concerned with all those arrangements which are adopted by the Government to collect the revenue and make the expenditures so that economic stability could be attained/maintained without inflation and deflation

    According to Lee, fiscal policy considers:


    Imposition of taxes Government expenditures Public Debt Management of Public Debt

    Objectives of fiscal policy in Pakistan


    self reliance expansion of exports containment of import of luxury and non-essential goods promotion of investment reduction in income disparity.

    Fiscal Performance during 2007-08


    The total revenue collected during the year 2007-08 stood at Rs 1,499 billion against the budget estimate of Rs.1,476 billion, thus surpassing the target by Rs.23 billion, mainly on account of higher than targeted non tax revenues

    Fiscal Projections for 2008-09


    The fiscal deficit is projected to decline to 4.2% of GDP in 2008-09 from 7.4% in 2007-08. The FBR is targeted to collect Rs.1360 billion in 2008-09.

    Projections (cont)
    Noninterest current expenditure is projected to decline by 1.5 percentage points of GDP The elimination of oil subsidies by December 2008 and electricity subsidies by June 2009.

    How Does Fiscal Policy works


    Fiscal Policy is based on Keynesian theory which states that government can influence macroeconomic productivity levels by increasing or decreasing tax levels and public spending. .

    Types of Fiscal Policy


    1. Expansionary: An increase in government purchases of goods and services, a decrease in net taxes, or some combination of two for the purpose of increasing aggregate demand and expanding real output 2. Contractionary: A decrease in government purchases of goods and services, an increase in net taxes, or some combination of the two for the purpose of decreasing aggregate demand and thus controlling inflation.

    Methods of Raising Funds


    Governments expenditure can be funded in a number of different ways: 1. Taxation of the population 2. Borrowing money from the population, resulting in a fiscal deficit. 3. External resources: Foreign grant and loans 4. Privatization proceeds 5. Change in provincial cash balance

    Types of Taxes
    1. Direct: Direct tax is the one paid directly to the Govt. by the persons (natural or juristic) on whom it is imposed Income Tax Corporate Tax Transfer Taxes-estate Tax & Gift Tax Property Tax Capital Value Tax

    Direct tax collection


    Direct Tax collection
    400

    Rs (in Billion)

    380 360 340 320 300 2006-07 Year 2007-08

    Types of Taxes (Cont)


    2. Indirect: An indirect Tax is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). Sales Tax Value Added Tax (VAT) Federal Excise Duty

    Indirect tax collection


    Indirect Tax collection
    Rs (in billion)

    1000 500 0 2006-07 Year 2007-08

    Who collects tax revenues?


    Government of Pakistan Ministry of Finance Ministry of Foreign Affairs Ministry of Agriculture

    Revenue Division

    Inland Revenue Service

    Federal Board Of Revenue


    Customs and Excise Department

    Structure of taxes

    Common issue regarding collection of Taxes


    Tax Evasion: It is an illegal practice where a person, organization or corporation intentionally avoids paying his/her/its true tax liability.

    Causes for Tax Evasion

    People do not want to disclose their true income


    Too many unlawful business activities such as drugs, hoarding, black money, etc. No fear of punishment Complex tax structure Some economic sectors are exempted: Agriculture, real estate and capital gain

    Tax payers see their taxes being used to further rich citizens interests.

    Uncontrolled inflation and high cost of living. Low level of literacy among taxpayers
    Tax pilferage has become the rule, and compliance an exception

    Why Pakistan faces large revenue expenditure gap?


    The principal reason lies in the structural weaknesses of Pakistans tax system which is: Complex Inefficient Unfair

    Principles of Tax Policy


    Widening the tax base Lowering tax rates Taxing all value additions including services, not just manufacturing sector Establish an effective and efficient tax system. Overcome the culture of tax avoidance and evasion

    Overview

    Overview

    Overview
    Inflation 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2005-06 2006-07 2007-08 2008-09

    Why Pakistan is Facing budget shortfall


    Increase in nondevelopment expenditure.

    Subsidies in billion 400 350 300 250 200 150 100 50 0 2006-07 2007-08

    Why Pakistan is Facing budget shortfall (Cont.)


    Increase in Non-Development expenditure
    600 400 Rs in billion 200 0 2006-07 2007-08

    1 250 278 Defence

    2 370 503 Interest

    Why Pakistan is Facing budget shortfall (Cont.)


    Too many factories are closed or in partial production for want of power and gas Tax Evasion by well performing industries (cement) Stock Exchange and Real Estate pay minimal tax. Corruption by Tax Officials Law and Order causing burden on the Expenditure side by way of compensation to the affected and mobilization to send forces to such areas.

    How Pakistan can avoid Surge in Fiscal Deficit?


    CBR should impose new taxes Increase the price of utilities Decrease in development spending

    Conclusion
    Pakistan fiscal position worsened because of unexpected events occurred on domestic and external scene. High proportion of revenues being spent on defense and interest payments. Lower industrial productivity leads to lower tax collection because of high interest rates. Pakistan needs to increase tax base by imposing tax on agriculture and capital gain to increase revenue.

    THANK YOU

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