slides

1. FISCAL POLICY
Presented by: SIDRA ASAD
RAHMA HASEEB
TAYYABA ASHRAF

2. LAYOUT
• FISCAL POLICY
• GOVERNMENT BUGDET
• NFC AWARDS

3. “Fiscal Policy with reference to public income
and public expenditure is the strategy which
guarantees the economic stability and
development of country”

4. • Economic Stability
• Increased Savings
• Control Inflation
• Stabilized Price Level
• Desirable Level Of Consumption
• Distribution Of Wealth

5. • Reduction in Burden Of Foreign Debts
• Control on the Concentration of Wealth
• Trade and Industrial Development
• Financial Assistance to Lower Income Group

6. • REVENUE TOOLS
direct taxes
 indirect taxes
• SPENDING TOOLS
 Government expenditure:
 current spending
 capital spending
 transfer payments

7. There are two types of fiscal policy
• Expansionary Fiscal Policy
• Contractionary Fiscal Policy

8. Government purchases Government Taxes
The goal of expansionary fiscal policy is to:
• Close a recessionary gap
• Stimulate the economy
• Decrease the unemployment rate

10. Government Purchases Government Taxes
The goal of contractionary fiscal policy is to:
• Close an inflationary gap
• Restrain the economy
• Decrease the inflation rate

12.  Direct Taxes:
• Direct taxation is defined as the tax which is directly levied
on the citizens of a country
• All individuals and business concerns have to pay direct
taxes to the government on a regular basis
• During the fiscal year 2011-2012, the Federal Bureau of
Revenue (FBR) expects to collect Rs 738.8 billion in direct
taxes
• The direct taxes in Pakistan Include income tax, wealth tax,
property tax.

13.  Indirect Taxes
• 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)
• During the fiscal year 2011-2012, the Federal Bureau of
Revenue (FBR) expects to collect Rs 1,144 billion in
indirect taxes
• In Pakistan, indirect taxes include sales tax, value added
tax, GST and excise and custom duty

14. • The FBR has provisionally collected taxes worth
Rs.1940 billion during last financial year 2012-
2013, which may go to Rs. 1950 billion when
figures get finalize”, said Ansar Javed (retired
chairman of FBR)
http://www.nation.com.pk

16. Outline
• Budget
• Components
• Types of Budget
• Government Budget
• Budget 2013-2014
• Revenue and Expenditure 2013-2014
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17. BUDGET
“Budget is the annual statement of the
expenditures and revenues of the federal
government with the laws and regulations that
approve and support those expenditures and
taxes”
Major objectives include:
• Finance activities of government
• Encourage economic growth and stability
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18. Components of Budget
• Revenue Budget
• Capital Budget
Revenue Budget:
It consists of revenue receipts of
government and its expenditures
Revenue receipts include tax and non tax
revenue
Revenue expenditure includes payment
for day to day running of government and
services it offers to citizens.
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19. Capital budget:
 The capital budget is different from the revenue
budget as its components are of a long-term
nature
 It includes capital receipts and payments
 Capital receipts are government loans raised
from the public, government borrowings from
the Reserve Bank and treasury bills, loans
received from foreign bodies and governments
 Capital expenditures are Capital payments are
capital expenditures on acquisition of assets like
land, buildings, machinery, and equipment
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20. DEFICIT
BALANCED
SURPLUS
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21. GOVERNMENT BUDGET:
Includes revenue and expenditures for capital
and revenue budget.
Revenue budget
The Receipts for this budget includes:
a)Tax Revenue
1.Tax on Income, profit and wealth
• Levied on income, profit and property of
people
• Have different rates for different income
groups and property owners
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22. 2. Taxes on Goods and Services
 Excise Duty
• Levied on production of selected industries
• Industries which have enjoyed tariff
preferences and have stability in market are
subjected to excise duty
• Also levied on services provided by hotels,
restaurants and advertisements.
 Sales Tax
• Levied on sale price of goods and services
• Rate varies with the nature of commodity
• Luxury goods have high sales tax then
necessities.
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23.  Sub charge
• Difference between maximum sale price and
production cost or import price of petroleum, natural
gas etc. is realized by government and the surplus is
the source of revenue.
3. Custom Duty:
• Source of indirect tax
• Tax on import and export of commodities is custom
duty
• Rates vary with nature of commodity and
government policy
• Luxury items have high rate to discourage import.
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24. b) Non – Tax Revenue
• Income from Property and enterprises
- Income from owned land, forests,
mines etc.
• Trading:
- Earned by Pakistan trading corporation
• Interest and dividend:
- Interest and dividends from investment
• Minor head:
- Receipts from civil administration
- Miscellaneous : passport fee, copy
right fee etc.
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25. The expenditures for this budget includes:
1. Civil Administration
- Expenditure on civil departments of
federal government.
2. Defense
- Expenditure on maintenance and
operation of defense services
3. Law and Order
- Expenditure on operation of police
and courts for maintaining law and order
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26. 4. Community Social And Economic Services
- Performed by government for welfare
of people such as construction of roads,
railways, education etc
5. Subsidies
- To increase production and keep prices
stable, government helps producers
financially through subsidies
6. Debt Servicing
- Includes payment of interest and
repayment of principal amount of debt
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27. Capital Budget:
The Receipts for capital budget includes:
1.Surplus from Revenue Budget:
• Measured as: Government savings=
Government Revenues – Current
Expenditure
2.Domestic Borrowing:
• It includes Bank borrowing and non- bank
borrowing
3.External Borrowing:
• External borrowing can increase
investment and growth
• If amount is not used for productivity
purpose, it will not generate revenues.
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28. The Expenditure for this budget
includes:
• Expenditures for agriculture
• Water and power
• Education
• Health
• Transport and communication
• Development of factories
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29. January 15 |Dacb| Rahma haseeb| 29
BUDGET PAKISTAN 2013-
2014

30. BUDGET 2013-2014
The budget 2013-14 has the following salient features:
• The total outlay of budget 2013-14 is Rs 3,985
billion. This size is 24.4% higher than the size of budget
estimates 2012-13.
• The net revenue receipts for 2013-14 have been
estimated at Rs 1,918 billion indicating an increase of
7.9% over the budget estimates of 2012-13.
• The net capital receipts for 2013-14 have been
estimated at Rs 493 billion against the budget estimates
of Rs 478 billion in 2012-13 i.e. an increase of 3.2%.
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31. • The external receipts in 2013-14 are estimated at
Rs 576 billion. This shows an increase of 50.1% over
the budget estimates for 2012-13.
• The current expenditure is Rs 3,196 billion and
development expenditure is Rs 789 billion. Current
expenditure has been estimated to be higher than the
revised estimates for 2012-13 by around 9.9%, while
development expenditure by 37.7% in 2012-13 over
the revised estimates of 2012-13.
• The size of Public Sector Development Program
(PSDP) for 2013-14 is Rs 1,155 billion. Out of this, Rs
615 billion has been allocated to provinces. Rs 115
billion to New Development Initiatives and Rs 10
billion to Earthquake Reconstruction and
Rehabilitation Authority (ERRA).
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32. • Standard rate of sales tax increased from
16% to 17%.
• Hybrid cars appear to be fortunate to have
been granted reduction in taxes. Curiously, the
relief is envisaged for cars over 1800cc!!
• FED at 40 paisa per kg on imported seeds and
at Rs 1 per kg on locally produced oil imposed.
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39. KEY TARGETS
• Fiscal deficit to be reduced to 6.3
percent by 2013-14 compared to 8.8
percent in the outgoing year.
• Rs. 2.6 trillion to be collected as taxes.
• Inflation to be contained in single digit.
• Tax on the GDP ratio to be raised to
15%.
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40. NFC AWARDS

41. DEFINITION
The NFC Award or National Finance
Commission Award, is the distribution
of financial resources among the
provinces of Pakistan by the federal
government on annual basis.

42. FEATURES
The main charter of NFC is to recommend on the
following:
• The distribution of specified taxes, duties between
federation and provinces.
• The disbursement of grants to provincial
governments.
• The borrowing powers exercised by federal and
provincial governments.
• Any other financial matter referred to commission.

43. WORKING
• Certain types of taxes collected in each province are
pooled and then redistributed according to the NFC
formula.
• Taxes included in the pool are
– income taxes
– general sales tax
– wealth taxes
– capital gains taxes
– custom duties

44. BACKGROUND
• 1971 incident: separation of East Pakistan
from West Pakistan
• Major issue arose about the “Distribution
of Resources” among the provinces.

45. PROVINCIAL SHARE IN 1970 AWARD
Punjab Sindh Khyber-
Pakhtunkhwa
Balochistan
56.50% 23.50% 15.50% 4.50%

46. FINANCIAL ARRANGEMENTS IN 1973
CONSTITUTION
It was made obligatory for the
government to compose NFC at an
interval extending not more than 5
years resource distribution among the
federation and their respective units.

47. • In this award fewer taxes were included in the
divisible pool which consisted of income tax, sales tax
and export duty while the criterion used for resource
redistribution was recommended to be population.
THE FIRST NFC AWARD 1974
Punjab Sindh Khyber-
Pakhtunkhwa
Balochistan
60.25% 22.50% 13.39% 3.86%

48. THE 2ND NFC AWARD 1979
Punjab Sindh Khyber-
Pakhtunkhwa
Balochistan
57.97% 23.34% 13.39% 5.30%

49. THE 3RD NFC AWARD 1985
The third NFC award 1985 as of its
previous 1979 award failed to produce
any fruits. The resource distribution
from divisible pools remains same as of
1974 up to 1990.

50. THE 4TH NFC AWARD 1990
• After almost 16 years of break in declaring a
consensus NFC award, the 1990 NFC award came
up with some positive recommendations in April
1991 under the democratic government of Prime
Minister Nawaz Sharif.
• The most significant development under this
award was the expansion of the divisible pool.
Still population remained the sole element for
revenue sharing criteria in the NFC award.

51. • The sharing of the divisible pool between
federal and provincial governments continued
to remain at 20:80 percent, respectively.
Punjab Sindh Khyber-
Pakhtunkhw
a
Balochistan
57.88% 23.28% 13.54% 5.30%

52. THE 5TH NFC AWARD 1996
• The shares in 5th NFC awards remained
the same
Punjab Sindh Khyber-
Pakhtunkhwa
Balochista
n
57.88% 23.28% 13.54% 5.30%

53. THE 6TH NFC AWARD 2000
• Provinces were demanding for higher
share in the divisible pool (up to 50
percent) as well as the diversification
of the distribution criteria.

54. THE 7TH NFC AWARD

55. THE 7TH NFC AWARD 2010
• Provincial share of the divisible pool would increase
from the present 47.5% to 56% in the first year of
NFC (2010-2011) and 57.5% in the remaining years
of the award under the vertical distribution of
resources
• Share of Provinces was approximately Rs.39 billion
• The federal government has agreed to cut tax
collection charges from 5.0 per cent to 1.0 per cent
and this amount would also be added to the divisible
pool

56. MEASURES TO BE TAKEN
• (1) Backwardness and development gap
• (2) Inverse income distribution (rural urban income disparity)
• (3) Natural resource endowment
• (4) Revenue generation/revenue collection
• (5) Population density
• (6) Poverty
• (7) Area
• (8) Non-formula transfers
• (9) Environmental consideration

57. REFERENCES
• www.finance.gov.pk
• www.fbr.gov.pk
• www.statpak.gov.pk
• www.wikipedia.com
• Economy of Pakistan, Saeed M. Nasir