He was equally generous in proposing relief to the government servants, pensioners and senior citizens.
Presenting Rs 902.77 billion incentives-laden federal budget with major incentives for manufacturing, construction, agriculture and SMEs, he announced a 15 percent ad hoc relief for government employees. A cut in electricity tariff by 10 paisa per unit for domestic consumers, 25 paisa for commercial consumers and up to 58 paisa per unit for industrial consumers has also been announced.
Sales tax on 228 tariff lines up to 20 percent causing higher industrial costs has been abolished. Sales tax ranging from 15 percent to 23 percent has been converted into a single rate of 15 percent. 'Further' 3 percent sales tax has also been removed. Zero rates of sales tax on ginned cotton, hides and skins and raw wool has been introduced.
Custom duty on 469 raw material items is to be slashed by various rates ranging from 20 percent or 10 percent or 5 percent. These raw materials cover a broad spectrum of industries and agriculture inputs.
Over one million jobs would be created directly through government investment, and nearly the same would be generated through investment coming from government incentives.
Large incentives have been given on various industries associated with housing and construction.
Shaukat said: "We have finally succeeded in regaining country's sovereignty through structural reforms and outstanding performance registered by the economy as Pakistan will be getting out of IMF program this year."
Total resource availability is envisaged at Rs 842.62 billion. The figure of budget deficit was not given in the documents made available. However, it would be 4 percent of GDP, calculated on previous base of 1980-81.
Total outlay of budget 2004-05 is 12.1 percent higher than the size of budget estimates 2003-04.
The resource availability for 2003-04 was Rs 767.298 billion in the budget estimates of 2003-04. The current expenditure is estimated at Rs 700.77 billion and development expenditure at Rs 202 billion.
A number of incentives announced are likely to push growth further and accelerate the growth momentum from paints and varnish to film industry. The Budget addressed both salaried class and business communities, offering the latter fresh incentives.
The Finance Minister also announced measures to meet future challenges, including pushing growth rate up to 8 percent and above, with meaningful reduction in poverty, improving human development indicators, reducing losses of public sector enterprises, developing adequate infrastructure of roads, water, power, gas and telecommunications, eliminating governance bottlenecks and improving law and order situation and country's image.
He said that the government is constantly applying itself to design programs for the welfare of vulnerable groups, which encompass setting up of national technical and vocational training authority, development of cottage industry, program for urban renewal and debt management strategy. Vocational training authority would be set up to give a new impetus to vocational education. For this, 700 new institutes would be set up.
INCENTIVES: Incentives of customs and sales tax on machinery, tractors and other contraction related machines are given. Tax concessions have been also announced for SMEs and Islamic banking. Agriculture sector though given many concessions incentives, but these run around the industry associated with the agriculture sector and rare short-term direct measures were introduced in the Budget except loan settlements of ZTBL.
In income tax, relaxation's have been announced for senior citizens, on income from Bahbood Saving Certificates/Accounts, and basic threshold of income tax has been enhanced from Rs 80,000 to Rs 100,000.
Income from 'capital gains' has been proposed to be extended for another two years ie up to June 2007.
Tax credit to profit on interest on loan is proposed to be extended to house loan to employees of statutory bodies and public listed companies, from employers is proposed.
The customs duties on all types of plants, machinery and equipment not locally manufactured is being reduced to 5 percent. In addition, there will be no sales tax and withholding tax, which are presently levied at the rate of 15 percent and 6 percent respectively, on the duty paid value.
To maintain a level playing field, locally supplied plant, machinery and equipment are proposed to be zero rated under the sales tax regime.
The multitude of administrative requirements that obstructed easy compliance with tax obligations has been eliminated. No longer will there be such things like surveys, installation certificates and indemnity bonds, all of which are proposed to be dispensed with.
Companies are given incentives in income tax for amalgamation of banking and non-banking financial institutions and insurance companies. Holding companies are allowed to claim loss, for three years, surrendered by 75 percent share subsidiary companies. To promote consumer financing and provide level playing field the facility is proposed to allow creation of reserve out of 3 percent consumer loan profits by NBFCs and HBFC.
CED has been withdrawn on paints & varnishes, syrups, squashes & juices.
The Finance Minister spoke about large allocation of funds on water and power projects, communications including railways, roads and seaports.
The public sector enterprises are likely to invest 6 percent of GDP on new projects. Energy sector public enterprises would invest Rs 50 billion on new infrastructure, while Rs 46 billion subsidies would be provided for Wapda and KESC during 2004-05.
Skill training has been given large incentives as new allocations for setting up institutes in rural areas have been made. It is proposed to allow exemption to income from vocational, technical or poly-technical institutions set up between July 1, 2004 and June 30, 2008 for a period of 5 years.
REFORMS: Reforms are being introduced in the national saving schemes, mutual funds, private pensions funds, government pension reforms, Islamic banking and Modaraba. Schemes for overseas Pakistanis, removing the problems of titles and civil services reforms are also being introduced. Large and medium taxpayer units would be expanded to modernise the tax administration system. Various processes of taxes are being overhauled.
ESTIMATES: Net revenue receipts for 2004-05 have been estimated at Rs 557,165 million indicating an increase of 8.5 percent over the budget estimates of 2003-04.
The size of Public Sector Development Programme for 2004-05 is Rs 202,000 million. This shows an increase of 26.25 percent over the budget estimates for 2003-04 and 31 percent over the revised estimates 2003-04.
Defence affairs and services are allocated Rs 193.926 billion including Rs 193.544 billion for defence services and Rs 382 billion for defence administration. It remained a one-line item in the budget.
The capital receipts (net) for 2004-05 have been estimated at Rs 64.439 billion, against the budget estimates of Rs 36.677 billion in 2003-04.
External receipts in 2004-05 are estimated at Rs 156.355 billion. This shows an increase of 8.0 percent over the revised estimates for 2003-04.
The current expenditure is estimated at Rs 700.77 billion and development expenditure at Rs 202 billion. Current expenditure shows a decline of Rs 13.249 billion from revised estimates of 2003-04. Development expenditure will increase by 31 percent in 2004-05 over the revised estimates of 2003-04.
The share of current expenditure in total budgetary outlay for 2004-05 is 77.62 percent as compared to 82.22 percent in revised estimates for 2003-04.
The expenditure on General Public Services (inclusive of debt servicing, transfer payments and superannuation allowance) is estimated at Rs 423,836 million, which is 60.5 percent of the current expenditure.
The provincial share in federal receipts is estimated at Rs 239.157 billion during 2004-05, which is 13.12 per cent higher than the revised estimates for 2003-04. Provincial transfers from federal receipts were budgeted at Rs 215 billion for 2003-04, whereas the revised estimates indicated transfers of Rs 211, which is almost close to the target.
CBR tax revenue has been projected at Rs 580 billion, which includes direct taxes of Rs 181.9 billion and indirect taxes of Rs 398.1 billion. The tax revenue other than CBR was Rs 748.06 billion and non-tax revenue was Rs 141.517 billion.
Direct taxes include income tax of Rs 174.362 billion and other taxes of Rs 7.538 billion. Indirect taxes include Rs 103.2 billion for Customs, Rs 249.2 billion for sales tax and Rs 4.57 billion federal excise.
Tax revenue other than CBR includes Rs 4 billion from workers profit participation tax, Rs 4.216 billion for foreign travel tax, Rs 47.506 billion for petroleum development levy and Rs 15.023 billion for gas development.