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Business Recorder
2 days ago
- Health
- Business Recorder
Health system suffers as cigarette tax left untouched
The federal budget for 2025-26, announced amidst a backdrop of fragile economic recovery, signals a continuation of fiscal restraint. While the government has rightly focused on maintaining macroeconomic stability and ensuring essential current expenditures, the significant reduction in the health sector's development allocation raises serious concerns about the country's long-term human development and economic resilience. According to the budget documents released by the Ministry of Finance, the Public Sector Development Programme (PSDP) allocation for health has been reduced by 16 percent, from approximately Rs 54.7 billion in the previous year to Rs 46.1 billion in the current fiscal cycle. This is not just a numerical adjustment; it has real and immediate implications. Development allocations typically fund the expansion of healthcare infrastructure, procurement of new equipment, training programmes, and the rollout of disease prevention and surveillance systems. A cut of this magnitude effectively means that many of these critical initiatives will be scaled back or shelved. From an economic standpoint, this trend is deeply concerning, because health is not just a social good, it is a foundational pillar of economic productivity. A healthy population is more capable, more employable, and less financially burdened. Countries that underinvest in health eventually pay the price in terms of lost productivity, increased poverty, and heightened vulnerability to public health emergencies. In Pakistan's case, where over 50% of health expenditure is still borne out-of-pocket by households, reducing development spending can further widen inequalities and push more families into financial hardship due to medical costs. What makes this budget decision even more concerning is that it comes at a time when Pakistan faces a dual disease burden: persistent infectious diseases on one hand, and rapidly increasing non-communicable diseases such as diabetes, cardiovascular conditions, and mental health disorders on the other. Development funding is crucial to building the institutional capacity needed to tackle this complex mix of health challenges, especially in under-served rural and peri-urban areas. The budget also misses an important opportunity to introduce health-related fiscal reforms. Despite strong evidence linking ultra-processed foods and sugary drinks to growing rates of non-communicable diseases, the government has chosen not to impose any new taxes on these items. This is a missed opportunity to both generate additional revenue and steer consumer behaviour toward healthier choices. Globally, such taxes have proven effective in improving public health outcomes while creating fiscal space for investment in health systems. Additionally, the budget maintains the existing two-tier Federal Excise Duty (FED) structure on cigarettes, with no increase in tax rates. The upper-tier remains at Rs 16,500 per 1,000 sticks, and the lower-tier continues near Rs 12,500 per 1,000 sticks. This effectively keeps cigarette prices static in real terms, despite inflation and rising disposable incomes. From a public health standpoint, this decision represents a clear deviation from evidence-based fiscal strategy. Maintaining cigarette excise rates at current levels ignores a growing body of economic and health research suggesting that increasing tobacco taxes not only reduces consumption but also substantially increases government revenue. For example, a targeted increase of Rs 39 per pack, raising the average rate to around Rs 140 for economy brands and Rs 369 for premium brands, could reduce cigarette consumption by nearly 7 percent and bring in an estimated Rs 67 billion in additional revenue. This revenue could be directly reinvested in health services, disease prevention programs, and infrastructure. The government's decision to hold back on increasing cigarette taxes, despite the health risks and economic opportunity, reflects a worrying pattern of inaction. It suggests that political considerations or lobbying pressures may have outweighed long-term fiscal and health imperatives. In a country where tobacco consumption contributes to over 160,000 deaths annually and disproportionately affects the poor, failing to revise cigarette taxes is a missed chance to use fiscal tools to improve both public health and equity. Similarly, the absence of new taxes on sugary beverages and processed foods, despite their well-documented contribution to Pakistan's growing non-communicable disease crisis, reinforces the perception that the government has shied away from confronting powerful industry interests. This reluctance undermines broader efforts to promote preventive health and reduce long-term medical costs, which are increasingly borne by low- and middle-income households. From a macroeconomic perspective, the budget's overall trajectory leans toward short-term fiscal stability but lacks the bold, forward-looking investments needed to address structural vulnerabilities. While allocations for debt servicing and defense remain protected, social sector development, particularly in health, continues to be deprioritized. This imbalance suggests a recurring policy bias that views health as a discretionary expense rather than a strategic investment. In times of economic constraint, governments face difficult choices. However, smart fiscal policy does not mean cutting essential development expenditures, it means spending more wisely and protecting sectors that yield long-term returns. Health is one such sector. Delayed infrastructure, inadequate surveillance systems, and a weakened public health response capability may not show immediate consequences in budget sheets, but they will manifest in slower human capital development and greater costs down the line. Conclusively, while the Budget 2025-26 reflects a certain degree of fiscal discipline, the decision to reduce health sector development spending and to leave cigarette taxation untouched is both short-sighted and economically risky. Pakistan cannot afford to treat health as a secondary priority. A more strategic and balanced approach is needed, one that protects and promotes public health as a critical enabler of sustained economic growth and national resilience. Copyright Business Recorder, 2025
Business Recorder
2 days ago
- Business
- Business Recorder
GST on imported solar panels reduced to 10pc
ISLAMABAD: Deputy Prime Minister and Foreign Minister Ishaq Dar said that the digital sales tax on services would remain within the jurisdiction of provinces and proposed general sales tax (GST)on solar panels has been reduced from 18 per cent to 10 per cent. Speaking on the floor of the National Assembly on Wednesday, Dar said that after detailed discussions with coalition partners and relevant stakeholders, consensus had been reached on resolving several contentious budgetary issues. He said that as part of the revisions, it was agreed that the imposition of digital sales tax on services falls under the constitutional domain of provincial governments. 'The concerns regarding digital taxation were valid. We held in-depth consultations with all stakeholders, including the Federal Board of Revenue (FBR), and it has been decided that the matter will be clearly addressed in the finance minister's budget winding-up speech.' NA panel rejects 18pc GST on solar panels He said that the earlier proposal of imposing 18 per cent general sales tax (GST) on solar panels had sparked considerable debate. Upon review, he said that it was revealed that 54 per cent of components used in solarisation were already taxed under the existing regime, and the 18 per cent tax applied only to the remaining 46 per cent. However, after mutual consultations, we have now proposed reducing the solar GST from 18 per cent to 10 per cent, he announced. The deputy prime minister said that tax proposals are essential for revenue generation, and any relief in one area necessitates compensation elsewhere. He pointed out that when the cabinet found the initial proposal of a six per cent salary increase for government employees insufficient and raised it to 10 per cent, corresponding budgetary adjustments also had to be made. 'We must move forward collectively. Our approach is rooted in consensus and cooperation.' Highlighting another key issue, he said it was decided to maintain funding for proposed universities in Sindh under the Public Sector Development Programme (PSDP) at Rs4.7 billion through the Higher Education Commission (HEC). He said that fund would be released for the universities. The deputy prime minister acknowledged valid concerns raised by the members of the house about the closure of the Public Works Department (PWD) and confirmed that the Pakistan Infrastructure Development Company Limited (PIDCL) would now oversee all federal development projects across provinces. He said that the PIDCL was initially formed for Sindh, but its mandate has now been expanded to oversee development projects across all provinces. Dar concluded by reaffirming the government's willingness to address genuine concerns through mutual dialogue and constructive engagement. Pakistan People's Party (PPP) senior leader Syed Naveed Qamar thanked Prime Minister Shehbaz Sharif and Deputy Prime Minister Ishaq Dar for accommodating the proposals of the party and Sindh government. 'We had wanted to reduce all 18 per cent tax on solar panels but it cannot do so. After approval of budget, a committee will be formed to discuss further reduce tax on solar panels.' He also acknowledged the government's decision to expand the mandate of the Pakistan Infrastructure Development Company Limited (PIDCL) to all provinces, instead of limiting it to Sindh, effectively addressing another PPP concern. Aijaz Hussain Jakhrani highlighted the steps being taken by Sindh government for development of Karachi including its health infrastructure. He said that we also want to eliminate arrest power of Federal Board of Revenue (FBR). He also said that the Sukkur-Hyderabad Motorway is a vital need of the people and urged the authorities to pay attention to the project. Earlier, legislators from both opposition and treasury benches called for the establishment of Special Agriculture Zones, IT Facilitation Centres nationwide, increased farmer support, and funding for churches and temples to promote economic growth and social inclusion. Resuming general budget discussions on the fifth day in the National Assembly, Dr Zulfikar Ali Bhatti of PML-N stressed the need to develop rural areas and strengthen the agricultural sector. He proposed the establishment of Special Agriculture Zones nationwide, equipped with all necessary facilities to enhance agricultural productivity. He also advocated for providing incentives to farmers. Additionally, he called for the creation of IT facilitation centres in rural regions and the implementation of skill development programs for youth, particularly in these areas, to promote self-sufficiency. Fatehullah Khan of PPP strongly denounced Israel's aggression against Iran. Drawing attention to the suffering of flood victims in his constituency, he urged the government to provide compensation to those affected. Awais Haider Jhakar of the Sunni Ittehad Council (SIC) highlighted the challenges faced by farmers and criticised government policies that have contributed to a decline in agricultural production. Sanjay Parwani of the MQM criticised the government for failing to allocate what he described as even a single penny for the country's churches and temples in the 2025-26 federal budget. Abdul Ghafoor Haideri of JUI-F urged the Deputy Speaker Ghulam Mustafa Shah to issue a ruling demanding strict punishment for the miscreants involved in the attempted abduction of Maulana Fazlur Rehman's son and called for the immediate arrest of those responsible. PPP's Zulfiqar Ali Behan called for the imposition of an agricultural emergency in the country and the removal of taxes on fertilisers to boost agricultural production. Chaudhry Mubeen Arif Jatt of SIC called for the immediate withdrawal of the proposed 18 percent GST on solar panels. He also highlighted the hardships faced by farmers, noting that their produce is being sold at prices lower than their production costs. Chaudhry Riazul Haq of PML-N demanded a review of the Federal Board of Revenue (FBR)'s excessive powers and emphasised the need to lower fertiliser prices. Sohail Sultan said that it is the government's duty to provide relief to the people. He urged the government to increase the monthly income of labourers and suggested including youth programmes in the current budget. Parliamentary Secretary Sajid Mehdi lauded the armed forces and their chiefs for performing outstanding performance against the Indian aggression against Pakistan. He said that Pakistan is far behind in modern agriculture, lamenting that we cannot even produce the seed of any crop. He linked the development of the country with the agriculture sector, adding, we cannot progress unless we develop agriculture sector. He said that a small relief was given to farmers in the shape of solar power but the government imposed tax on this facility which is injustice. He demanded that the pesticides and fertiliser be tax-free. Mahtab Akbar Rashdi, Muhammad Moeen Wattoo, Rai Hassan Nawaz Khan, Chaudhry Anwarul Haq, Nasir Iqbal, Musa Gilani, Ali Jadoon, and others participated in the budget debate. Copyright Business Recorder, 2025
Business Recorder
3 days ago
- Business
- Business Recorder
Digital sales tax stays with provinces, solar GST cut to 10%: Dar
Deputy Prime Minister and Foreign Minister, Senator Muhammad Ishaq Dar on Wednesday said that the digital sales tax on services would remain within the jurisdiction of provinces, while the proposed 18% GST tax on solar panels had been reviewed and revised down to 10% following consultations. Speaking in the National Assembly, Senator Dar stated that after detailed discussions with coalition partners and relevant stakeholders, consensus had been reached on resolving several contentious budgetary issues. As part of the revisions, it was agreed that the imposition of digital sales tax on services falls under the constitutional domain of provincial governments. 'The concerns regarding digital taxation were valid. We held in-depth consultations with all stakeholders, including the Federal Board of Revenue (FBR), and it has been decided that the matter will be clearly addressed in the Finance Minister's budget winding-up speech,' he said. Mian Zahid concerned over proposed 18pc tax on solar panels Dar further clarified that the earlier proposal of imposing 18% General Sales Tax (GST) on solar panels had sparked considerable debate. Upon review, it was revealed that 54% of components used in solarization were already taxed under the existing regime, and the 18% tax applied only to the remaining 46%. However, after mutual consultations, we have now proposed reducing the solar GST from 18% to 10%, he announced. He emphasized that tax proposals are essential for revenue generation, and any relief in one area necessitates compensation elsewhere. He pointed out that when the cabinet found the initial proposal of a 6% salary increase for government employees insufficient and raised it to 10%, corresponding budgetary adjustments also had to be made. 'We must move forward collectively. Our approach is rooted in consensus and cooperation,' he said. enter link description here Highlighting another key issue, Dar said it was decided to maintain funding for a proposed university in Sindh under the Public Sector Development Programme (PSDP) at Rs 4.7 billion through the Higher Education Commission (HEC). He also acknowledged valid concerns raised by MNAs regarding the closure of the Public Works Department (PWD) and confirmed that the Pakistan Infrastructure Development Company Limited (PIDCL) would now oversee all federal development projects across provinces. He said, while PIDCL was initially formed for Sindh, its mandate has now been expanded to oversee development projects across all provinces. Senator Dar concluded by reaffirming the government's willingness to address genuine concerns through mutual dialogue and constructive engagement. Meanwhile, Pakistan Peoples Party (PPP) MNA Syed Naveed Qamar thanked Prime Minister Shehbaz Sharif and Deputy Prime Minister Ishaq Dar for accommodating key PPP and Sindh government budget proposals. Speaking in the National Assembly, Qamar said the government accepted major demands raised by PPP lawmakers during the budget debate. He welcomed the reduction of proposed sales tax on solar equipment from 18% to 10%, aligning with the party's stance. He also acknowledged the government's decision to expand the mandate of the Pakistan Infrastructure Development Company Limited (PIDCL) to all provinces, instead of limiting it to Sindh, effectively addressing another PPP concern.
Business Recorder
3 days ago
- Business
- Business Recorder
IMF agreed to spare agriculture sector from taxes, says PM Shehbaz
Prime Minister Shehbaz Sharif on Wednesday said the government successfully convinced the International Monetary Fund (IMF) to exempt Pakistan's agriculture sector from taxation, despite persistent demands from the global lender. 'We informed the IMF that the government will not impose any tax on the agriculture sector, including fertiliser and pesticide. I am happy to convey that the IMF, despite its insistence, agreed to our terms,' said PM Shehbaz, while addressing the federal cabinet meeting. He said that the agriculture sector is 'already under pressure' in Pakistan, thus protecting it was necessary. The prime minister shared that the salaried class earning between Rs 600,000-1.2 million will pay 1% income tax annually, as compared to 5% imposed in FY25. Whereas, the salaries of government employees have been raised by 10%. However, this contrasts with an earlier announcement by Finance Minister Muhammad Aurangzeb, who, during his budget speech for FY26, stated that the tax rate for this slab will be 2.5% income tax, contrary to 1% mentioned in the Finance Bill 2025. Last week, Pakistan unveiled its federal budget 2025-26 'for a competitive economy', targeting a modest 4.2% growth for the coming fiscal year, compared to 2.7% expected in the outgoing FY25. Numbers speak: Sindh agriculturalists spend more on vehicle registration, pay less in income tax Addressing the cabinet, PM Shehbaz also touched on rising regional tensions, saying that the government increased its fiscal space to meet the country's defence needs amid ongoing tensions with India. 'It is a dire need of the time,' he said. Similarly, the government has allocated Rs1 trillion under the Public Sector Development Programme (PSDP). 'We need to honour commitments made with our partners,' the PM said. He said that Pakistan has successfully averted a sovereign default and is now moving ahead on a sustainable path.
Business Recorder
3 days ago
- Automotive
- Business Recorder
Numbers speak: Sindh agriculturalists spend more on vehicle registration, pay less in income tax
In a revealing fiscal projection, the Sindh government has said it will collect Rs9.35 billion in motor vehicle registration fees in the outgoing fiscal year ending June 30, 2025. That is more than double the Rs4 billion to be collected from income tax on the province's vast agriculture sector, according to budget documents. The figures highlight a long-standing wealth imbalance, suggesting people who are classified in middle and upper agriculture income brackets and rural elite earn and spend significantly on their lifestyle, but their tax contributions remain surprisingly low. The situation has resulted in a climbing tax burden on tax compliant industrial and services sectors as well as individuals earning salaries from non-agriculture sectors. The provincial government is set to collect comparatively higher revenue from motor vehicle registration fees despite the fact that the tax is charged at lower rates — ranging from 1% to 5% of the value of vehicles, depending on engine size. In contrast, agriculture income is taxed at significantly higher rates, from 15% to 45%, effective January 1, 2025. Additionally, a super tax of 1% to 10% applies to high agricultural incomes, while corporate farming is taxed at rates between 20% and 29%. Agriculturists remain minimal contributors to provincial tax revenues During the first half of FY25 (July–December), the applicable agriculture income tax ranged from 5% to 15%. Yet, agriculturists continue to contribute disproportionately little to provincial tax revenues. Agriculture remains a big source of income for almost half of the total provincial population (55.7 million) living in rural areas including poor farmers, landlords and individuals as well as businesses engaged in large-scale agricultural production including livestock. Muhammad Abrar Polani, an auto analyst at Arif Habib Limited, estimated that some 40% of the total vehicles sold nationwide are purchased by the people living in rural areas across the country. People living in rural Sindh buy around 40% of the total sold in the province. Other analysts said car purchasing is at peak in rural areas at the time of harvesting winter and summer crops, as well as around Eid-ul-Adha when farmers sell livestock mainly in urban centers. Hamdan Ahmed, an auto analyst at Optimus Capital Management, said in a commentary this week that agriculture season and development (PSDP/public sector development programme) spending fueled volumes growth in sale of passenger cars, SUVs (Sports Utility Vehicles) and LCVs (Light Commercial Vehicles) in May 2025. Auto sales (excluding tractors, buses and 2/3 wheelers) improved 38% year-on-year to 15,396 units in May, 'supported by the easing of highway closures from last month's canal protests, PSDP spending in the last months of FY25, (and) 'wheat harvest' despite pre-budgetary expectations.' Numbers reveal deeper reality As cars continue to fill garages in rural Sindh while collection of revenue in income tax on agriculture remain significantly low, the province's fiscal data tells a deeper story — of wealth that's visible on roads, but not reflected in the tax rolls. Latest estimates suggest the share of agriculture in Pakistan's gross domestic product stands at around 23.54% in FY25, while its share in revenue in taxes remained around 1%. Since agriculture income tax remains a provincial subject, Federal Finance Minister Muhammad Aurangzeb said the provinces have done legislation for income tax on agriculture, expecting a significant increase in collections in the next fiscal year starting July 1, 2025. In contrast to Aurangzeb's projection, the Sindh government has targeted to collect Rs8 billion income tax on agriculture at in the next fiscal year (FY26) starting July 1, 2025. This is still low compared to the motor vehicle registration fees to be collected at Rs9.35 billion in both outgoing FY25 and upcoming FY26. All four provincial governments have legislated agriculture income tax recently in compliance with the federal government commitment with International Monetary Fund (IMF) to increase tax collection to Rs14.307 trillion (10.7% of GDP). The Sindh government, however, criticized the federal government for the commitment, saying it should have taken provinces into confidence before making such promises. The agriculture income tax is projected to make agriculture produces expensive, as people belonging to the sector may pass on the tax impact to end-consumers, it was learnt. A major portion of the motor vehicle registration fee was earned from passenger cars, SUVs and LCVs segment, according to Sindh's Excise, Taxation and Narcotics Control Department, which collects the fee in the range of 1% to 5% of the value of the vehicle. The department books small collections from the registration of tractors at Rs2,000/unit and motorcycles in range of 0.5% to 2% of the value of the two-wheelers.
