Budget 2024-25 and Its Impact on Pakistani Nation

The Finance Bill 2024-2025, presented in the National Assembly on June 12, 2024, was approved and became the Finance Act 2024 on June 28, 2024.

The recently approved federal budget for the fiscal year 2024-25 has sparked widespread discussions and debates, leading to significantly impacting the lives of Pakistani citizens.  

The coalition-led federal government touts it as a step towards fiscal consolidation and economic growth. However, this budget’s main aim is to secure the long-term financial loan package from the International monetary fund (IMF).

The 2024-25 federal budget in Pakistan will have significant implications for citizens. Let’s explore how these measures will impact various aspects of citizens’ lives:

1. Higher Tax Rates for Non-Salaried Individuals and AOPs:

• One of the significant changes in the new budget is the revision of tax rates for non-salaried individuals and Associations of Persons (AOPs).
• The tax rate has been increased from 35% to 45% for non-salaried individuals and AOPs, except for professional firms regulated by law, which will face a maximum tax rate of 40%.
• This increase aims to generate additional revenue for the government but may place a higher financial burden on small business owners and freelancers who fall under these categories​​.

2. New Penalties for Non-Filers:

• To enforce tax compliance, the new budget introduces several penalties for non-filers.
• These include restrictions on foreign travel, blocking of mobile SIM connections, and discontinuation of utility services.
• Such measures are expected to increase the tax net but may also create challenges for individuals who are unable to file their returns on time due to various reasons​​.

3. Changes in Capital Gains Tax on Property Sales:

• The capital gains tax on the sale of properties acquired on or after July 1, 2024, has been set at 15% for filers, while non-filers will face a variable tax rate ranging from 15% to 45%.
• This change is intended to streamline property transactions and encourage more individuals to file their tax returns.
• However, it could also deter real estate investments, particularly among those who have not been regular filers​​.

Impact on Different Sectors:

4. Real Estate:

• The real estate sector is one of the most affected by the new budget.
• With the introduction of higher capital gains taxes and penalties for non-filers, the government aims to bring more transparency and regulation to this sector.
• While these changes may lead to short-term disruptions, they are expected to foster a more stable and documented real estate market in the long run​​.

5. Salaried Individuals:

• This budget has significantly altered the tax rates for salaried individuals, which will be a huge burden on the middle class.
• However, increased indirect taxes and inflationary pressures would further affect their disposable income.
• The overall economic environment created by the budget will influence job security and wage growth in various sectors.

6. Businesses and Corporations:

• For businesses, especially exporters and large corporations, the budget brings a mix of challenges and opportunities.
• Exporters are now under the normal tax regime, and the minimum tax on export proceeds has been set at 1%.
• Additionally, high-income non-salaried individuals and AOPs with earnings over Rs. 500 million will face an effective tax rate of around 60% due to the introduction of super and additional taxes.

Social Impact:

7. Inflation and Cost of Living:

• As the government implements measures to increase revenue through higher taxes and reduced exemptions, the cost of living is expected to rise.
• Items that were previously exempt from sales tax, such as certain medical and diagnostic kits and stationery items, will now be taxed, potentially increasing their prices​​.

8. Employment and Wages:

• While the budget aims to stabilize the economy and boost government revenues, its impact on employment and wages remains to be seen.
• Increased taxation on businesses may lead to reduced investment in new projects, affecting job creation.
• On the other hand, it is to be seen how this budget would succeed in creating a more robust economic environment, that could eventually lead to better job opportunities and wage growth.

The Pakistan Budget 2024-2025 introduced significant changes to boost tax revenues and enhance compliance. While necessary measures for health, education, and human development lacks reforms which pose significant challenges for these sectors.

Non-salaried individuals and property owners face an increased tax burden. Stricter penalties for non-filers underscore the government’s focus on broadening the tax base.

The social and economic impact depends on implementation and the broader environment. Citizens and businesses must stay informed and adapt. Long-term success hinges on transparency and fairness.