Fiscal policy of Pakistan 2015-16

3. Fiscal Policy of Pakistan
Definition
According to Semuelson: fiscal policy is concerned with all
those activities which are adopted by the government to collect
revenues and make the expenditures so that economic stability
could be attained without inflation and deflation”

4. Objectives of fiscal Policy
1.Economic growth
2.Full employment
3.Optimum allocation of economic resources
4.Increasing rate of investment (6.50% - may 2015)
5.Reducing inequality of income and wealth
6.Controlling inflation

5. Tools of Fiscal policy
Government
expenditures
Government
revenues
Non tax
revenue
Tax revenue
Non-
Development
Development

7. Budget of Pakistan 2015-16
o Budget : An estimate of costs, revenues, and resources over
a specified period, reflecting a reading of future financial
conditions and goals.
Process of preparing budget of Pakistan:
1. Preparing of budget
2. Consideration debts and approval of budget
3. Communication of grant
4. Execution of budget
5. Post budget allocation
6. Post audit

8. Budget of Pakistan
Revenues:
• 4.451 economic growth is expected
(direct taxes 13457 billion) and (indirect
taxes 1755 billion)
Expenses:
• Pension increased by 7.5%
• Markup rate of Business Youth
Loan Scheme reduced to 6%
• Rs600 billion for agriculture sector.

9. • Rs 20.88 billion for health sector.
• Rs71.5 billion for education
• Rs 159.6 billion for national high way
authority
• Rs151 billion for security for CPEC route
• Rs78 billion for Pakistan Railways
• Rs100 billion for TDPs
• Rs 30.4 billion for Pakistan atomic energy
commission
• Rs20.5 billion for HEC
• Rs 112.28 billion for wapda
• Rs 19600 mw for electricity

11. Government expenditures
• Government expenditure is the spending made by the
government to achieve the fiscal objectives and increase the
general welfare of the people
• Basic objective of these spending is the welfare of the society
• Total expenditures incurred during 2015-16 Rs 4,451 billion

12. Types of government expenditures
Development or capital
expenditure
Incurred for development purpose.
Include expenditures incurred on long
term planning projects
• Irrigation
• Transport
• Communication
• Industrial and agricultural
development
• Railway, social welfare ,health
projects, education schemes
• and on the projects of water ,gas and
electricity etc.
• 2015-16
Rs 969
billion
• The
share in
total
budget
outlay
was
21.8%

13. Include expenditures incurred on day
to day functioning:
• Defense
• Economic, community and social
services
• Maintenance of law and order,
• General administrator
• Debt servicing
• Government subsidies etc.
Non Development or current
expenditure
Current
expenditure
2015-16
Rs 3,482
billion.
• The
share in
total
budget
outlay
was 78%

14. Government expenditures financed by these sources
• Internal source: include recoveries of advances and loans,
floating and permanent debt ,savings schemes of the
government etc.
• External source: Foreign aids which includes project aid
,technical aid ,grants etc.

16. Direct taxes
Disadvantages
• Lump sum amount
• Evasion
• Arbitrary
Advantages
• Economical
• Fairer
• Elasticity
Definition:
Direct tax is the tax that is directly paid by
the person on whom it is imposed.
And direct tax is current ratio is 0.8%.

17. Types of Direct taxes
•
There are four types of direct tax.
o Income tax
this type of tax current ration is 20%
o Property tax
this type of tax current ratio is 0.0%
o Corporate tax
this type of tax current ratio is 33%
o Wealth tax
this type of tax estimated on total
wealth of a person.

19. Indirect taxes
Disadvantages
• These taxes are paid by
everyone.
• Indirect taxes are regressive
in nature.
• Indirect taxes are
inflationary.
Advantages
• Indirect taxes evasion is
almost impossible.
• Indirect taxes are not
painful.
• Indirect taxes are equitable
and elastic.
Definition:
Indirect tax is the tax which is not paid by the
person on whom it is imposed and its burden is shifted to
someone else

20. Types of Indirect taxes
Sales tax : A sales tax is a consumption tax
imposed by the government on the sale of goods and
services.
Custom duty : Customs taxes are applied to
imported and exported products.
Excise duty: it imposed on the producer and is
shifted to the consumer

22. Non-Tax revenue
• Income from property and enterprise
• Profit from post office and telegraph
• Trading profit
• Interest receipts
• Surcharges