Budget 2023-24: A few goodie bags won’t undo the damage

Every year, the federal budget is a cruel reminder of the Pakistani economy’s descent into chaos and the meaninglessness of numbers. The mediocrity of the size of outlays, the unrealistic targets and the crushing burden of debt are all recurring features now, with no end in sight to this madness. However, unlike all previous editions, this budget was unique in one respect: the focus on information technology. The finance minister called it the “engine of growth” and set its promotion as one of the guiding principles. This is in stark contrast to the yesteryears when one would struggle to find more than a handful of mentions on the sector. For starters, it extended the concessionary fixed tax rate at 0.25pc to export IT services until June 2026. In contrast, the Pakistan Software House Association (P@SHA) had asked for a complete exemption in its recommendations. In Islamabad Capital Territory, the sales tax has been proposed to be reduced by 10 percentage points to 5pc. On the other hand, the industry body’s demand regarding the import of hardware was met. Well, at least partially. The budget has proposed that IT and enabled service companies can import hardware and software of up to 1pc of their exports without paying any tax, but capping it at an annual $50,000.