ISLAMABAD - Following is the text of Budget Speech 2018-19, delivered by Minister for Finance Dr Miftah Ismail here at the National Assembly on Friday.

1. It is my honour to present today the sixth budget of the PML(N) government to this Parliament. It is, indeed, a historic moment for the nation and the Parliament to celebrate.

Despite challenges, we have achieved a highest growth in thirteen years, low inflationary environment, and overall macro-economic stability. I congratulate the nation and the Parliament.

2. Presentation of the budget 2018-19 is a solemn obligation of the present government. It is incumbent on this Parliament, before its term expires, to debate and pass Annual Budget for next year.

Presentation of Federal budget is essential for provinces to estimate Federal fiscal transfers without which provincial government can neither formulate their budgets, nor carry out their business. Passage of the budget is necessary for financial stability and continuity of government machinery.

The next elected government will be free to make  changes in the budget priorities.  

3. The budget, being presented today, reflects the vision of Mian Nawaz Sharif and aspirations and hopes of the people of Pakistan who voted for him as their Prime Minister in 2013. His absence today in the House is dearly missed.

4. I would like to take you back to May 2013 when we inherited a collapsed economy, low growth, high inflation and high fiscal deficit. Foreign Exchange reserves were at a historic low. International default seemed imminent and was widely predicted.

5. Let me remind this House that during the five years preceding 2013, average inflation was 12% and average GDP growth was 2.8%. Even worse, the country  was in grip of a protracted energy crisis. There was 12-18 hours of electricity  load-shedding in urban and rural areas. Our country was facing large scale industrial shutdowns and labour layoffs. My farmer brothers did not have electricity to run  tube-wells. My sisters in urban areas did not have gas to heat hearths and cook food for their children.

6. Domestically, terrorism was widespread, and people were not feeling safe in their houses. Corruption and bad governance was common. Doom and gloom  was pervasive, and nation’s morale was at the lowest.

7. The PML(N) came into power in 2013 and immediately embarked upon a home-grown agenda. Economy, energy and good governance were the core  elements of that agenda. Under the leadership of Mian Nawaz Sharif we took on the challenges head on. For five years, we worked long and hard, took painful decisions and never allowed our personal interests to be our preference.

There has been only one motivation and that is serving the people who are the real masters in a democratic dispensation.

8. I will now present before this House the main achievements of our government in the area of economy; a. Real GDP Growth. Last year, our Government achieved GDP growth of 5.4% which was the highest growth rate in last 10 years. In contrast, the average GDP growth during the period 2008-12 was a paltry 2.8% per annum. For this year, our growth is projected 5.8% which is the highest in the last 13 years. This places Pakistan among the fastest growing economies.

The high growth rates over the last 5 years have produced unprecedented economic expansion. Size of the economy expanded from Rs.22,385 billion in FY2013 to Rs.34,396 billion in FY2018, while per capita income increased from Rs.129,005 in 2013 to Rs.180,204.

Today Pakistan’s economy is 24th largest economy in the world.

b. Agriculture: Agriculture is the mainstay of our economy. Agriculture sector has shown the highest growth in the past 18 years of 3.8%. All major cash crops including cotton, rice, and sugarcane have contributed to this growth. This is the result of prudent policies pursued by our govt during the last five years. In addition a special Kisaan package was announced by Mian Nawaz Sharif in 2015-16.

Under this package, cost of fertilizers and pesticides were reduced, and cheaper credit was made available, and cash support was given to rice and cotton growers.

INDUSTRY

Industrial production grew by 5.8% this year. This growth is the highest in a decade. It is driven by historically low interest rates and uninterrupted supply of electricity and gas after many long years of load shedding and darkness. A robust industrial sector is today generating several thousand additional jobs for our youth.

d. Services.

Services sector, which includes banking, retail, transportation etc. witnessed a remarkable growth of 6.4%. You will not be surprised now if I tell you that this too is one of the highest in a decade.

e. Inflation: Inflation is the biggest tax on the poor people of Pakistan. Alhamdolilah, we have been able to curtail average inflation to less than 5 percent in the past five years, compared to 12 percent between 2008-13. In the first nine months of this year, inflation was only 3.8 percent while food inflation was only 2 percent. Over our last 5 years, people have enjoyed an unprecedented period of price stability.

f. Fiscal Deficit: In FY2013, fiscal deficit was 8.2% of GDP. Our government pursued a policy of financial prudence and fiscal consolidation. During the current year, fiscal deficit will be contained below 5.5% of GDP. Public money is a trust and we will continue to spend it prudently.

g. FBR Revenues: In FY2013, FBR tax collection was Rs.1,946 billion. For the current fiscal year, FBR revenue is projected to increase to Rs.3,935 billion which is two times increase in 5 years. Tax-to-GDP ratio which was 10.1% in 2013 will increase to 13.2% this year. Such phenomenal increase in tax collection in 5 years is not a small achievement. I want to thank taxpayers of Pakistan for this achievement.

h. Policy Rate of State Bank of Pakistan: Policy rate came down from 9.5% in June 2013 to 5.75% in 2017, which was lowest in many decades. Similarly, mark-up rates of Export Refinance Facility was reduced from 9.5% in 2013 to 3% in June 2016. Mark up rate on Long Term Finance Facility was also brought down from 11.4 % to 5-6%. Unprecedented low interest rates have allowed businesses and industry to grow and create jobs.

i. Agriculture Credit: Five years ago, credit given to agriculturists was Rs.336 billion. At the end of February 2018, it stood at Rs.570 billion and it is expected to increase to Rs.800 billion by June 2018. In addition, interest rate of agriculture credit was also reduced significantly.

j. Credit to Private Sector: Credit to private sector has grown by 383 percent, from Rs.93 billion in 2013 to Rs.441 billion by April 2018.

k. Exports. Exports have been a challenging area of the economy due  to both internal and external factors. As a result of concerted efforts, export package of Rs.180 billion as well as exchange rate adjustments exports have increased by 13% increase in the first nine months of this year and 24% in March on shipment basis. We expect this momentum to continue.

l. Imports: Imports during the first nine months increased by 17%when compared with the same period last year.

Higher imports are mainly driven by an increase in import of POL products, machinery and raw materials. These imports are augmenting productive capacity of the economy for higher export volumes in the future. With the completion of the CPEC related projects this year and the recent exchange rate adjustment, imports are likely to moderate.

m. Current Account: Increase in productive imports has led to a widening of current account deficit to $12 billion in the first nine months of the current fiscal year. Government has made adequate efforts to finance this deficit. I am certain that the foreign exchange reserves will be higher than their current level.  

n. Foreign Direct Investment: Foreign Direct Investment increased to $2.7 billion in FY2017 from $1.3 billion in 2013. During the first nine months of the current fiscal year, it has increased to $2.1 billion as against $1.9 billion during the same period last year. Increased FDI reflects confidence of international investors in policies of the present government.

o. Workers’ Remittances: Remittances by Pakistani’s abroad jumped from only $13.9 billion in 2013 to $19.3 billion last year. This year, we expect to end the year at more than $20 billion which will be a record for Pakistan.

p. Foreign Exchange Reserves: When the government took office, the foreign exchange reserves had depleted to only $6.3 billion. Reserves increased to $19.4 billion by October 2016. However, the increased trade deficit has impacted the build-up of reserves. Presently reserves held with SBP stand at $11 billion. The Government is taking necessary measures to ensure reserve adequacy.

q. Pakistan Stock Exchange: Pakistan Stock Exchange performed exceptionally well to reach an all-time high of 53,124 points in May 2017 from 19,000 in May 2013. The market capitalisation reached almost $100 billion. As a result of political events, the stock exchange plunged to 37,919 in December 2017. However, the index has recovered to almost 46,000 points.

r. Registration of new Companies: This year 8,349 companies were registered till March 2018 compared to 5,883 companies in the same period last year. During the last 5 years 33,285 new companies were registered as compared to 17,079 registrations between 2008-13.

Registration of such large numbers of new companies reflects buoyancy of businesses.

s. Increase in Investment: Better governance, business friendly policies and improved security conditions have brought investors back to Pakistan.

China-Pakistan Economic Corridor is attracting large scale investments to key sectors of the economy including; energy, communication infrastructure, transportation, telecommunication, textile and construction. These investments addressed perpetual bottlenecks of energy and infrastructure and unleashed the growth momentum. A total of $223 billion were invested in the economy from both domestic and foreign sources over the five years as compared to $140 billion during 2008-13.

t. Energy Sector Development. Five years back, electricity was not available for 16-18 hours to our people and businesses. The biggest promise we made during the last election to the nation, was to eliminate electricity load shedding which stands fulfilled today. During the last sixty-six years of Pakistan’s history, a total of 20,000 megawatts of generation capacity was added. In a short-term of five years, we have added 12,230 megawatts of new generation capacity. Mian Nawaz Sharif, Khawaja Muhammad Asif and Chief Minister Punjab Mian Shebaz Sharif worked day and night for this success.

Structural Reforms during the last Five Years

9. To accelerate economic growth, Prime Minister Shahid Khakaan Abbasi has lately announced 5-point economic reform package through which taxes have been lowered. These are the biggest tax-cuts in the history of Pakistan. Some of the key features of this package are;

a. Tax rates on individuals have been lowered. Complete tax exemption has been given to people who earn upto Rs.12 lakh per year or Rs.1 lakh per month. This exemption limit, which was previously Rs.4 lakh per year has been increased three times to Rs.12 lakh per year. Tax will be levied at the rate of 5 percent for income between two and four lakhs monthly. People earning above four lakh monthly will be taxed at the rate of 15 percent.

In Pakistan highest tax burden was on the salaried middle-class which include teachers, doctors, lawyers, nurses, accountants. Reduced tax rates will significantly lower tax burden on this class.

b. New initiatives in data-mining are being initiated to identify individuals who, despite earning taxable income, are not paying their due share in taxes. Government will now monitor potential taxpayers’ financial records and issue notices on evidence of tax evasion.

c. Now that tax rates have been reduced and data-mining methods have been introduced to identify assets, we are providing last chance to declare undeclared assets held inside the country. Undeclared incomes earned before 30th June 2017 and held as local assets (gold, bonds, property etc.) can be regularized on payment of 5% of the value of the asset. Dollar account holders in Pakistan who have purchased dollars through undeclared money can regularize them on a payment of 2%.

d. Protection of Economic Reforms Act in 1992 was intended for liberalisation of economy and facilitation of foreign investment. This facility allowed free movement of foreign exchange in and out of the country without questions being asked. However, this law was misused by some elements for whitening of black money. We have plugged this loophole in the law. The law has been amended and now only the filers can make cash deposit in their foreign currency accounts. However, all inflows up to$100,000/year/person will continue without any questions from any agency about the source and enjoy tax exemptions. The FBR will have the right to ask for source of income from people bringing in more than $100,000/year/person.

e. We are also allowing people to declare their foreign undeclared assets at 3 percent and undeclared liquid assets at 5 percent.

f. To check under-declaration of land and property, the state is being given the power to purchase land and property at 100% of the declared value within six-months of its registration. Non-filers will be barred from procuring property above Rs.4 million. FBR rate on property is being abolished from 1st July 2018 and provinces have been advised to abolish DC rates. There will be a reduced tax incidence on property registration, with a maximum of 1% tax for filers. This reform measure is unprecedented and will help in documentation of the economy.

Budget Strategy

10. Following are the key targets of our budget strategy:

a. Real GDP growth rate of 6.2%

b. Inflation to remain below 6%

c. Tax to GDP ratio of 13.8%

d. Budget deficit of 4.9% of GDP

e. Net Public Debt at 63.2% of GDP

f. Foreign exchange reserves at $15 billion, and

g. Continuation of social protection programmes.

11. Our macroeconomic policy aims to address the imbalances of external account, while protecting economic growth. Over the medium-term we propose to continue reduction of fiscal deficit, maintain a cautious monetary stance, and embark upon next generation of reforms for strengthening investment climate, export promotion, and energy sector. Priority should be accorded to reducing losses in the public-sector enterprises and expanding tax base.

12. To achieve these goals, the following budget strategy is being proposed:

a. FBR tax revenue target is proposed to be fixed at Rs.4,435 billion which is to be achieved through tax administration and compliance and not through any new tax measures. Tax base will be enhanced while tax rates are being lowered.

b. The Government will continue investments in social protection - particularly Benazir Income Support Programme and continue initiatives for marginalised segments of the society through a targeted subsidy regime. For Benazir Income Support Programme, an amount of Rs.125 billion is being proposed in the budget, while Rs.179 billion has been earmarked as subsidies.

c. The Prime Minister’s Youth Scheme will continue. For this purpose, Rs.10 billion have been allocated.

d. Total size of the PSDP is proposed as Rs.800 billion however, additional resources of Rs.230 billion will be financed through autonomous organisation, Public Private Partnership, and other means. Investments in the water, road infrastructure, electricity sector and China Pakistan Economic Corridor (CPEC) will be protected.

After the 7th National Finance Commission (NFC) Award, fiscal space of the Federal Government shrunk by 10 - 11% while its expenditure could not be reduced. The provinces received an additional transfer of Rs.2.5 trillion in 8 years which otherwise could have been spent by the Federal government. The Federal government also had to allocate substantial resources for special security and rehabilitation of TDPs. Special Initiatives 2018-19:

14. Now I will present before the House special measures that we propose for the next year.

15. Actualising agriculture sector potential is imperative for sustainable higher GDP growth. Pakistan needs a second green revolution to achieve yield growth potential, investment in agriculture technology, research and development, cropping patterns more adaptable to climate change and in changing management and labour tenure practices.

16. A radical transition of agriculture sector can only be achieved moving away from subsidy driven approach to a market driven dynamic policy regime. Going forward Federal Government will leave the business of subsidies to provincial governments and will focus on building a conducive policy environment for research and development, productivity enhancement, market access, improvements in management, labour practices and technology. We are making a beginning by announcing the following measures:

a. Continuation of Incentives of FY 2017-18: A number of incentives were announced in Budget 2017-18 including in agriculture credits, exemption of customs duty on harvesters, removal of GST on imported sunflower and canola seeds etc. All these incentives shall continue to be available during 2018-19.

b. Uniform Rate of GST on all Fertilizers: Considering fertilizer as the critical farm input our government reduced the sales tax on fertilizer from a high of 17% to 4% on DAP, 5% on Urea and 9-11% on others. I am happy to announce that from 1st July there will be a reduced uniform GST rate of 2% on all fertilizers. This will eliminate distortions  in tax regime, further reduce fertilizer prices and promote use of balanced nutrients. c. It is also proposed to reduce GST on agriculture machinery from the current 7 percent to 5 percent. d. Further concessions in taxes and duties are being proposed for the dairy and livestock sector.

Details will be announced in Part II of this speech. e. Enhancing Cotton Production and Quality: Producing high quality and large quantities of cotton is central to economic growth and exports. In terms of climatic conditions, water and soil availability Pakistan enjoys a natural advantage we are 5th largest cotton producing country in the World, but in terms of exports textile products we are ranked amongst the lowest. We need to dramatically improve both quality and productivity to achieve higher export values.

The subject of cotton has been transferred to Ministry of National Food Security and Research from the Ministry of Textile Industry. We are working with provincial governments to formulate and enforce a policy to halt conversion of cotton growing area into sugarcane growing area. Plant Breeders Rights Act, which had been facing prolonged delays over the last 15 years, has been recently enacted by our government. The Plant Breeders Rights Registry established under this law will help in producing higher yield varieties of cotton and other crops locally through availability of better quality seed.

f. Tariff subsidy on Agriculture tube wells: Availability of water is necessary for crops. Government is presently providing electricity for agriculture tube well at reduced rates. During 2018-19, this scheme will continue in these areas where the Provincial Governments agree to share cost of subsidy on 50:50 basis.

g. Agriculture Research Support Fund: The Government is proposing setting up an Agriculture Research Support Fund with an initial allocation of Rs.5 billion. The Fund will provide financial grants for research and development of modern plant and seed varieties for achieving higher crop yields. The Fund will be jointly managed by Finance Division and Ministry of National Food Security and Research. h. Agriculture Technology Fund: The Government of Pakistan is also proposing to establish a separate Fund for indigenisation of agriculture technology with an initial allocation of Rs.5 billion.

The Fund will be jointly managed by Finance Division and Ministry of National Food Security and Research. It will work with partner organizations and promote indigenization of agriculture technology.

i. Revamping of Agriculture Research Organizations: Ministry of National Food Security and Research is working on a plan for restructuring and revamping of research organizations and institutes to convert them into world class state of the art platforms for research and development. Necessary financial support will be made available.

Export Promotion 17.

During the last five years we took several measures for promotion of textile and exports. These included reductions in markup rates of LTFF and ERF to historic lows of 5 percent and 3 percent respectively, duty free import of textile machinery, uninterrupted supply of gas and electricity for industries, zero-rating of five key export sectors, and introduction of export package of Rs.180 billion.

18. These were immediate measures to arrest decline in exports. We need to reset policy framework and move away from quick fixes approach to more robust, sustainable and market driven policy instruments. Going forward, we plan to rationalise subsidies and concurrently reduce cost of production. We are making a beginning through this Budget; a. Zero-Rating Regime: Five export sectors namely textiles, leather, sports goods, surgical goods and carpets shall continue to remain in zero-rated sales tax regime.

b. The government has decided to provide freight support on export of potatoes. Details will be announced subsequently. c. LTFF and ERF Rates: Reduced mark-up rates shall continue to be available as per SBP policy under Long Term Finance Facility and Export Refinance Facility respectively. d. Export Promotion Schemes under Textile Policy and Strategic Trade Policy Framework: Incentives under various schemes of Textile Policy 2014-19 shall remain available during FY 2018-19. Ministry of Commerce is also working on Strategic Trade Policy  Framework 2018-23.

An amount of Rs.10 billion is being allocated for various schemes under these policies.

e. Tariff Restructuring: Tariffs on various lines, which are mainly industrial raw materials, are proposed to be reduced. Details shall be presented in Part-II of Finance Bill. Tariff Restructuring shall increase competitiveness of exports and help in reducing the current account deficit. f. Export Sector Refunds: The following measures are proposed to overcome the issue of refunds of exporters:

i. We are moving towards zero rating of import materials for export sector which will significantly reduce creation of new refund claims. ii. Refund claims currently pending will be cleared in a phased manner over the next 12 months starting 1st July 2018. iii. After 1st July 2018 all new refund claims will be paid as per the time stipulated in law and regulations on monthly basis and there will be no delay. g. In order to facilitate exports, the government is working on a new package. Keeping in view the prevailing circumstances, this package will focus on increase non-traditional and value-added exports.

Financial Sector: 19. Remittances. Remittances from overseas Pakistanis are a major source of foreign exchange earnings. To further encourage remittances through formal channels, the Government has decided to introduce following incentive in FY2018- 19:

a. Prize Scheme for overseas Pakistanis: All home remittance transactions sent through commercial banks, exchange companies and other financial institutions will be included in monthly lucky draws. Details of the scheme are being finalized and shall be announced shortly by State Bank of Pakistan.

Peace and Security55. today Pakistan is more peaceful than it was five years ago. Our military and para-military apparatus has fought hard and laid their precious lives for our country.

Last hideouts in North Waziristan have been eliminated through operation Zarb-e-Azb. I would like to salute the Jawans, officers, civilians who have laid their lives for our today and future of our children.  56. Millions of people had to leave their homes in the areas of military operations. We will remember their sacrifices. The government wants to assure them that in this hour of need we will do our best to provide necessary rehabilitation and reconstruction facilities. Rs.90 billion have been allocated for this purpose in the budget 2018-19. 

Budget Estimates 2018-19

57. I would now like to present key numbers for the budget year 2018-19: a. The Federal gross revenue is estimated at Rs.5,661 billion. As compared to revised estimates of Rs.4,992 billion in 2017-18, this is higher by 13.4 percent. b. This includes FBR tax estimate of Rs.4,435 billion as compared to revised estimate of Rs.3,935 billion.

c. Out of the total revenues, the provincial governments share is estimated to be Rs.2,590 billion as compared to Rs.2,316 billion revised estimates for 2017-18, showing an increase of 11.8 percent. These resources will be utilized by the provincial governments in enhancing human development and security of the people. d. After transfer to provincial governments, the net revenue of the Federal Government is estimated at Rs.3,070 billion in 2018-19 as compared to revised estimates of Rs.2,676 billion in the current financial year.  e. Total Federal expenditure for 2018-19 is budgeted at Rs.5,246 billion compared to the revised estimates of Rs.4,857 billion for 2017-18, showing an increase of 8 percent. f. Interest payments for 2018-19 have been budgeted at Rs.1,620 billion against the revised budget of Rs.1,526 billion for 2017-18.

g. The defence budget is proposed at Rs.1,100 billion against the revised budget of Rs.999 billion in the 2017-18. h. Total size of Federal PSDP 2018-19 would be Rs.1,030 billion against revised estimates of Rs.750 billion. i. Provincial surplus is estimated at Rs.286 billion in 2018-19 against revised estimate of Rs.274 billion for 2017-18. j. Based on the above estimates budget deficit will be 4.9% of GDP as opposed to 5.5% of GDP of revised budget estimate in the financial year in 2017-18.  PART II  FBR Tax

58. Now I present part II of the speech which consists of tax proposals.

59. Before announcing relief measures specific to individual taxes I want to mention a few steps that will provide ease of doing business for the taxpayers and curtail the discretionary powers of the tax collectors.

60. Tax audit of a business involves considerable hassle and cost for the taxpayers. There are instances of taxpayers being subjected to multiple audits in successive years. In order to encourage compliant tax payers, selection for audit in respect of all three taxes; Income Tax, Sales Tax and Federal Excise Duty, has been made risk based and a case shall not be audited more than once in three years for each tax. This limitation will apply to selection of audit by the commissioner as well as FBR. The concept of composite audit will also be introduced to ensure that audit of tax affairs under all tax laws is undertaken simultaneously to avoid inconvenience to the tax payers. This approach shall serve as an encouragement for compliant taxpayers, and decrease the cost of compliance with tax laws.

61. Previously grant of stay by the Commissioner (Appeals) was subject to payment of 25% of tax liability. The condition has now been relaxed, and the payment is proposed to be reduced to 10%. It is expected that this will provide  substantial relief to taxpayers who are sometimes burdened with unrealistic tax demands.

62. Under the current law the decision of the ADRC is neither binding upon the FBR nor upon the taxpayer. It is proposed that composition of the members of ADRC may be changed so that retired judge of a High Court and tax professionals may be included in the Committee in addition to representatives from FBR.

63. As per the Sales Tax Act, any commissioner or chief commissioner has authority to appoint staff at the premises of taxpayer, and monitor sales and production. Complaints have been received on the misuse of this authority. Therefore, this authority is being withdrawn from commissioners and chief commissioners. Now only FBR will use this authority based on evidence of variations in sectoral averages.

64. Now I shall place before the House further relief and tax measures that are proposed to be introduced in the current Budget starting with income tax measures  

INCOME TAX

Relief measures

65. It is widely recognized that a substantial portion of untaxed money is parked in the real estate sector. Furthermore, the practice of under declaring the value of properties viz-a-viz their actual market value is rampant.

In a bid to address these challenges to ensure declaration of property transactions at actual market rate and discourage whitening of black money through investment in the real estate sector the Prime Minister had announced certain measures in his press conference on April 05, 2018.

Accordingly the following measures are proposed to be adopted: a. The property transactions are proposed to be recorded on the value declared by the buyer and the seller b. The FBR notified rates are proposed to be abolished c. At the Federal level, a one percent adjustable advance tax from the purchaser on the declared value is proposed to replace the existing withholding tax on sellers and purchasers. It is proposed that the non- filers may not be permitted to purchase property having declared value exceeding four million rupees.

d. The provinces have been requested to abolish the provincial rates for the collection of stamp duty and to collect a total of one percent tax under stamp duty and capital value tax on the value declared by the buyer and the seller e. In order to deter under-declaration and consequent loss of revenue, it is proposed that FBR may hold a right to purchase any property within six months of registration by paying a certain amount over and above the declared value which may be 100 percent in the fiscal year 2018- 2019, 75 percent in the fiscal year 2019-2020 and 50 percent in the fiscal year 2020-2021 and thereafter. f. In order to implement the above measures enabling provisions are proposed to be incorporated in the Income Tax Ordinance, 2001.

Detailed procedure and the date of coming into force of the above measures are proposed to be notified later. 

Gradual reduction in the rates of Super Tax

66. Super tax was imposed in 2015 for rehabilitation of internally displaced persons. It was continued in 2016 & 2017. Various organizations have demanded its abolition to reduce the effective tax rate. It is currently being charged @ 4% on banking companies & 3% on non-banking companies having income greater than 500 M. It is proposed that Super tax may be continued for the financial year 2017-18 but the rate may be reduced by 1% per year from financial year 2018-19 for both banking and non-banking companies.

Rationalization of Corporate Tax Rate

67. In consonance with the policy to reduce tax rates for individuals and AOPs, the Government has decided to likewise reduce corporate tax rates from 30% in tax year 2018 to 25% in tax year 2023. The corporate tax rate will be 29% in tax year 2019 and will be reduced by 1% each year up to tax year 2023.

Reduction in tax rate on undistributed profits

68. Tax on undistributed profits is charged @ 7.5% on accounting profit if at least 40% of after-tax profits are not distributed within 6 months of the end of the year.

Various professional bodies have insisted on relaxing the requirements to facilitate businesses in retaining earnings for investments. Therefore it is proposed that tax may be reduced from 7.5% to 5% and the condition of distributing 40% after-tax profits may be reduced to 20%.

Reduced rate of tax on REIT dividends

69. In order to promote Real Estate Investment Trust, the rate of tax on dividends issued to the unit holders by REIT is pro