Sunday, July 14, 2013

Please-all budget hikes salary of civil servants, expands tax ceiling for salaried people

Finance Minister Shankar Koirala today announced a please-all budget for the fiscal year 2013-14 hiking the salary of civil servants by 18 per cent, except Rs 1,000 allowance, and increasing income tax ceiling for all salaried individuals.
The Rs 517.24-billion full budget – that is some 39.75 per cent more than the current fiscal year’s budget of Rs 404.82 billion – for the next fiscal year starting from July 16, has exempted income tax in an annual earning of Rs 200,000 for an unmarried person from earlier Rs 160,000, and Rs 250,000 for married ones from Rs 200,000, though they will be charged one per cent social security tax.
An unmarried person earning Rs 16,667 per month and a married person earning Rs 20,834 per month will now have to pay only one per cent social security tax, according to the 10th budget in the last six years after the Constituent Assembly (CA) election.
Likewise, after the hike, a lowest level of civil servants – peon – will get Rs 12,682 from earlier Rs 9,900, whereas the highest level of civil servants – chief secretary – will receive Rs 40,695 per month from earlier Rs 33,640. The hike in salary however, has increased the size of the budget out of the ceiling – provided by the National Planning Commission (NPC) – of Rs 506 billion, apart from pushing the price up hurting the general people.
Though, the budget has claimed to contain inflation at eight per cent, the hike in salary of the civil servants is expected to push the inflation up to double digit as the government has no effective mechanism to crack whip in the price hike.
Likewise, the technocrat government that has been formed for the second CA election has not changed the tax structures as suggested by the political parties, except for excise duty on cigarettes, alcohol and beer.
The former bureaucrat turned finance minister hiked excise duty by nine per cent in cigarettes without filter, 12 per cent in cigarettes with filter and 15 per cent in premium brand of cigarettes.
Likewise, the excise duty in beer has been increased by 11 per cent, whereas excise duty in alcohol items has been increased from 10.5 per cent to 15 per cent, based on brand and quality.
The budget has however, prioritised energy as it is the engine of growth. “Giving high priority to energy, the budget has allocated Rs 30 billion for energy projects,” Koirala said, adding that agriculture has been allocated Rs 21.40 billion, and irrigation has been allocated Rs 12.56 billion as the country has been dependent on rainfall for the agriculture. “It is expected to substitute the imports of agro products and boost exports too,” he added.
The country has been importing huge quantity of agro products, despite being an agrarian economy that employs two-third of the population. Likewise, Rs 200
per tonne has been increased in the import duty of cement – that has been witnessing more industries lately in the country – to discourage the imports and encourage the domestic cement industries. “The budget has also reduced customs duty by 0.5 per cent on 27 items to fulfill its World Trade Organisation (WTO) commitment,” the finance minister said.
Similarly, the budget has also prioritised physical infrastructure allocating Rs 35.27 billion to various priority one (P1) projects that has also included development of Pashupati, Lumbini and President Chure Development Programme, he said, hoping that with the expenditures of the government will help propel growth by 5.5 per cent.
But the country needs a growth rate of seven per cent to graduate to developing countries status – as has been the envisaged by the budget for the next fiscal year 2013-14 and third Three Year Interim Plan 2013-2016 – from the current Least Developed Countries (LDC) status.
To achieve 5.5 per cent growth, the government will spend Rs 85.10 billion under capital expenditure, that is 16.45 per cent of the total outlay, the finance said, adding that the government will spend Rs 353.42 billion under recurrent expenditures – that is 68.33 per cent of the total outlay – that is salaries and regular administrative expenses, and Rs 78.72 billion under financial management, which is 15.22 per cent of the total outlay.
The government has also increased the social sector expenditures as education received Rs 80.95 billion and health received Rs 30.43 billion.
However, to finance the expenses, the government is planning to mobilise Rs 354.50 billion revenue, Rs 69.54 billion from foreign grants, Rs 5.50 billion from principal repayment, and remaining Rs 87.70 billion budget deficit will be covered from foreign loan (Rs 43.70 billion) and domestic borrowing (Rs 43.87 billion).

The budget has also been expected to boost the confidence of private sector as the finance minister in his budget reaffirmed to create investment-friendly environment. “The private sector is the engine of economic growth and the budget aims to promote the private sector,” he said, adding that the budget will also address the mismatch problem of the traders.

Total Budget outlay – Rs 517.24 billion
Recurrent Expenditure – Rs 353.42 billion
Capital Expenditure Rs 85.10 billion
Financial Management Rs 78.72 billion

Revenue – Rs 354. 50 billion
Foreign Grants – Rs 69.54 billion
Principal Repayment –Rs 5.50 billion
Foreign Loan –Rs 43.70 billion
Domestic Borrowing –Rs 43.87 billion

Budget Target:
·        Economic growth – 5.5 per cent
·        Inflation – eight per cent

Sectoral Allocation:
·        Education – Rs 80.95 billion
·        Physical infrastructure – Rs 35.27 billion
·        Health – Rs30.43 billion
·        Energy – Rs 30 billion
·        Agriculture – Rs 21.40 billion
·        CA Election – Rs 16 billion
·        Irrigation –Rs 12.56 billion

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