This document provides an overview of macroeconomics concepts related to fiscal policy in Pakistan. It discusses key topics like the objectives, instruments, and impact of fiscal policy. It notes that Pakistan is facing budget shortfalls due to high government spending, lower tax revenues, and factors like tax evasion. To avoid increasing fiscal deficits, the document suggests that Pakistan could impose new taxes, increase utility prices, and decrease development spending.

1. Presentation Of
Macro
Economics
Presented
By:
Afeef
Javed
Hamza
Rehman
Butt
Sikander
Fiaz Ejaz
Sohail
Rashid
Taimoor
Khalid

2. Fiscal
Policy

3. 
 Fiscal policy is an important part of overall economic
Framework of country.
 The Fiscal policy is formed by Central Govt (Federal
Govt)----Ministry of Finance.
Introduction:

5. 
 Fiscal policy refers to the policy under which
government uses its expenditure and revenue
program to produce the desirable effect of national
income , production and employment.
“According to Arthur Smith”

6. 
 Taxes
 Direct tax
 Indirect Tax
 Fees
 Aids
 Fines
 Loan
Collection of Revenue:

7.  Development of country
 Expansion of Employment
 Fixation of Govt Policy
 Economic Growth
 Controlling Inflation
 Check imbalance the various sectors
 Reduce inequality the income and wealth
 Increasing the Investment
 Optimum allocation of Resources
Objectives of Fiscal Policy:

8. 
 Implementing the Fiscal policy of the Nation
 Govt revenue
 Expenditure
 Budget
 The Budget of the Govt is main instrument of the
Fiscal Policy.
Instrument or Tools of
Fiscal Policy:

9. 
 The Estimated Revenue and Expenditure of the next
year and the Future year of the Govt with specific
time.
 Fiscal policy involves the Revenue and Expenditure
pattern to achieve the range of Economics Objectives.
Budget:

10. 
Governments expenditure can be funded in a number of
different ways:
 Taxation of the population
 Non Tax
 Borrowing money from the population,resulting in a
fiscal deficit.
 External resources: Foreign grant and loans etc
Methodes of Raising
funds

11. 1) Direct:
Direct tax is the one paid directly to the Govt. By the
persons on whom it is imposed
Income Tax, Property Tax, Capital Value Tax etc
2) Indirect:
It is collected by an intermediary(such as a retail store)
from the person who bears the ultimate economic
burden of the tax(such as the customer).
Sales Tax
Types of Taxes

12. 
 Tax Evasion
It is an illegal practice where a person, organization or
corporation intentionally avoids paying his/her/its
true tax liability.
Common issue regarding
collection of taxes

13. 
 People do not want to disclose their true income
 Too many unlawful business activities such as drugs,
hoarding, black money, etc.
 No fear of punishment
 Complex tax structure
 Uncontrolled inflation and high cost of living
 Low level of literacy among tax payers
 Some economic sectors are exempted:
Agriculture,real estate and capital gain
Causes of Tax Evasion

14. 
The principal reason lies in the structural weaknesses
of Pakistan’s tax system which is:
 Complex
 Inefficient
 Unfair
Weakness of Tax System

15. 
 Lowering tax rates
 Taxing all value additions including services,not
just manufacturing sector
 Establish an effective and efficient tax system.
 Overcome the culture of tax avoidance and evasion
Principles of tax Policy

16.  Expansionary:
An increase in government purchases of goods and services, a
decrease in net taxes, or some combination of two for the purpose of
increasing aggregate demand and expanding real output.
Aggregate demand= consumption+investment+Govt spending+net Exports
 Contractionary:
A decrease in government purchases of goods and services, an
increase in net taxes, or some combination of the two for the
purpose of decreasing aggregate demand and thus controlling
inflation.
Types of fiscal Policy

17. 
Fiscal deficit is the difference between the government’s expenditures
and its revenues (excluding the money it’s borrowed). A country’s
fiscal deficit is usually communicated as a percentage of its gross
domestic product (GDP).
Fiscal Deficit=Govt. Spending –Govt. Earning
Causes of Fiscal Deficit
 High Govt. Spending
 Lower Revenue
 Inflation
Fiscal Deficit

18. 
Economist John Maynard Keynes believed that
deficits help countries climb out of economic recession.
On the other hand, fiscal conservatives feel that
governments should avoid deficits in favor of a
balanced budget policy.
Economist’s opinions

19. 
The deviation from initial estimates was largely on
account of three factors:
 underestimation of subsidies
 underestimation of interest payments
 overestimation of FBR tax revenue.
Factors of Deviation in
fiscal Deficit

20. 
 Increase in non-development expenditure
Why Pakistan is Facing
budget shortfall
32%
68%
Interest & Defense Total Expanditure
32%
Of the total expenditure is spend
on the Defense &
Interest Payments.

21. 
 Too many factories are closed or in partial
production for want of power and gas
 Tax Evasion by well performing industries
 Corruption by Tax Officials
 Law and Order causing burden on the Expenditure
side by way of compensation to the affected and
mobilization to send forces to such areas.
Why Pakistan is Facing
budget shortfall(Cont.)

22. 
 Govt should impose new taxes
 Increase the price of utilities
 Decrease in development spending
How Pakistan can avoid
Surge in Fiscal Deficit?

23. 
 Pakistan fiscal position worsened because of unexpected
events occurred on domestic and external scene.
 High proportion of revenues being spent on defense and
interest payments.
 Lower industrial productivity leads to lower tax
collection because of high interest rates.
 Pakistan needs to increase tax base by imposing tax on
agriculture and capital gain to increase revenue.
Conclusion