EUR 23.18 For Business Accounts Only

Intermarket Perspective - Federal Budget FY18 - Pro-Agriculture Tilt in Election Year Budget

• Stock market related measures will have a mixed impact; a uniform CGT rate of 15%/20% for filers/non-filers may lead to higher turnover but 2.5ppt increase in tax on dividends to 15% is a negative. Proposed 10% tax on companies with less than 40% payout (cash or bonus) may lead to positives for minority shareholders.

• Measures for the corporate sector include: (i) 1ppt reduction in income tax rate to 30%, (ii) turnover tax raised from 1% to 1.25%, (iii) super tax extended for another year and (iv) tax credit upon listing extended to 4yrs. Sectors with a positive impact are Autos (OEMs & Parts), Tractors (pro-agri Budget),Telecom and Consumer (FMCGs).

• There is a clear pro-agriculture tilt to the FY18 Budget, which lacks incremental steps to incentivize exports. Key macroeconomic targets include (i) 6% GDP growth, (ii) inflation below 6%YoY, (iii) 14%YoY increase in FBR revenue with Tax-to-GDP rising to 13.7%, (iv) fiscal deficit at 4.1% of GDP and (v) 4m import cover. We think these targets are broadly optimistic especially fiscal deficit and import cover.