May 312015

The budget is upon us and we are waiting to see what the government has to offer. Finance minister Ishaq Dar says that no budget can be a “please all” and some sectors will be taxed more than others. Our PM has called for revolutionary steps. For most observers, this translates into a vision-less budget that continues to support a government that is creaking under the weight of its inefficiencies.

Our indefatigable business correspondent, Shahbaz Rana, tells us that an unhealthy lifestyle is about to get more expensive in Pakistan. The government has decided to increase taxes on cigarettes, carbonated beverages, and even sugar in a bid to raise more revenue in the upcoming budget. But these are gimmicks. One year we raise taxes on tea, another year on cigarettes. Nothing is done to check evasion and smuggling. In fact, such measures only encourage.

One wants to know what other steps are being taken to make this budget more meaningful. So far, all the statements we have heard suggest that the budget will be more of the same. While lauding Pakistan’s economic performance over the past year – which is a combination of good luck and persistent economic performance in certain areas, the IMF has said that Pakistan is once against standing at the point where if it has the resolve, it can change the destiny of the country.

There have been several occasions in the past as well when the economy is at a point of take-off but then thanks to poor economic vision and political expediency, we are back to square one. What is stopping us from putting in place a fair and equitable tax regime that ensures across the board collections of direct tax, which in turn will help the government fund much needed projects in sectors that have been starved.

The PM told a cabinet committee meeting recently that he wanted to give relief to the people in the budget. In his remarks at the meeting, he directed the Ministry of Commerce to gear up efforts to increase country’s exports. This at a time when the country’s exporters continue to protest over the rising cost of production in Pakistan.

On the issue of tax collection, the PM had the same old formula. “We aim at reducing tax rates and duties to increase our revenue. This would encourage people to willingly pay their taxes.” So far this strategy has not worked. Tax evasion is at levels never seen before. Our tax collection machinery is both corrupt and inefficient.

Our PM has also said that we must take “revolutionary decisions and work day in and day out to further strengthen country’s economy.” Easier said than done.

Our media has not helped highlight the problems. The coverage of the budget proceedings focuses more on the antics of opposition MNAs and less on the substance of what is being proposed. In fact, the finance minister possibly hopes for as many distractions as possible.

The first question that is asked at the post-budget press conference which is held at the finance ministry auditorium in Islamabad is about whether the salaries of federal government employees are being raised, and if so, by what percentage. There is no discussion about targets that were set in the previous budget being met. In most instances, they are not. And what has been done to plug revenue leakages and gaps.

In the larger picture, Pakistan has to decrease expenses and needs to focus on health and education.  A senior IMF official said at a seminar recently that his organization was aware that billions spent on security were putting pressure on Pakistan’s economy but that necessary measures have to be taken to increase tax revenue.

That is the real challenge for Pakistan. To collect money that is due to the government. And put the same money into education, health and also in job creation, that too at a time when our country is in a conflict situation.

The performance of the government in this regard had been dismal. Our problem is not the billions we are pouring into security. It is the much larger amounts that we are losing to corruption and poor spending. Corruption continues to plague the public sector but no serious effort has been made to address the issue.

Published in The Express Tribune, June 1st,  2015.

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