NAWAIWAQT GROUP
 
 
 
Budget 2013-2014
 
June 14, 2013
 
 

After presenting the budget for 2013-2014 to the National Assembly on Wednesday, Federal Finance Minister Ishaq Dar held the traditional post-budget press conference on Tuesday. However, on neither occasion was he able to rebut the charges that the budget did not contain any relief for the people. In fact, with the increase in the General Sales Tax rate to 17 percent, a regressive tax has been further worsened. With a millionaire and the common man paying the same increased sales tax at the point of sale, the power of purchasing of the common man will be further reduced. Indeed the GST system in Pakistan needs to be re-examined as a whole, and at the very least, must be supplemented by the introduction of a Value Added Tax. The calculation and imposition of VAT, in various percentages, at the different stages of the production process would result in goods remaining largely the same price as with the sales tax, with the only difference being that instead of the consumer, the producer at various stages would pay the tax; adding this up as a cost of doing business and adjusting the sale price accordingly. This would mean that all stages of the production process would be documented, and Pakistan’s huge black economy, made up of small traders who refuse to pay tax, write proper receipts, or even open bank accounts, will finally irrefutably be revealed as tax absconders to the government, which can then pursue tax collection on behalf of the people of Pakistan more effectively. There is no use lobbying for the VAT, it will simply have to be put into place. That the PML-N government, with its hefty mandate and apparent resolve to get things back on track, has not done so, is a bitter disappointment. The increase in GST will only barely cover IMF requirements for issuing a new bailout to Pakistan, but the options in front of Pakistan included the VAT, which our new government has chosen not to impose, perhaps for fear of offending its constituents. These constituents, if Pakistan’s tax to GDP figure is anything to go by, are nine out of ten, all tax absconders.Another aspect, in which the budget was lacking, was its continuance of the exemptions from taxes given to various sectors, the most glaring being the continued exemption of agricultural income from taxation, something which benefited members of the majority. The Benazir Income Support Programme, now the National Income Support Programme, lauded as a good initiative continues, with an increase. This is a welcome tradition, where previous governments, including Mian Nawaz’s, have cut down worthy projects initiated by their adversaries immediately upon coming into government. The renaming is hardly a scandal. Government servants, given a raise three months ago, were also told to make do with what they have. Another good measure, given the fact that the government of Pakistan in its entirety is the single largest employer in Pakistan, and in keeping with a conservative style of government, PML-N appears to be trying to reduce government size and encourage private enterprise to take a leading role.Though much money, over Rs 1 trillion, has been allocated to development, Senator Dar will have to defend this spending, as this is the first place where the finance bureaucracy will look when there is a need for budget cuts. One place where Senator Dar can make a difference is by ensuring that there is no slippage in revenue collection, for that is also an area where the previous government had a dismal record which worsened the problems faced by its successor.The problem that Senator Dar faced was typical. With the mammoth expenditures of debt servicing (Rs 1154 billion), defence (Rs 627 billion) and civil government (Rs 275 billion), the revenue collection target of Rs 1918 billion is exceeded, leaving nothing behind. The budget and post-budget press conference did not yield the results the people were expecting, and did not indicate that the government is going in the direction that will cause the ‘economic explosion’ promised in the recent election campaign. However, the fact that the GST has cast a pall over the layman’s future, may be balanced by the fact that his employers appear to be rejoicing at the thought of a ‘business friendly’ budget. A business friendly budget is, indeed, a people friendly budget. It remains to be seen whether the PML-N has, in fact, devised a “business-friendly” formula. Some sort of economic recovery jump-start is badly needed, and all fingers are crossed that this rather desperate budget, may provide it.

 
 
on epaper page 7
 
Topics
 
budget
 
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