One of the major drawbacks of the budget analysis and monitoring work in Pakistan is that only the expenditure side is discussed, while the resources are totally ignored, as a result of which the negative effects of various taxes, particularly indirect ones like sales tax, on the poor are often overlooked. With this in view, an attempt has been made to examine the resources in the Federal Budget 2012-13 and measure the possible impact of revenue generation on the people of Pakistan.In the Federal Budget 2012-13, the total resources have been estimated at Rs2.719 trillion. Of these, internal resources have been estimated at Rs2.332 trillion (85.77%), meaning that the government plans to raise – through tax and non-tax revenue receipts, capital receipts, and estimated provincial surplus – about Rs12,605 per person annually or Rs34.35 per person daily. This also shows a substantial increase over the ongoing fiscal year, in which the government planned to raise Rs11,076 per person annually or Rs30.34 per person daily. On the other hand, external resources have been estimated at Rs387 billion (14.23%), showing a decrease of about Rs27 billion over the ongoing fiscal year.The internal resources in Pakistan’s federal budget comprise mainly ‘net revenue receipts’, the most important classification in the budget in terms of size. A detailed discussion on the impact of net revenue receipts – comprising ‘tax revenue’ and ‘non-tax revenue’, and estimated to account for almost two-thirds of the country’s income from all sources (Rs1.775 trillion or 65.3% of the Rs2.719 trillion) in the Federal Budget 2012-13 – on the people of the country is essential here. Moreover, other sources of internal revenue – ‘net capital receipts’ and ‘estimated provincial surplus’ – are also significant, since they reflect the government’s economic priorities and the Centre’s financial relations with the federating units.Let us start with the ‘direct’ and ‘indirect’ taxes that collectively make up tax revenue! Direct taxes, as the name implies, are paid directly to the government. Consisting mainly of ‘income tax’ – a progressive tax applied at increasing rates as the taxable income increases – their major objective is income redistribution in the society since only the people above a certain level of income are supposed to pay them. However, collection of direct taxes in Pakistan has traditionally been abysmal because of the corrupt Federal Board of Revenue (FBR) staff on the one hand and lack of voluntary compliance on the part of taxpayers on the other. Therefore, mostly salaried people – employed with both the public and the private sector – have to bear the brunt because they get their salaries after income tax deduction and have no choice in this matter.Indirect taxes – comprising mainly ‘sales tax’, ‘customs’, ‘federal excise duty’ and ‘petroleum levy’ – are charged on commodities and transactions, and are paid to a second party, mostly the seller of a good, who then passes them onto the government. Indirect taxes are normally regressive in nature and everybody pays them at the same rate (percentage). The main regressive tax in Pakistan is sales tax, which is levied on all consumer goods at a rate of 16 percent. This means that all Pakistanis, irrespective of their economic status, have to pay sales tax when they buy goods and services. Sales tax puts additional burden on the poor because, in comparison with the rich, they have to spend a much larger percentage of their income on commodities and foodstuff. The percentage of indirect taxes in the total revenue receipts has been high over the years simply because their collection is much easier for the government than that of the direct taxes.Interestingly, despite the fact that terms like poverty-eradication are gaining global currency, the focus has recently been on indirect taxes, even in the developed world. While that is understandable in countries like Pakistan that lack the culture of voluntary tax payment, developed countries have opted for indirect taxation for other reasons. With well-entrenched safety nets for the poor – like subsidies – they can afford to experiment without hurting the cause of the poor. On the other hand, if countries with a sizeable population of the poor follow suit on the ‘advice’ of the international financial institutions, the poor are only likely to be further marginalised.What frustrates one the most is that there is hardly any debate on this issue in either the media or parliament in Pakistan. The budget analyses offered by economic experts mostly fail to capture the complete socioeconomic picture, because there is no debate on whether the country is generating additional revenue through direct or indirect taxes. The incumbent government can proudly claim to have increased the country’s revenue receipts by almost 63 per cent during its current tenure (from Rs1.111 trillion in 2008-09 to Rs1.775 trillion in 2012-13). However, who is supposed to tell the people that while the indirect taxes have increased by 108 per cent in these five years (from Rs755 billion in 2008-09 to Rs1.572 trillion in 20012-13), direct taxes have increased by only 88 percent (from Rs496 billion in 2008-09 to Rs932 billion in 2012-13) during the same period?However, the above figures are based on budgetary estimates and hide the real picture of the economy, for which we have to locate the actual figures released a few months after the fiscal year ends. In the Federal Budget 2010-11, direct taxes were estimated at Rs658 billion; reduced to Rs627 billion in the revised estimates; and the target for the Federal Budget 2011-12 was set at Rs744 billion. But the actual budgetary figures showed that the government ended up collecting only Rs595 billion under the head of direct taxes in fiscal year 2010-11, implying that it collected Rs32 billion less than the revised estimates for the year and Rs149 billion less than the estimates for the next year.On the other hand, in the Federal Budget 2010-11, indirect taxes were estimated at Rs1.121 trillion; reduced to Rs1.052 trillion in the revised estimates; and the target for the Federal Budget 2011-12 was set at Rs1.331 trillion. But the actual budgetary figures showed that the government ended up collecting Rs1.104 trillion under the head of indirect taxes in fiscal year 2010-11, implying that it collected Rs52 billion more than the revised estimates for the year. This clearly goes on to show that while direct taxes are overestimated and indirect taxes are underestimated to show that the government cares for the poor and wants to put more burden on the rich.In short, one can say that despite all the apparent good intentions of the government, the Federal Budget 2012-13 will only add to the existing problems of the masses. The government wants to curtail the fiscal deficit, which it must do, but acquiring more permanent and floating debt – through sale of prize bonds, floating of new bonds and encouraging the people to invest in various savings’ schemes – is not the right way to go about it. Ultimately the interest on the newly acquired debt will have to be repaid by the people of this country and the poor will have to bear the major brunt. So, even if they are to accrue any benefit out of the relief measures announced in the next fiscal year’s budget, it will be nullified by the additional taxes they will have to pay.In a bid to woo the disenchanted masses, whose votes count for much, and present a populist budget, the government has made many promises that it will find difficult to keep as the year progresses. This becomes evident if one analyses the government’s economic performance in the outgoing fiscal year, which ends on June 30. Because of an enormous increase in the current expenditure, the government has not only failed to ensure full utilisation of the funds allocated for development, but it also had to borrow heavily from both domestic and foreign sources to cater to the increasing current account deficit.To sum up, the targets set in the Federal Budget 2012-13 can at best be described as ambitious. The government would have to perform really well; otherwise, very soon the shortfall in revenue would force it to resort to anti-people measures, such as overburdening taxation. Even if the government meets the revenue shortfall through bank borrowings, the people would have to suffer, as they would have to pay the interest on the borrowed money in the years to come.(Concluded)