For the first time, a fifth budget
What does one mean by the term election-year budget? Around the world, it is meant to imply some populist measures in public spending and taxation. In our hapless republic, however, every year is an election year budget as far as the taxation bit is concerned. Populist pundits would be chiming in agreement about how the bigwig feudals just won’t let any taxation legislation get through but that is absolutely incorrect. All sectors, all demographics in the country, have an abject aversion to paying taxes.
To give this government its due, they did try to spice things up on the tax front. They have been trying every year to pass through legislation reforming the GST. This year, they aren’t even going to try.
Because it is election year? Not entirely true. This is another popularly held misconception which the punditry here copy-pastes from the west. The nation’s tax code exempts the poor from income tax. At present, any individual earning less than Rs. 33,000 per month doesn’t have to pay any income tax at all. They still have to pay GST, yes. But there is no GST on items that make up the bulk of the poor’s budgets. The meek have far from inherited the earth but they do have the lion’s share of the number of votes cast. In our country, therefore, direct taxes shouldn’t be as big an election issue as we are led to believe.
The reformed GST would have calibrated the nation’s indirect tax schemes with the records for direct, income taxation. It would have, through a devilishly clever system of sticks and carrots, made it more difficult (it’s never impossible) for businesses and individuals to cheat on their taxes.
Before moving forwards, it would be interesting to note how the legislation was scuttled. See, across the world, the left-of-centre parties propose higher taxes. The right-of-centre, big business parties propose cutting them. Both are legitimate points of view. In Pakistan, whereas the left-of-centre parties like the PPP and ANP fall in that model, the parties of the bazaar (the Muslim Leagues and the MQM) have taken a curious line. They aren’t advocating lowering the tax rate but are opposing a difficult to cheat taxation system. That is an illegitimate point of view to take. It is an affront to the concept of a supposedly vigilant media that those opposing the reform of the GST haven’t been hounded incessantly.
To the government’s credit, it made an unprecedented increase in revenue collection (around 25 percent) the last fiscal all while remaining in the unreformed tax structure by swooping in on leaks. This year, they have also attempted to simplify the tax code by reducing the number of progressive slabs.
That doesn’t mean it the government has done all it could have done on the taxation front. Agriculture tax is a glaring issue. But the federal government cannot tax agriculture, Dr Hafeez Shaikh will point out. True, but the party that runs two provincial governments and is a junior coalition partner in a third cannot avoid this accusation. The industrialists and traders oppose income tax reforms and the feudals abhor agriculture taxes. Both sides have to get over themselves there.
Moving on to another trend that we have to change. The stark lack of debate on the budget allocation to the armed forces, which saw a fat Rs 20 billion increase this year. There is enough of an impetus in public discourse against government expenditures to force the prime minister to shift out of the PM secretariat, as the finance minister announced in his speech, but not a peep about the vast military expenditure. Ideally, military hardware expenditures should also undergo the same scrutiny by the audits and accounts service as the one the irrigation department is subjected to. But, perhaps, questioning the surfeit of military golf-courses could be a good enough start?
Not taking away anything from the jawaans in our armed forces but even the most casual of analyses would testify that the real struggle in the war on terror is being borne by civil armed forces like the police. As the Americans realised in Iraq and continue to find in Afghanistan, the army’s job is relatively easy; the police’s isn’t. The government should splurge on the ministry of interior and incentivise the provinces to spend on the police.
Power crisis: There isn’t enough fiscal space to undertake the vast maintenance work our grid needs to cut down on transmission losses. And throwing money at the circular debt problem would have been irresponsible, given how it would ratchet up yet again. Unless there are SROs and mini-budgets in the works for later on. Therefore, expect the loadshedding to continue this fiscal year despite whatever the government is to spend on building capacity. No quick fix for this problem, specially on this government’s inept watch.
At the end of the day, one should realise that the budget is overrated when looked at as a complete picture of what the government is doing, financially. There are many other variables involved, like the monetary policy, international trade patterns, natural calamities and law and order.
A vacuous media leads the public to believe the federal and provincial budgets are documents that somehow fix tightly how much haircuts and shoes cost. That is a ridiculous notion.
Tailpiece: the opposition’s behaviour was deplorable. There is much to criticise in the government financial policies. By frothing at the mouth and undertaking Neanderthal behaviour, the opposition gave the impression it had nothing, really, to say. Why is the opposition so easy on the government?
