A budget for the rich

The clear signal: change is just wishful thinking

The budget is a ritual that each year is performed with due indifference by the government and received with due apprehension by the public. This time the expectations were different. The new government had taken over with many claims, and the public was expecting at the least an attempt to be different from the last one. And many felt that the government would try to put in a first good impression with a more people-friendly approach. But unbelievably it has not bothered to make any pretense of being pro poor and has blatantly made a budget for the rich, against the poor, with the clear intention of signaling that change is just wishful thinking.

The budget should be the most important exercise but it has become the most dreaded one. It is an exercise where innocent public have to pay for the sins of corrupt governments. It is an exercise that is made with a very muddled vision, where figure fudging is done to create veneer of benefits hiding beneath a host of painful price hike tumours ready to burst out in the long run.

The budget document loses all its importance if it does not have a direction, a vision and a mission. Thus all budgets are generally supposed to be for public benefit but none of them have a vision statement and purpose statement explaining where the country is heading. Are we aiming at an investment-oriented budget? Are we aiming at a consumption-oriented budget? Are we encouraging savings? Are we providing relief for the poor? Are we paying obeisance to IMF? This is the first discussion that should be held in any budget preparation. The direction setting exercise then aligns every budgeting area to be guided by that direction. In the absence of this overarching direction the budget is a mere cut and paste exercise that makes a mess of a random and hashed approach of fitting in figures in various slots and somehow balancing the receipts with expenditures.

The present budget announced by the government is a classic example of this thoughtless and directionless exercise. The prime minister and finance minister kept on claiming that the budget is pro poor, giving relief to the under privileged. However the details of the budget show a total contradiction to these claims. It has been a blatant exercise in traditional squeezing of the already squeezed. The GST increase of one per cent on consumption is a cumulative, regressive and indirect tax that will have a high inflationary impact. This increase will result in actual terms of at least six per cent as the calculation is more technical than a simple deduction. However by the time the middlemen add their margins and pass on the cost to the consumer the impact escalates between 25 to 30 per cent. On the one hand the cost of living goes up, and on the other the salaries have not budged. This is a classic case of strangulating the masses and increasing the difference between haves and have nots. In this budget the salaried class has been mercilessly taxed as people who have worked hard and have started earning a decent amount have now to pay for this hard work by paying off 35 per cent of it to the taxman. Even within the salary scales the formula is that as it increases from Rs60,000 to Rs70,000 the tax rate is cut from 35 to 19 per cent. This is totally contrary to the earlier claims of being equitable, not taxing the already taxed and enhancing the tax net. The big business meanwhile has remained untouched and the other sectors like agricultural tax etc. have been left to provincial domain.

This disconnect, with where you are claiming you want to go and where you end up, is attributable to two reasons. One is that most of our politicians are rooted in paying lip service to pacify the public and keep on doing the contrary. Either they will justify it on the basis of conditions, circumstances etc. or they simply do not have the competence to understand the importance of having a strategic budget planning process where a clear purpose is the driving force behind this document. In either case, the public suffers and starts disbelieving and distrusting this exercise as a threat to their existence.

The budget actually is a reflection of the mindset of the leaders. The budget has done some cursory increases in education and health but not really any significant growth in these areas. Yet the Prime minister has been saying that he wants Pakistan to become an Asian Tiger. What is puzzling now is how can he do it without making huge investments in education and health, which was the hallmark of the countries where rapid progress was made. The mindset is disappointingly similar to previous regimes that reek of stop gap arrangements to fight fires but no long term plan of how to increase revenue. The same tried, tested and failed solutions are again on display: tax the already taxed; borrow more locally to pay off debts and then borrow from the IMF to keep the country afloat and indebted; spend on roads and buses first and education and health later.

Maybe it is this inherent fear of these leaders of having an aware and educated populace that will question the budget window dressing that forces them to keep the public in ignorance. This mindset is the biggest hurdle on making non-traditional policies and plans.

The government must realize that after five years of living with injustice, the public’s patience with more of the same has exhausted itself. Also they should not overestimate the level of ignorance of the man on street. With media so penetrative and public distrust at a high it will be difficult for the government to justify earlier claims on the basis of severity of circumstances. What they need to do is to take some bold and innovative approaches. The NADRA has already identified almost a million more people who can be brought into the tax net. The least that the government can do is to bring some of them to pay taxes. The rationale behind this is that to get a different result, you must adopt a different approach. Otherwise their claims of ‘No More’ will simply sound hollow compared to the IMF dictate of ‘Do More’.

The writer is an analyst and columnist and can be reached at [email protected]