Our own bad governance and poor policies are to blame
Muhammad Saleem, who has been running a pushcart in the Shah Alam Market of Lahore for the last two decades to earn his daily livelihood, has nothing to do with the recently announced tranche for Pakistan by the International Monetary Fund (IMF) because he thinks that the $502 million amount announced by IMF would not improve his living standard. Saleem is a contributor to the economy of Pakistan as he is working in the commercial hub of Lahore. He judges the inflation rate with the prices of petrol and diesel in the country. He was of the view that the incumbent government must take some concrete steps to bring out the poor from the circle of poverty because the present rulers promised alleviate poverty prior coming into power in 2013.
Finance Minister Ishaq Dar admitted that the government has missed the target of revenue collection in the first quarter of ongoing fiscal year by Rs40 billion. He gave assurances to the IMF that the shortfall would be bridged by imposing new taxes. It is being predicted that the new taxes during the year may have detrimental consequences on the economy keeping in view the already poor investment atmosphere here. Economists are saying that the government has taken a path of 1990s when mini-budgets were used to introduce taxes during the fiscal year. It is pertinent to mention here that the business community, which is considered as a strong vote bank for the PML-N, is already in agitation mode and will not accept any further indirect taxation.
The president of All Pakistan Anjuman-e-Tajran, Khalid Pervaiz, told DNA that due to the imposition of Withholding Tax (WHT) on banking transactions the government is trying to promote illegal ways of transaction; i.e., Hundi
The president of All Pakistan Anjuman-e-Tajran, Khalid Pervaiz, told DNA that due to the imposition of Withholding Tax (WHT) on banking transactions the government is trying to promote illegal ways of transaction; i.e., Hundi. He further added that the trader community has started to withdraw its money from commercial banks because of WHT and that is not a good omen for our economy.
“We were taken to the Islamabad by Chief Minister Shehbaz Sharif to consult with representatives of the Federal Board of Revenue (FBR), but unfortunately our lawyer — the CM himself — could not win our case”, he said.
He was of the view that the government is trying to ruin the already suffering economy by implementing the policies of the World Bank and IMF.
“If the situation does not change and the government is eyeing new taxes, the business community would not support the incumbent rulers in the next general elections”, he concluded.
The mission chief of IMF for Pakistan, Harald Finger, who announced the tranche of $502 million for Pakistan, said Pakistan is lagging behind in four crucial areas and needs to work hard for their improvement. These areas are taxation, energy sector reforms, privatisation of public sector enterprises and improvement in the investment climate. It seems that the idea to revamp these sectors cannot be materialised in the near feature because of some settled truths and ground realities.
Energy sector
Everyone wants to get rid of the perennial crisis of energy sector on war footing. The previous government of Pakistan Peoples Party (PPP) was routed from the general elections of 2013 because load shedding was at its peak during the election days. The incumbent government came into power with a promise to resolve the energy crisis but not a single substantial project in this regard was witnessed in last two and a half years. The reports about corruption started to emerge in Nandipur Power Project that was regarded as a hallmark of this government. In Pakistan, the price of one unit of electricity is much higher in the whole region because we are producing electricity by using furnace oil. The time has come that we must shift towards the hydropower for the production of cheaper electricity.
Privatisation
The privatisation of public entities that are a burden on our national exchequer is a good option but it is very difficult for the government to privatise them keeping in view protest movements by trade unions. The government must sit with the representatives of trade unions and reach a workable plan. Pakistan is not the only country that is going to privatise its institutions. This exercise has been made in some other countries with a workable plan of awarding golden handshakes to labourers and the plan worked.
Investment cannot improve by imposing new taxes and growth will also decrease as domestic investors are already shifting their business from Pakistan
Taxation
There is a notion in the world that people of Pakistan do not pay taxes but the reality is altogether different. Here in Pakistan, even a beggar pays his tax when he buys matches boxes in the form of sales tax. It is a pity that the ratio of indirect taxation is much greater than direct taxation in Pakistan and only the sales tax contribute 75 percent of our tax revenue. In developed economies all over the world indirect taxation is discouraged and most focus is on direct taxation.
Investment
Investment cannot improve by imposing new taxes and growth will also decrease as domestic investors are already shifting their business from Pakistan. Unconventional taxes are not the solution for our economy as they would have drastic consequences for the national exchequer.
A distinguished professor of economics who delivers lectures on the subject all over the world told DNA, on the condition of anonymity, that our incumbent representatives are unable to build our case effectively because of their inefficiencies. “They have made this country subjugated to financial institutions like World Bank and IMF”, he said.
Pakistan asked for a loan for the first time from IMF in 1958 and since then it is unable to free itself from its clutches due to its own poor polices and bad governance.