"OVERSHADOWED PUBLIC RELIEF IN THE FEDERAL BUDGET"
TARIQ AHMED SAEEDI (email@example.com)
June 16 - 22, 2008
Maybe due to the fact that this is first federal budget of this government after a pause of a decade that it has not much volley of latest public-related achievements in store to boast about in the proposed budget of upcoming fiscal 2008-09.
Poignantly enough, even then, the proposal to run socio-economic state of affairs of next financial year could not verify the much-ballyhooed pre-election claim of this government that deluded public into believing its having a magic wand to uproot public agonies forthwith after assuming power.
Yet, blessed with global crises savvy people and inherited economical flaws as justifications a presenter of the budget proposal for this fiscal, de facto finance minister, Naveed Qamar in his budget speech has well orchestrated a ground for his fellow beings in advance for skin saving in case of unpleasant implications and thrust of budget on public welfare.
Despite all these blasts, the proposal presented before the upper house was simply a black and white telltale of government intentions towards society and economy. Some of the propositions mentioned in latter part of the speech clearly militate against the prologue.
For example, while rationalization of subsidies is set as an objective in the budget 2008-09 government's budget makers plan to rationalizing subsidies through Rs. 400 billion curtailment. So far so good, as rationalization does not imply relief. But then pulling down inflation to 12% as per budgetary target seems to be far sighted. The reason for significant slash revealed is to bring in fiscal stability. And, all kind of subsidies cut-short measure was adopted to preserve the country's finance.
While budget proposal aims to introduce low cost housing units for the masses, increase in federal excise duty on cement manufacturing from Rs. 750 PMT to Rs. 900 PMT is proposed to add on government's revenue collection and on account of indexation of inflation. Cement is a main component of construction and following implementation of revised FED, cement bag price may likely to shoot up. However, it is proposed to allocate Rs. 2 billion as a revolving fund for low housing projects and "to make additions to low cost housing to lessen the rising gap in housing stock especially for the low income groups". Does this mean an interest charged revolving?
While government condones over gigantic tax free capital gains in stock markets and rare translation of this capital in to the expansion of industry or employment creation, it completely makes real estate investment responsible for slowdown in investment in industries. Thus, it is proposed "that developers and builders should pay Rs. 100 per sq. yard on developed plots sold during the year and Rs. 50 per sq. ft. on the sale of constructed property as minimum tax". Probably, these applications would also not commensurate with the government objective of promoting low cost housing units as ultimately price of property becomes burdensome to this effect.
Howsoever scant impact being relieved off from the exchequer's coffer, decision of freezing non salary and non development expenditures to a level of outgoing financial year is skeptically appreciable. Also, the National Economic Council has already approved public services development expenditures of Rs. 541 billion in contrast to Rs. 520 billion in outgoing fiscal year. Nothing pressing is resisting making a guess that load stemmed from extra allocation would pass on to all-time sustainable, docile, and high revenue spinning group like indirect taxpayers.
Obviously government claim of less dependence on indirect taxes and of shifting focus to direct taxes to achieve net revenue target of over Rs. 1 trillion does not stand along with jacking up of GST to 16%. It is a fact that out of its entire population of over 150 million, Pakistan has a lowest taxpayers" base of not more than 2 million and tax to GDP ratio of 11%, despite annual growth in numbers of taxpayers by 20% that has been stagnant for years. But, increase in GST is directly reflected on rise in price of product. And, highly affected segment of this valuing price comprises of poverty stricken consumers to whom ironically the budget is said to benefit. In the backdrop of spiraling food prices, this measure would not support people's accessibility to basic necessities of life.
In a sequel of season of amnesty to bygone sins, this time tax evaders are baited and switched through concessionary 2% percent levy on their hitherto tax-hidden assets. Perhaps out of doctrine of necessity budget proposal assures "the declarants [of such assets] would not have any fear of investigation in their tax affairs for the past."
Similarly, the companies fudging figures to disclose crumbling income statement would get exemption from minimum tax payment of 0.5%, so far levied to enrich exchequer's account to a certain level. Belying the government's assertion of shifting attention from indirect tax, this proposal in the budget is aimed at to encourage participation of faltering industrial units in the mainstream economy. Is it not a travesty of justice that tax network is going to cover already deprived strata whereas big fishes of corporate sector remain off the hook?
To rub salt on the wounds of poor, law correction is also in progress to allow the government to impose at its discretion petroleum development levy on CNG and LPG. On one hand it is proposed to import incentivized duty CNG buses and policy of new tax on on-road buses would not help but leverage public transportation costs.
All in all, proposed public relief propositions in the federal budget 2008-09 are unfortunately overshadowed by the above discussed analyses. Otherwise, the budget has promised to bring public relief out especially from closely linked agriculture, livestock, and textile sectors as well as from monetary saving programmes.
Beside, insulating "only" government employees against astronomical waves of prices, its proposal of reduction in custom duties on pharmaceutical ingredients and packaging materials from 10% to 5% would hopefully ensure low priced medicines to public at large. Eighteen life saving drugs for cancer and other terminal diseases are proposed import duty free. Depending on timely execution of propositions in the budget public well being can be measurable.