ICMAP - POST-BUDGET SEMINAR
June 14 - 20, 2010
The Institute of Cost and Management Accountants of Pakistan (ICMAP) is an organisation that not only maintains a sustained production of quality business managers and accountants, but also acts as a bridge between the regulatory authorities and all important sectors of economy. The seminars organised by this basically educational institution go a long way in disseminating vital information through face-to-face dialogue situations. It facilitates the assemblage of bureaucratic authorities, public figures, members of the intelligentsia and experts to address an educated audience comprising business and investor groups, industrialists, corporate representatives and media people. The human interface serves to resolve the ambiguities and anomalies that may arise with the introduction of certain new rules or incorporation of changes in the existing systems and procedures.
The announcement of annual budget also brings with it scores of anomalies and ambiguities that need to be resolved/cleared. The recent seminar ICMAP arranged under the aegis of its Karachi Branch Council (KBC) on 9th June was aimed at inviting expert comments on 2010-11 budget from renowned panelists besides presenting to the audience the viewpoint of relevant fiscal authorities. The chief guest for the occasion was Speaker Sindh Assembly Nisar Ahmad Khuro.
Hammad Raza Zaidi, KBC chairman emphatically advocated the imposition of agriculture tax, which surprisingly none of the latter speakers took seriously. Over the years, the feudals have succeeded in taking the sting out of this very important subject. It is now treated as a peripheral issue in the economy, just capable of generating some academic interest. Recently a columnist from a local press tried to politicise this issue. In fact, through the demand for agro tax imposition no one tries to target the powerless and impoverished majority of the rural populace. The tax, if introduced, will certainly be on the basis of ability to pay and according to the size of land holding. It will have nothing to do with the sharecroppers. If urban populace is exempted from tax up to the Rs300,000 per annum, how the poor farmers with the same size of annual income or less can be asked to pay tax. Only the farmers with a monthly income of more than Rs25,000 will come into the tax net. Not only the low agro income groups but the middle income groups too will automatically stand exempted. So, the demand to tax agriculture essentially presupposes effective land reforms to bring into the tax net the high income groups and the top notch feudalists who are an economic burden on the society. As a result of these reforms, resource reallocation will take place and the lower cadres of agro society will benefit. Similarly, all moves to block this demand are essentially aimed at providing cover to the exploitative feudalists and their decades-old system.
Shabbar Zaidi, partner, A.F Ferguson declared the budget a non-event. He was of the view that the revenue target of Rs1,667 billion was almost impossible to achieve. What maximum we can expect should be around. Rs1,575 billion and that too after a lot of arm-twisting of the genuine tax payers. He raised serious doubts about the efficacy of National Tariff Commission. According to him, Afghan Transit Trade, smuggling and under-invoicing were the main culprits responsible for economic miseries. To get rid of them, he said, we will have to develop a national consensus and create pressure groups such as consumer bodies etc. He also criticised the government programs under 'incomes policies' by contending that the young generation of Pakistan needs jobs, not donations.
Masood Naqvi, partner KPMG Taseer Hadi pointed out that none of the budget 2009-10 objectives were achieved during the outgoing financial year. The objective mostly referred to the betterment and welfare of the common man. He raised serious questions about the reliability of economic date. The revision of GDP growth figures of previous years creates serious doubts about our 2009-10 GDP growth which has been placed at 4.1 per cent against the independent international estimates of 3 per cent and less. He was of the view that if adequate and proper investment in the agriculture sector is made - on yield development, on product development and on research - we can feed the entire Middle East. He said that Pakistan's demographics represent both opportunities and threats. A nation of predominantly young people needs proper planning to benefit from this competitive edge. The country's youth needs education, training and right type of jobs. If we fail to provide this, we are doomed as the disgruntled youth might become tool in the hands of terrorists.
The chief guest joined the proceedings late, obviously owing to his heavy schedule and more pressing assignments. The chief guest opened his speech with the remarks that Naqvi's speech smacked of a political manifesto. He said that he (and his party) exactly knew what the common man needed and what his problems were. He further said that they were also aware of the potential of agriculture and the richness of country's resource base. But the problem was, he argued, that the country has had a chequred history-the governance kept alternating between dictators and democrats. So, no single government or party can be held responsible for the present state of economy. We were going through energy shortage period because no megawatts were added to the national grid system during the last ten years or so. We have been doing what we possibly could do. We have offered the farmers attractive prices for their produce to boost agricultural production. We are going through the worst phase of terrorism. This phenomenon is eating into our economy. But we are on the right track and expect to bring peace back to this country. He informed that attempts at direct taxation are thwarted by the vested interests. We are losing around Rs400 billion each year through tax evasion. Addressing the panel of experts present there, he said, "you people need to help us on budget and tax issues. We have been interacting with you during the process of budget making."
Whenever and wherever the national economic experts assemble, their job is to dispassionately analyse the prevailing economic situation and not to present political manifestos which are of course the domain of political parties only. True, no single party can be held responsible for the economic mess the country is in, but alternatively, no party including the army Generals can escape the blame - they all have to share it. On the energy side, it's not right to assume that the previous government did nothing to augment power generation capacity. We all know that we were surplus in electricity around the year 2004. The previous government, during the period 2002-07 conceived and started a number of hydropower projects including Diamer Basha dam project for 4,500MW. Since energy projects have a very long gestation period, the political benefit of these projects will go to the government in whose tenure these projects start commercial production.
The fiscal authorities and Tax Bar Presidents namely Imtiaz Ahmed Barakzai (Chief Commissioner, Inland Revenue-RTO), Sher Nawaz Khan (Chief Collector Customs, South), Ali Rahim (President, Karachi Tax Bar Association), and Abdul Qadir Memon (President Pakistan Tax Bar Association) spoke in detail on the technical aspects of the budget.
Sher Nawaz Khan informed the audience that penalties for Afghan Transit Trade violations have been increased under sections 128 and 129 of the Custom Act. Imtiaz A. Barakzai conceded that the revenue target of Rs1,667 billion was a tall order, nevertheless he expressed hope that through hard work the target could be achieved. Hasan A. Bilgrami, President ICMAP summed up the proceedings in his lucid style. He said that the budget forecasts a 4.5 per cent GDP growth for the next financial year whereas the independent analysts foresee a growth of just 3 per cent. He said that all budgets are pro-poor, with hardly any thing to demonstrate that they really are.