In days of yore, businessmen would wait with trepidation and a sense of suspense to hear what Finance Minister Ghulam Ishaq Khan would, in a somber and unemotional tone, announce in the budget. It would take over four hours to read out the entire document. Seldom were there any pre-budget leaks, and there were no TV channels to drumbeat breaking news. By late evening, businessmen would absorb the impact of the carrot and the stick policies.
Today, kite-flying, strategic leaks, influential insights, and the power of the media have taken away much of the apprehensions and expectations. Chambers and Trade Association, who traditionally prepare and forward their budget proposals, are more or less aware of what is in store and what would be the ramifications and impacts of the budget.
The government asserts that the 2015-16 budget is a pragmatic medium-term framework that would usher in a formidable economy by the time its tenure ends. Taking advantage of declining oil prices, reduced discount rates and inflation, a semblance of political stability, the euphoria over the large Chinese investment, favorable responses by international lending institutions, and a boost in the confidence of the PML-N leadership, the finance minister is treading a cautious path. He announced attainable growth targets as well as imposing measures that are not easily digested by stakeholders.
The finance minister has to slog on a difficult terrain while focusing on social safety nets, controlling cost of doing business, guaranteeing formidable resources for the nation’s overall security, tackling the ever-growing debt load, tightening the screws for those in the undocumented economy, embracing political exigencies, and more importantly, ensuring macroeconomic stability and growth.
It is now normal for the finance ministry to make pit stops and change the route throughout the fiscal year. There is no fixed game plan to adhere to. Revisits and amendments are a routine feature. Targets are revised, more often towards the Deep South, while spin doctoring and justifications are unabashedly the normal mode.
The 2015-16 budget is a manifestation of the constraints, compulsions, and the conditions faced by the government. Although many stakeholders and economic analysts point fingers of accusation at the IMF, the truth is that the country’s economic health is the overarching factor. Notwithstanding the penchant of Nawaz Sharif for grandiose projects, it is important to note that these priorities are overshadowing the emergent needs of the populace. To mitigate the difficulties of the less privileged population, certain welfare-oriented and social programs have been initiated, continued or expanded. Over Rs 100 billion have been earmarked for the Benazir Income Support Program and youth support programs have been made more attractive and affordable. Other measures include interest free loans for solar tube wells, relief to families of victims of suicidal attacks, relief and compensation for flood and calamity victims, infrastructure connectivity for remote areas, and cheaper housing credit.
Trade and industry are, to a large extent, unhappy with the added front-loading on them and their enterprises. The inability of the Federal Board of Revenue to bring non-filers into the tax net is a matter of great concern. The negative impact of this incapability is the utter frustration of those taxpayers who have to pay for this blatant failure.
The outbursts of traders and industrialists reflect this disappointment. “Corruption-incentive budget,” thundered Karachi Chamber of Commerce and Industry (KCCI) supremo Siraj Teli. “Goonda Tax,” roared ex-Senator Haseeb Khan of the Korangi Association of Trade and Industry. “The worst budget, in the opinion of the capital market – it should be entirely scrapped,” said top Karachi Stock Exchange broker Aqeel Karim Dhedhi. An importer quipped, “When our finance minister says the GDP will rise this year, he actually means Gas, Diesel, and Petrol.” A senior KCCI member demanded: “Karachi should also be given tax relief like Khyber Pakhtunkhwa, because Karachi is also facing terrorism.” The KCCI senior vice president cautioned that the “actual sales tax is camouflaged – 17% basic, plus 3% further tax if you sell to non-filers. Now, where will you find a filer to buy your goods in a country with just 1% registered filers? Thus, you will be forced to sell to non-filers and pay the additional tax from your pocket.” Another KCCI member stated: “Personally I don’t think this budget will achieve the targets as our political culture isn’t equipped to cater to mass welfare, as against benefits to select favorites.”
“Why are governments always emphasizing revenue collection and not revenue generation? FBR even considers tax refunds as revenue and despite assurances of the finance minister, refunds are blocked,” lamented a leader of freight forwarders.
Pakistan Tehrik-e-Insaf (PTI) came up with its ‘shadow budget’. Will Ishaq Dar listen to PTI lawmakers? Some parliamentarians have concerns about the Gas Infrastructure Development Cess (GIDC) too. As one high-profile ex-President of KCCI remarked: “GIDC is economic terrorism”.
It is to be seen what role the parliamentarians will play to convince the finance minister to accept some meaningful proposed changes. But the real test would be for Dar and his team to sustain and achieve the targets and not meander to justify failure and complacency of the FBR.
The writer is a former president of the Karachi Chamber of Commerce and Industry
Twitter: @MajydAziz
