KARACHI, June 9: Difficult to measure, but the budget 2007-08 presented on Saturday has opened up a debate whether the relief and concessions outweigh additional taxation or it is otherwise.
About 392 importable items have been brought in zero-tax list for which the estimate is a loss of Rs9bn plus for the government. Adjustments and rationalisation of tax rates is likely to generate additional revenue of more than Rs42 billion.
In net terms, the government is gaining Rs34 billion revenue which obviously will impact the general public who mostly are poor.
The debate and discussions on budgetary measures became all the more significance as the biggest business district of Pakistan, I.I. Chundrigar Road in Karachi was plunged in to darkness, and rioters were battling with police on Abdullah Haroon road because of hours long power breakdown when the State Finance Minister Omar Ayub Khan was delivering his budget speech on Saturday.
No wonder, the budget proposes duty-free import of electric generators. But what about the fuel cost to be needed for running of these generators and the resultant environmental pollution? A harassed economist asked who was guessing on how much oil import bill will rise.
There are subsidies of about Rs114bn on fertiliser, sugar, wheat, urea and other items. Where will the money come from? A noted economist Kaiser Bengali says that if it comes from money supply, it will cause inflation. “But if government manages to squeeze current expenditure to make a provision for this amount than it is alright,” he said.
Economists and consultants called the 2007-08 federal budget a conventional “Babu Budget” that offers cosmetic relief by way of raise in wages, subsidies and tax cuts but has loaded the general public with additional taxation burden of Rs185bn plus.
“Political governments of past seven years still haunt this military-civilian set up,” Mr Kaiser Bengali remarked on the budget speech of State Finance Minister Omar Ayub Khan which he said lacked contents.
Akbar Zaidi too shares the perception that the government is panicky because of the recent developments after March 9. The government is facing two elections “one the General’s election as President next September or October and second the general elections of the new assemblies at the end of this year or early next year”.
Obviously, the budget strategies have been drawn to address the election issues in coming months. Akbar fears that the government will not be able to contain its expenditure and in all likelihood is expected to over spend to keep all segments of population happy.
The government is quiet on withdrawal of capital gains tax in the 2007-08 budget because it cannot afford to annoy the stock brokers, big investors, bankers and brokerage houses.
Asad Saeed believes that the government has taken half-hearted populist measures in the budget which “are too little and too late”.
Economists say that the budget strategy is to increase tax collection from Rs835bn in 2006-07 to Rs1,025bn next year suggesting that additional burden of Rs185bn will be put on the taxpayers. The resultant expansion in economy at 7pc may see growth of about $10bn or Rs600bn.
“The load of additional taxation will be shared by general public mainly the poor. The fruits of expansion in economy will be shared by hardly 10 per cent top rich segment of the population. It is bound to further increase disparities and create more social tension”.
“Why the minister did not touch upon inflation and growing trade imbalance that is haunting Pakistan’s economy for the third consecutive year?” asked a business leader. For last three years, the people of Pakistan were groaning under the impact of rising inflation.
The exports in 2006-07 did not show desired growth. Has government taken notice of this slow growth? Obviously, not because there was neither any word on trade imbalance or on exports nor any strategy was spelt out for next fiscal year.
The businessmen are now waiting for Trade Policy to address this issue.
