Corporate Pakistan and the salaried class should get ready to pay a sizable chunk of Rs250 billion that the Dar team needs to mobilise to hit the deficit target of 4.8pc of GDP in the budget for next fiscal year.

Many in business circles believe the government might increase the capital gain tax rate on the trading of shares and levy 0.5pc wealth tax on declared assets in excess of Rs1m. It may up the rates of certain levies for high bracket utility consumers. Duties on non essential items may also be hiked to compensate for a fall in revenue collection because of a stronger rupee.

According to official data, a steep adjustment of 2.2pc of GDP was achieved during this year to drag the fiscal deficit from seven to 5.8pc of the GDP that the IMF wants to be slashed by at least 1pc of GDP over the fiscal year ahead.

The second budget of the Nawaz Sharif government is not expected to be any different in essence from its first which focused on existing tax payers and preferred indirect over direct taxation for domestic resource mobilisation

The second budget of the Nawaz Sharif government is not expected to be any different in essence from its first which focused on existing tax payers and preferred indirect over direct taxation for domestic resource mobilisation.

“The mistrust of people the government enjoys as an honest custodian of their interest and resources de-motivates tax-worthy citizens. The tax regime is flawed. The reliance on indirect taxation which contributes as much as 60.9pc of the tax revenue, flouts equity in a nation suffering from high income disparity”, says a tax expert.

“Manufacturing, which enjoys 22pc share in GDP, chips in as much as 66pc of direct tax revenue whereas the retail sector, that accounts for 18pc of GDP, virtually enjoys tax holiday along with many of the other services which collectively make up as much as 57pc of GDP, according to Pakistan Economic Survey 2012-13”, he added.

An analyst found the provincial governments worse than the federal government, going by their record of resource mobilisation.

“In Punjab the resource generation increased by mere 8pc but in Sindh it actually declined by 10pc. This is when Sindh fought tooth and nail to grab the authority to collect the sales tax on services from the federal government. The agriculture income tax also falls in the provincial domain. The point is that the political class, irrespective of their inclination or different names, has not proven to be any better than dictatorships in terms of economic efficiency or effectiveness”, he said , declining to be named.

The business community has used multiple forums to convey its concerns about the next budget to the government. From Pakistan Business Council (PBC) that represents successful business houses to the Federation of Pakistan Chamber of Commerce and Industry, to several sector based trade bodies, all have developed their detailed position papers on the budget, voicing interests of their members.

They diverge in specifics but converge in their view that the government is compromising on development potential by ignoring demands of the key driver of growth — the private business.

“I do not see any significant improvement in GDP growth unless the government decides to break out of the cycle of conservative short term outlook. The environment will have to be transformed through structural reforms to make it investment-friendly. As long companies encounter cash flow problems because of delays in tax refunds and investible profits are scooped by the government in taxes, I see little scope for investment activity picking up pace”, Kamran Mirza, CEO Pakistan Business Council, told Dawn commenting on budget expectations.

“Why can’t they simplify tax regime, pay sales tax refund promptly and focus on growth for better mobilisation of resources? How do they expect a distressed company to pay more in taxes? Is this really a rocket science that policymakers find hard to digest?” asked a frustrated businessman sifting through a voluminous document on budget proposals of a private sector body at this newspaper’s office.

A respected economist hinted at an irony. “I file income tax and wealth tax returns honestly. If anything the system penalises me as I end up paying to the exchequer more than people visibly many times more resourceful”, he told this writer over telephone in Karachi.

Dar team managed to ward off the threat of a melt down on the external front by mobilising resources from external sources and the sale of 3-4 G licences to support the country’s reserves.

However, domestic resource mobilisation required to finance government administration and meet its obligations to maintain and develop social and physical infrastructure, may not improve without effective documentation and broadening the tax base for which the tax regime needs to be made simple, equitable while the tax collection machinery should be made efficient.

Published in Dawn, Economic & Business, May 19th, 2014