The PML-N firmly believes Pakistan is heading towards a bright future as the nation is blessed with all that is needed to earn a place in the league of responsible emerging nations on the global stage. The PML-N’s last government has already carved the path. The real challenge is to address the public trust deficit on the government and the continuity of key economic policies.
We believe there is enough wealth in this country to sustain the growth trajectory. To channelise a fair portion of the private wealth for public good we reduced the depth of taxation to achieve required breadth.
According to our assessments chopped tax rates will benefit 1.2 million tax payers in the country. Earlier the high tax regime exerted a debilitating burden on professionals such as doctors, dentists, architects and other self employed service providers. Small and medium enterprises, the backbone of a country’s industrial base, also preferred to stay out of the tax net because of high incidence of government levies.
The simpler and rationalised tax regime, we believe will motivate more people to legalise their earnings and increase public resource mobilisation.
We think this is a nation of responsible people who would like to chip in their share in nation building if they know that their contribution will not be wasted and instead be utilised efficiently.
There is no question of backtracking on our taxation policies. If voted to power we will encourage people to partake in economic development both individually and collectively.
We are perfectly aware of the challenges on the external front but are confident that stability is achievable without compromising growth.
People who dismissed the tax amnesty scheme as bogus and predicted its failure were proved wrong. The final count of resources mobilised under the scheme is not out yet but it is public knowledge that it worked or it wouldn’t have been extended by the Caretaker setup through a Presidential Ordinance. We expect that declaration of assets abroad will partially ease the pressure on foreign exchange reserves in the short run.
The export promotion schemes of PML-N’s last government are also delivering as the country’s export earnings have been increasing slowly but consistently over the last three quarters. To contain the import bill we have increased regulatory duties on luxury items. The devaluation also served the dual purpose of discouraging imports and encouraging exports.
And to top everything else is CPEC. Yes we mobilised investment and facilitated funding from Chinese lenders but these loans are not booked on the government’s accounts. Under our watch capital formation not just restarted but is picking up pace in Pakistan. Do you think all this investment in power, roads, railways, bridges and ports will go waste?
We trust the youth and our entrepreneurs. If business facilitation works anywhere there is no reason for it not to work here. The rapid pace of industrialisation will lead to exportable surpluses produced competitively. We hope to narrow down trade deficit by encouraging trade in new products and new markets in the medium term.
The question of compromising growth doesn’t arise; we will brave all challenges on the strength of spectacular growth.
First of all, the PPP runs an internal policy conversation all year round as part of our core organisational dynamic. We work with development economists, like we have through the last several manifestos to flesh out our public spending and policy costing proposals. Pie in the sky is not encouraged beyond ten minutes, because frankly, people want delivery from democracy now, and we can’t promise what we can’t cost, plan or resource.
There are several targeted poverty alleviation and social welfare proposals in our manifesto. We are acutely aware that many of these proposals are parked in sectors which already make demands on public spending, but as I said, like the successful Benazir Income Support Programme which we launched, none were un-costed.
Public expenditure on education, for instance, which is critical and should rise to match rising higher capacity to use it, is already above two per cent of GDP, but without the critical link between education and the world of work, educated young people are left without prospects.
Secondly, our manifesto pledges for the expansion of welfare measures are built on the following principles: cost effectiveness, reprioritisation, targeting, and a wide usage of information technology for management and targeting.
We have carefully costed all of our proposals using existing cost structures and various scenarios. The cost of our social policy proposals ranges from between 1.1-1.8pc of GDP depending on the policy options and spending chosen.
Thirdly, our manifesto also plans for a critical increase in the tax base. So instead of constant ad hoc borrowing to feed our spending, we must strive to ideally reach a tax to GDP ratio from 12.5pc to around 15pc over the term of the next parliament.
Additionally, we have proposed cost savings measures in sectors such as energy.
There are revenue proposals for provincial and local governments too in our manifesto. But our main thrust at the federal level will be to utilise our experience in Sindh, particularly with the revenue board, for expanding tax compliance and collection.
The most buoyant source of tax revenue increases in the recent years has been the increase in GST revenues on services collected by provinces.
Unfortunately, the previous government, despite a favourable external environment, such as historically low global oil prices, has left our economy in a precarious situation. Exports are down from the historic highs reached in our previous tenure.
When external balances become precarious, stabilisation is not an option but a necessary measure, whether we like it or not. But we do have some options within stabilisation of ensuring that as little of the penalty is paid by the poorest, who contributed nothing to the crisis.
Also, there are options, if exercised carefully, for resumption of growth along a more sustainable path.
In our 2008 tenure, we ensured that the poorest be protected through the establishment of the first large-scale social protection programme (BISP) in the country. In fact, as everyone knows, this programme helped Pakistan in negotiations with the IMF in the subsequent stabilisation programme.
While it is not prudent to either talk up a crisis, or to give away too many of our negotiating points at this stage, our party is of the view that we are uniquely placed to deliver a stabilisation programme that will protect the poorest and most vulnerable, return to growth responsibly and quickly, and set us on the path to sustainable growth rather than another stop-start-stop cycle.
Our manifesto specifically addresses the problem of how our economy typically moves in depressingly predictable stop-start-stop cycles because major structural reforms needed to put our economy on an inclusive growth path have not been given sustainability. We believe that structural reforms which we have outlined are essential for breaking this cycle.
We are clear and committed towards undertaking a comprehensive package of reforms, once voted into power.
The economy, with all emphasis, is one of the prime areas of focus. We believe that Pakistan is blessed with the treasures of both resources and potential; however the most devastating issue is the absence of true spirit and political will.
Rulers, one after the other have compromised the interests of the nation and treated the economy as an instrument to accumulate wealth for themselves or facilitate the corrupt, wealthy elite that invests heavily to bring them into power.
Details of our plan to reform the economy can be found both in my “hundred-day plan” and “PTI’s manifesto” however, I would specifically like to mention that my government will go to every possible extent to exploit our own resources to generate capital and fix our tax administration to ensure minimum leakages.
Comprehensive overhauling of the tax system to enhance the tax base without hurting production forces (both industrial and agricultural), too is a part of the priority agenda we would like to implement.
Pakistan’s economy is mostly based on indirect taxation and means of resources collection. The society by large lacks confidence in successive governments, thus the tax base and tax collection has constantly been declining. PTI will restore the confidence of the tax payers, reduce indirect taxation and rationalise taxes.
Our government will seek the support from overseas Pakistanis in the form of FDI and remittances. —AS
Published in Dawn, The Business and Finance Weekly, July 9th, 2018