THE government has announced a set of incentives for business that are aimed at getting the wheels of the economy moving. Whether or not these steps help in achieving that objective is now the big question.

The speech by finance minister Asad Umar focused on the politics his party faces, as well as the incentives the government is offering to the business community in the hope that with more money placed at their disposal, investment will receive a boost.

The minister was correct to point out that Pakistan’s saving rate is far too low to support elevated investment, and growth in the face of a low savings rate is likely to prove self defeating.

It seems the measures tabled in the supplementary finance bill are trying to encourage investment and discourage the import of luxury items.

All bets, it seems, are now on getting growth started. The speech gave nothing away on how it will be paid for, so either there are tax bombshells hiding in the taxation details to be revealed later, or there is an ardent hope that revival in business activity alone will lead to higher revenues.

Read more: Advance taxes give artificial boost to revenue collection: SAI

The minister gave no indication of the revenue impact of all the incentives he announced, but given their sprawling scale — from customs duties to sales tax to income tax — it is likely to be substantial.

Also, in some cases like reduction in tax on inter-corporate dividends or elimination of the super tax on non-banking corporates after July 1, it is difficult to see why these merited such urgent treatment at this time.

One thinks of a mid-year mini budget as a course correction in response to immediate pressures. Large agenda-setting changes, particularly if they are to be made effective from July 1, did not need to be accommodated in a mid-year supplementary bill.

It appears that the measures and the bill have been designed to put a smile on the face of the business community. Such an exercise carries great costs in terms of revenue foregone. Whether or not it spurs economic growth is entirely another matter.

If there are indeed measures designed to offset the revenue impact of all the incentives, then we can be certain that big surprises lurk in the details. But if there are no surprises, and everything has been revealed, then the government has placed an outsize bet that stirring business sentiments will lead to a revival of growth.

And once the dust from this mini-budget session settles, the larger questions facing the government about structural reform and plugging the growing revenue shortfall will still be there. In that sense, it is now an open bet as to which will speak louder with the passage of time: the words of the finance minister or the silent gaps in the speech?

Published in Dawn, January 24th, 2019

Opinion

De-programming the robot
25 Jul 2021

De-programming the robot

The robot that is programmed to be a predator, to dominate, to hurt, to rape, to kill, will do as he pleases, where he pleases...
A toxic discourse
Updated 25 Jul 2021

A toxic discourse

Politics as it exists now is a catalyst for further divisions...
Cyberespionage
25 Jul 2021

Cyberespionage

Sellers of surveillance tools must be held accountable...
Managing human agency
24 Jul 2021

Managing human agency

Is the private sector able to manage the ‘human agency’ of teachers better than the public sector?...

Editorial

Noor murder case
Updated 25 Jul 2021

Noor murder case

IT would not be an exaggeration to describe Pakistan as no country for women. This truth was underscored yet again...
25 Jul 2021

Rental inflation

HOUSE rent prices soared in June by 6.21pc from 4.2pc a year ago, topping the list of 10 contributors to the urban...
Cyberattack on rights
Updated 24 Jul 2021

Cyberattack on rights

A COLLABORATIVE investigation into a data leak of software sold by the Israeli surveillance company NSO Group has ...
24 Jul 2021

Sleeper cells

THERE was a time not too long ago when militant groups had unleashed a reign of terror in Pakistan, resulting in...
24 Jul 2021

Prisoners’ return

THE families of 62 Pakistani prisoners who had been imprisoned in Saudi Arabia had reason to rejoice this Eid as...