By all means, it can be established with data and data do not lie that the finance minister has unveiled a new budget, different from what he presented in a quiet and calm National Assembly session on June 13. Though the June 13 budget was not a feel-good one, the ministry has by and by unveiled the parts of the financial bill, making it a nightmare for commoners and industrialists alike. The June 13 budget was a Rs90.5 trillion bill, which has now increased to Rs95 trillion, and the added part of Rs465 billion entails a string of taxes, with different names. Friday was another day when the finance minister told a presser with a set of bad, hard news for everyone. The hardest one is the imposition of the ‘Super Tax’ which will be deducted from the businesses at the rate of four per cent to 10 per cent, depending on their ability to pay tax. A 10 per cent ‘Super Tax’ is applicable on 13 large industries, including sugar and fertilizers, while all other industries will pay a blanket four per cent. The super tax news was just like a bombshell on those who are part of the stock exchange, and a bloodbath ensued, resulting in the stoppage of the trade activity in the Pakistan Stock Exchange after its benchmark index fell by 2,053 points at midday. Those who are not directly or indirectly concerned with the stock exchange, turned to social media to vent their pent up feelings. The overwhelming majority of the people are talking about the government’s inability to raise the tax base and decrease fiscal spending to raise income and lower the level of fiscal hardships. Instead, the government has opted to do what most of the developed or developing nations do: increase tax.
Other than the ‘Super Tax’, the minister has announced one per cent tax on those with annual income exceeding Rs150 million, two per cent for Rs200 million income, three per cent for Rs250 million income and four per cent for Rs300 million income. Moreover, a Rs50 per liter petroleum development levy is in the pipeline to be imposed bit by bit every month. A levy of Rs30,000 per tonne on liquefied petroleum gas will impact 90 per cent of the Pakistanis using LPG as domestic fuel. Those using natural gas and electricity as fuel will also feel the heat of the taxes in the new fiscal year. Similarly, the biggest relief the June 13 budget had and what the government people bragged about, the Rs47 billion tax relief for the salaried citizens has also been withdrawn. Earlier, the government had exempted the slab falling in up to Rs1.2 million. Now, those drawing salary from Rs600,000 to Rs1.2 million will pay a 2.5 per cent income tax for individuals earning between Rs600,000 and Rs1.2m. Still it is unclear if the additional Rs465 billion will be collected and if the International Monetary Fund will be convinced by the budgetary jugglery of figures. Former finance minister Shaukat Tarin has rightly castigated the government for avoiding progressive taxing mechanisms, and instead all guns are aimed at those already being taxed. We are a nation that’s fairly productive and yet we are facing economic and other crises. It also gives the impression that it’s the corrupt system that is responsible for all the ills. That is partially true but there is a far more honest way to look at things. A very simple explanation for our problems is this: we earn less and spend more. This is the crux of the matter and yet we do not understand this simple fact even though we have gone to the IMF more than 15 times for bailouts. The country has large sections of populations that do not pay direct taxes. We can increase income by increasing taxes, increasing the number of people under the tax net or increasing exports. We hate taking these steps.
Let us take help from the data: in a population of 220 million, the actual people paying direct taxes are only 1.8 million, which can be said in other words that out of more than 40 million families, only 1.8 million families pay direct taxes. This cannot be sustained for long. All those people and sectors who are exempted from paying direct taxes should be taxed and should be direct-taxed. Also, exports will have to be increased, no matter how. In other words, the total revenue of the country needs to be increased rapidly. And it can be done when sectors like agriculture and several informal sectors will have to be brought under tax base. If this is not done immediately, the government will have to take more loans and as we see loans are coming handy; every time we go to a lender, we are slapped with tough, humiliating terms.
On the domestic front, the government needs to get rid of loss-making enterprises like PIA and Steel Mills and several others, and they should be sold off immediately. These white elephants collectively eat away Rs700 billion every year. If these are sold the difference between expenditure and revenue will be narrowed down quite a bit. What’s the point in ruining the nation’s finances for the sake of a few thousand families whose heads work in such companies. These are tough decisions that will have to be taken because the day is not far when nobody will be willing to give us loans. The loan stock is growing so fast that soon we will be in no position to pay off past loans, what to talk of new loans. Problems will not cease to exist even if we continue with resolving them with painkillers, instead of going for permanent solutions. Who is stopping the government, the policymakers, the politicians and the bureaucracy from taking such measures?