Budget 2013: Testing Times And Desperate Measures

                                  Budget 2013: Testing Times And Desperate Measures

Federal Budget has been unveiled by new Governments Finance Minister Ishaq Dar, many promises and pledges were being made and many commitments to revamp ailing economy which was left in shambles by previous rulers. It was a difficult task to prepare budget under such circumstances when total debt reaching historic highs and budget deficit to unprecedented levels.

Ishaq Dar did an incredible job by preparing Budget in less than a week, working day in and day out, conducting hectic meetings and finally coming up with Budget Document. It is clear from Budget document that it is a growth driven budget, total focus has been to cut the expenditure side of the Budget and kick start the economy by spending huge 1.15 trillion rupees on developmental side. Reducing Cooperate tax gradually to 30% from current 35% is part of that, because businessman sitting on huge funds and were waiting for right moment to invest their savings,  hardly have  been provided with any opportunity to invest in last five years. Investing heavily on development side would definitely create huge number of jobs both in private and Government sector as Government has already announced that they wouldn't be investing in  any bankrupted public entities in coming months and years so it was very important to kick start the economy to create job and achieve GDP target of 7% in medium term Government Goal. Stock Market sentiments touched  new highs, as close to 550 million dollars foreign investment was  witnessed in Pakistani Stocks, an incredible increase of stock prices  to the tune of 8 billion dollar plus was  witnessed post 11th May. Investors had in mind the track record of previous PMLN Governments and their deliverance on economic front boasted positive sentiments.

We have seen in last decade or so that every coming Government rely heavily on huge discretionary funds to fulfil their hidden agendas and at the same time the funds allocated to Executive sky rocketed with every passing day. This Government has taken a huge initiative to abolish all discretionary and secret funds of all Ministries saving over 40 billion rupees in 2013-14 Budget alone. Expenditure cut of 30% on non-developmental budget, Prime Minister voluntarily slashing his Budget by 45% and abolished all his discretionary funds. Yes all these measures look symbolic in a 3.9 trillion rupees Budget but unfortunately for  society and for Pakistan Government they are very new and a breath of fresh air.

The thing which need to be admired and appreciated about this Budget is that Government is showing will to revamp bleeding public sector entities which have become monsters and eating away hard earned tax payers money, close to 400-500 billion rupees are spent in these organisations due to misgoverning and corruption. Finance Minister's promise to settle circular debt of 500 billion rupees and bring in institutional mechanism in WAPDA so that this menace of circular debt is dealt once for all. Prime Minister is about to announce "Comprehensive Energy Policy" in a few days, where he will take the  Nation into confidence regarding Energy  and steps taken by Government to tackle this crisis. I think, Government needs to take care of when they rationalise energy tariff, they must protect  consumer who use 100-200 units, for them Tariff should  be unchanged or rather needs to be down graded. Similarly, pledge to reorganise other entities like Railway, PIA, Pakistan Steel, PSO, OGRA etc. needs to be revamped on war footings as Government has already disclosed their plan of Independent Board Of Governors and Executive from Private Sector selected on merit. This exercise was very successful in PMLN previous Government when all Banks were revamped and privatised, now banking sector has become the backbone of Pakistan Financial Sector. If PMLN is  able to achieve this,  will go down in history as one of the success story  and they will definitely be remembered by future generations.

There is heavy criticism of PMLN for raising GST and at the same time not raising the pay of salaried class but above all taxing the same group of people paying taxes for decades. As far as first part of criticism is concerned I completely endorse the notion that GST being an indirect tax and has always been passed on to the consumers, 1% raise mean 25-26 billion rupees but Finance Minister clarifying that its not applicable to consumer goods  but raising GST is never a good idea in a country where inflation already has become a headache. Similarly salaried class can easily be accommodated by slashing the "BISP", which has  ballooned  to 75 billion rupees from 40 billion . As far as burdening the salaried class is concerned, I think there is an obvious effort to tax richer and protect poor that is why this new method has been introduced to tax them, interesting as explained by our honourable Finance Minister that only close to 4200 people are effected who fall in 7 million plus bracket but hue and cry in Social Media has been raised giving the impression that  millions have been taxed in this non tax paying country!!.

There is a visible effort to broaden the tax base by introducing many new taxes, which are small but definitely a new beginning by this Government and an effort to document economy to some extent, close to 202 billion rupees will be collected by these measures. Many new avenues tapped in by this Government, like people paying huge tuition fees for their children but never bothered to pay their taxes, people spending huge on marriages and other functions but unfortunately don't have NTN number, retailers earning millions but their contribution to  tax net is dismal, even Federal Government has tried to tax Agricultural Income, now they have to deposit certificate in FBR that their Agricultural income has been taxed in Provinces before getting exemptions from Federal Government, similarly housing sector has been brought into tax net so many measures which look small but remember when PMLN first introduced GST in nineties it started off slowly but now has become the backbone of tax net. Main focus of this Government seems to be to plug in all loop holes which many take advantage to evade taxes with the help of black sheep's in "FBR". But what is heartening to see is the resolve and will of this Government to revamp "FBR" and make it an autonomous body and corruption free, reports suggest close to 1 trillion rupees corruption happening in this organisation  annually. FBR  has already identified the potential tax payers, Government will and intentions will be closely watched and monitored by Independent Media and Economists. Government has announced to bring half a million potential tax payers in tax net which can really boast the final tax numbers.

Summing it up, it was a difficult budget presented in testing times, focus was to promote growth and at the same time  reduce the expenditures, a visible effort to start an era of documented economy, testing times for consumers but Government tried to protect life line consumers through humongous revamped "BISP" and a comprehensive Prime Minister Package announced for youth. Government must increase pays of low income salaried class and revise its decision on GST raise because it doesn't send a good signal when you are trying to broaden the tax base.