EDITORIAL: Despite intense pressure from the IMF, which is seeking substantial improvements in the country’s revenue generation base, the Punjab budget for 2024-25 clearly signals that the largest province isn’t yet ready to take the transformative measures that would introduce new revenue-generating avenues to help reduce its dependence on federal transfers.
The first such exercise under the stewardship of Chief Minister Maryam Nawaz unveiled a “tax-free”, Rs5,446 billion surplus budget, with total income estimates of the province clocking in at Rs4,643 billion.
Of this amount, the Punjab government will receive a massive Rs3683 billion from the federal divisible pool under the National Finance Commission Award, while the provincial authorities will be collecting around Rs960 billion under various heads.
While the latter sum is more than 50 percent higher than the amount generated during the previous fiscal year, it is clear that a lack of political will, boldness and ingenuity continue to plague policymakers, too afraid to implement essential but potentially unpopular fiscal initiatives that could alienate certain segments of the electorate.
This is highlighted by the fact that the provincial government has shied away from increasing or levying any new taxes on agricultural incomes or on the real estate sector. Agricultural incomes will continue to be taxed at lower rates compared to income tax rates of other sectors while stamp duties and corporation fees on property transfers have also not seen any rise.
Coming to the development aspect of the budget, it includes an Annual Development Programme (ADP) of Rs842 billion, amounting to a 28 percent increase over the previous year’s ADP. Encouragingly, substantial sums have also been apportioned for vital areas like health and education.
Spending on health will see an allocation of Rs539.15 billion, with focus on both primary and secondary healthcare, as well as plans to establish Basic Health Units and Rural Health Centers on modern lines. Also welcome is the Rs669 billion earmarked for education, with a focus on funding to restore dilapidated school buildings and on ensuring provision of basic facilities. There are also plans to introduce the Public Schools Reorganisation Programme to improve the standard of education imparted in government schools.
Salaries and pensions will see substantial allocations, with Rs603 billion earmarked for payment of the former, while Rs451 billion has been apportioned for pension payments, which is a significant 15 percent increase over the previous year.
Given that pensions remain entirely untaxed, such a substantial rise in payments under this head will only serve to constrain the fiscal space further, with there being no plans currently on part of either the federal or provincial governments to bring pensions that are above the statutory exemption level into the tax net.
While increased spending has been earmarked for infrastructure development, underprivileged districts, small farmers and the social sector, the continued reliance on federal transfers and reluctance to look into its own revenue-generating avenues will continue to hamper not only Punjab’s aims to alleviate the various areas in desperate need for more funding, this strategy will also exacerbate the constrained fiscal space at the federal level.
The persistent refusal of provincial governments to recognise that federal transfers should primarily augment their revenues rather than serve as the main source of their revenue generation has been a major contributor to Pakistan’s current economic difficulties.
Moreover, much like their counterparts at the centre, the Punjab authorities also do not appear to care that when large segments of the economy do not contribute their fair share in taxes, it results in perpetuating elite capture.
The Punjab chief minister’s statement about the budget containing no new taxes, as if that were a good thing, shows the lack of awareness regarding the country’s dire economic realities among the upper echelons. That has been the disappointing aspect of this budget-making exercise.
Copyright Business Recorder, 2024
Comments
Comments are closed.