The Federal Budget 2006-07 is likely to be announced on June 5, 2006. Stress and tension continues in the country. Salaried persons, suffering from the onslaught of inflation, are expecting increase in their pay and emolument. The business community is eagerly awaiting the announcement of incentives, rebates and other benefits.
Expecting raise in taxes on luxury items, some people, having belief in hoarding, are thinking of business malpractices. The small farmers, small businessmen, small shopkeepers are also expecting a package of incentives from the financial institutions. The Chambers of Commerce and Industry are hoping for a favourable treatment to their suggestions by the Government. Stock markets desire the luxury of enjoyment of no capital gain on the income tax front. Real Estate dealers wish to continue to be untaxed.
Indeed all types of stakeholders have different desires and perceptions.
BUDGET CHALLENGES
SOME STRATEGIC CHALLENGES FACING THE PREPARATION OF FEDERAL BUDGET 2006-07 ARE AS UNDER:
A REVENUE BUDGET:
1. Unlike a deficit of Rs 184 billion in the Federal Budget 2005-06, the forthcoming budget (2006-07) must generate a surplus so that sufficient amount is available for financing ADP 2006-07.
2. In indirect taxes, as announced earlier, federal excise was to be merged into sales tax. The sales tax net be expanded and the standard sales tax rate be reduced.
3. The current number of income tax payees is around 1.4 million. CBR, with the support of the Federal Government, should endeavour to expand it to at least 2.0 million now with increasing targets of 2.5 and 3.00 million in the next two years. Except for pensioners, all exemptions at present available under the Second Schedule of the Income Tax Ordinance, 2001, be withdrawn immediately.
The foregoing suggestions will boost domestic resource mobilisation and develop a sense of confidence on self-reliant basis and result in not resorting to debt.
4. The current expenditure needs substantial review. This should be cut down to 25%-30% against 37% of the Federal Budget 2005-2006.
5. As nuclear deterrent exists in Pakistan, around 200,000 army-men be challenised to civil work assignments namely, establishing cottage and small industries near the border areas, construction of farm to the main roads and undertaking physical infrastructure jobs. This concept is known as "Productive Army."
B: ADP
1. As against 50% allocated to the departments of federal government in the ADP of 2005-06, this should be restricted to a maximum of 35% in 2006-07 budget.
2. the provincial ADPs were allocated 25% in ADP 2005-06.
THIS AMOUNT IS SUGGESTED TO BE INCREASED AS UNDER:
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2006-07 30%
2007-08 35%
2008-09 40%
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The provincial harmony is likely to follow with financial autonomy, thus strengthening the federation.
3. No amount be allocated to autonomous bodies in the ADP 2006-
07. These should be asked to enjoy the autonomy by raising funds from other sources like capital market rather than be a burden on the ADP.
4. The practice of allocating appropriate amount to special programmes and special areas must continue till such time that sound planning at the grass-root takes a firm root.
5. Dependence on external assistance and bank borrowings be discouraged and be replaced by a determined will to raise resources from the domestic front by trying all strategic moves, including a crackdown on tax evasion, withdrawal of exemptions and expanding the tax base.
CONSTITUTIONAL ASPECTS
The Federal Budget must address issues identified in the 1973 Constitution of Pakistan. Selected articles requiring urgent attention of the Parliament and affecting the forthcoming Federal Budget are listed below:
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Article Focus
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3 Elimination of exploitation.
18 Freedom of trade, business or profession.
37 Promotion of social justice and eradication of social evils.
38 Promotion of social and economic well--being of the people.
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The common man is in search of solutions to the basic needs. The earlier these are addressed to the better. Social tensions are mounting and need attention of the federal government.
SUPPLY SIDE
Production shortages in agriculture, vegetables, meat, large-scale industrial units products, energy, food and other aspects be carefully addressed. Hoarding should be eliminated. Self-confidence can only be achieved through the supply side of economics.
It is high time that strategic initiative are undertaken to ensure that the fruits of prosperity are shared by the common man and a sense of confidence is developed in Pakistan and its constituents.
(The writer is Principal, Hailey College of Banking and Finance, University of the Punjab, Lahore.)
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