ICMA Pakistan’s pre-budget proposals

The federal budget 2017-18 is just a few days away, and proposals from all and sundry are flowing around. The Institute of Cost and Management Accountants of Pakistan (ICMAP) too shared a detailed document making pre-budget proposals for the government, which has also been duly submitted to the relevant ministry and the FBR.

Most proposals laid out, especially those on improving tax refund and enhancing tax revenues, are well laid out and argued for, but are less likely to see the light of the day. The usual calls for documenting the economy and addressing the cumbersome process of tax collection and reporting requirements find ample space in the proposal document.

Not entirely ICMAP’s expertise, but the proposal touches on reducing government expenditure. That said, recommending reduced bank borrowing, limiting non—development expenditure, closing down heavy loss projects, limiting energy subsidies – does not really need expertise. Offering viable solutions does, which is found missing here, but expectedly so.

Some interesting tax revenue enhancing proposals have been made, in addition to the usual calls for rationalizing tax rates and increasing income tax rate on agriculture.

The ICMA Pakistan has recommended incentivizing retailers who maintain a cash register with the FBR, via means of covering up in case of losses. The idea behind the proposal is to expand the tax net of retail sector, as over 70 percent retailers are believed to be earning more than the exemption limit.

But the real deal in pre-budget proposals document is ICMA Pakistan’s plea to have a more inclusive role of cost and management accounting in economic growth and efficiency. The body has tried to make a case of controlling inflation through cost audit. ICMA Pakistan argues that the cost reduction eventually lessens inflation without negatively impacting tax collection, and speeds up economic activities and enhances revues.

The ICMA Pakistan has recommended the government to consider increasing the scope of cost audit, as it believes it is imperative to achieve economic efficiency and control market inflation. The role of management accountants in developing revival plans for the ailing PSEs, increase role in financial management of PSDP projects and drug pricing is also sought by the ICMAP.

Of greater significance and perhaps the most practical demand is that of forming a regulatory body for financial reporting. The ICMAP has taken a dig on the monopoly and conflict of interest of the SECP and ICAP, claiming that the aforementioned bodies focus on compliance rather than corporate reporting. An independent financial reporting council has been recommended to help attract investment and corporate culture in Pakistan. Exclusivity for cost audit rights has also been demanded, and the example of India has been cited.

All in all, the pre-budget ICMAP proposals cover most aspects facing Pakistan’s economy and do warrant a serious look. The recommendations pertaining to ICMAP’s area of expertise are the ones that should be considered for adoption, unless argued against by the authorities.