EDITORIAL: So, just like Punjab’s, Sindh’s Rs3.056 trillion budget also leverages rising transfers from the federal divisible pool under the existing NFC (National Finance Commission) to give a “record” Rs959.06 billion development outlay and assume a populist outlook.
Yet, from the people’s point of view, the fact remains that the PPP (Pakistan People’s Party) government – which has held the province for two decades – has progressively increased development spending without any significant improvement in their lives or the working of the Sindh administration.
Indeed, while FY25’s development allocation is about 30 percent higher than FY24’s, i.e., Rs735.103 billion, it is 81 percent higher than the actual spending and revised budget estimate of Rs529.6 billion. And since the recent past is a very good guide for what to expect in the immediate future, banking on optics alone and that too because of growing transfers from the federal pool, might not be enough to make much of a difference on the ground; especially with the poor record of utilising development funds properly.
What will have an immediate impact, though, are measures to extract Rs77 billion in new taxes. Chief Minister Syed Murad Ali Shah, who also holds Sindh’s finance portfolio, said the next fiscal’s Rs661.9 billion tax revenue target, against Rs469.9 billion in the outgoing year, is needed for a “sustainable solution” to the province’s “ever increasing financing needs”.
That is why the Sindh government has finally broken from its tradition of keeping the sales tax rate lower than other units and increased it by 2 percent to 15 percent for not just increasing revenue but also “harmonising the tax rates with other Service Tax Administrations in Pakistan”.
Whatever the benefits of this new harmony in tax rates, it reflects a penchant for relying on indirect taxes to meet revenue requirements across the country, even though it is very well known and understood by now that such taxes burden the poor a lot more than the rich, especially in times of financial crunch like the present. What is more, these taxes are also highly inflationary in nature, stoking cost-push inflation and driving down real incomes of people the budget is supposed to be friendly to.
CM Shah also said the situation “calls for levying new taxes, rationalising the prevailing regime, assuring relief to poor segments, and capturing the potential revenue from affluent sections”. Yet there was no progressive restructuring of the agricultural income tax regime, which was widely expected despite the fancy rhetoric because everybody knows that the government would never squeeze due taxes out of the feudal aristocracy that controls the party and its primary vote bank.
In the zeal to levy new taxes, the government proposes to levy sales tax on healthcare and education, albeit at reduced rates to start with. Even then, this proposal is outrageous, to say the least. Education and healthcare, under the constitution, are provincial subjects and their responsibility.
The right to education and health is indeed no less than a fundamental right of citizens for which the state is responsible and has miserably failed in this obligation. The state of most government-run education institutions and healthcare facilities, barring NICVDs and SIUTs, can best be described by the recent assertion by, no less, than the Sindh minister for education that 14,000 schools in the province do not have drinking water.
This indeed presents a vivid picture of the criminal neglect of these two sectors by the Sindh government. Consequently, the private sector has moved into these sectors to fill and, in some cases, exploit the void created by the government’s default. Instead of improving the lot of the government operated institutions in these two sectors, the government shamelessly seeks to extract income for itself by taxing the private sector.
That is why people have increasingly become disillusioned with the whole budget exercise and role of government. Because, for all the fanfare, the only real difference it makes in the lives of the majority – middle- and lower-income classes – is how much more they will have to surrender to the state in taxes without any guarantee of the so-called benefits ever coming to fruition. And in Sindh, just like in other provinces, nobody is holding their breath in anticipation of a better fiscal year ahead.
Copyright Business Recorder, 2024
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