EDITORIAL: Finance Minister Muhammad Aurangzeb’s claims at a news conference after parliament passed the budget for 2024-25 that he has only continued the existing exemptions for the officialdom and no new exemptions have been given in the finance act, in fact, nearly all other exemptions have been abolished may have fuelled the already simmering public discontent to boiling point – simmering against electricity load-shedding in spite of the prevailing high temperatures with the old and the young at great risk.
The budget presented by him has patently widened the divide between the haves and the have-nots through not only raising salaries of the 7 percent of the total HR (Human Resource) employed at the taxpayers’ expense by 20 to 25 percent, but his income tax measures exempting government employees from taxes imposed on the remaining 93 percent of the labour force operating in the private sector (who have not witnessed a raise in salaries due to flawed policies keeping the economy in a fragile state for the past three to four years), reflects a complete disregard for the taxpaying public in general; and creates additional anomalies in the tax structure instead of eliminating them as pledged.
The decision not to levy the same tax rates on all those engaged in the real estate business will further exacerbate the anomalies and may well lead to considerable abuse.
To make matters worse, Aurangzeb acknowledged that he would withdraw the income tax on the salaried class as and when the economy improved – a baffling pledge given that his budget envisages a raise of 21 percent in the current expenditure, which should have been slashed, through voluntary sacrifices by the influential (read 7 percent of the total HR employed by governments).
He added that chief ministers are not taking salaries and even if one adds the federal cabinet members to this list yet it cannot be denied that they are costing the taxpayers at least 50 times more on free utilities up to a point, protocol, security, fuel and in being housed at state expense.
The finance minister’s claim that 750 billion rupees will be generated through ending tax evasion (due to the connivance between the FBR officials and taxpayers) indicates a reliance on digitisation that has not been borne out in other countries; for example, the UK government’s digitisation of its economy is very high and its claims that it would end evasion (as it envisages raising revenue that would not burden the taxpayers) is being viewed sceptically by the sector experts as administration after administration has pledged and then failed to generate significant resources from this source.
One would have to wait to see whether the claim that the tax imposed on small retailers effective on 1 July will be implemented as any organised resistance by these retailers would further inconvenience and anger the general public reeling from a budget that is even more inequitable and unfair than previous budgets as it has widened the gulf between the rulers (officialdom) and the ruled (people).
Fuel (POL) prices have also been jacked up for the ongoing fortnight on the back of their increase in the international price.
However, this hike has an immediate impact on the Sensitive Price Index because of the raise in transport costs of edibles and public transport.
While on its own, the public may have accepted this hike yet with all the taxes imposed in the budget effective 1 July – the disposable income of the average Pakistani would decline by an amount that would imply his/her inability to meet the kitchen budget which could have far reaching socio-economic consequences.
True, that Pakistan has already gone through the election process with a coalition of sorts in place yet the budget will no doubt reinvigorate those who challenge the 8 February results and their support may well be considerably strengthened by the silent majority inordinately burdened by these tax measures.
And in that respect it may bring to mind the Biden-Trump recent debate that focused attention on the cognitive challenges facing the former and the penchant for lying by the latter that highlight the need for alternatives.
Aurangzeb also claimed rather optimistically that the International Monetary Fund will agree to a 6 to 8 billion dollar loan and that this would be the last IMF loan.
The budget 2024-25 follows the IMF objective of a primary deficit surplus but the budget deficit of 6.9 percent is unsustainable as its impact on inflation would make it even more unacceptable to the public and at the same time it is unlikely that the Fund would support budgeted measures that seek to shelter the powerful from across the board application of tax measures.
As we have been consistently stating the government’s only option to increase its leverage with the Fund and other lenders is to cut its own current expenditure which it has not done so yet, and instead burdened the public mistakenly thinking that it would, as in the past, accept this burden.
The 2024-25 budget is worse than previous ones with an even heavier fallout on the people while continuing to mollycoddle the government personnel and unless there are substantial changes made, its acceptability will erode with each passing day that may be akin to the government pushing the self-destruct button.
Copyright Business Recorder, 2024
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