There were no fireworks in the parliamentary debate on Budget. The treasury was as disinterested as the opposition. Lack of quorum had to be pointed out during the Accountant's winding-up speech before a reluctant brood of treasury members was herded in. Is this a lack of interest symptomatic of the parliament's irrelevance - or the vacuity of the budget?
His invitation to the constituents to have chicken instead of dal apart, the Accountant put up a stout defence - except the defence was not about the directionless, more of the same, budget that was not really debated. It was about government's credibility. On GDP growth the Accountant's challenge was 'prove me wrong'. On borrowings his case was that by approving a deficit budget the Parliament gave him the requisite authority. On overall debt, he was 'less guilty than the preceding governments'.
In our view the opposition failed in its duty to prove the Accountant wrong, especially if his waltzing with the data was their main grouse. Either they don't have what it takes, or they found it to be an exercise in futility.
The GDP growth numbers are central to the debate on this government's economic performance - not because GDP growth, by itself, does much to ameliorate the sufferings of the unemployed and the indigent, but because it masks variables like fiscal deficit and borrowing when shown as a percentage of GDP. So how does the opposition prove that growth last year was closer to 3.1 % than the Accountant's claim of 4.7%? It is not enough to quote one think tank or another; or even the IMF that has maintained a stoic silence after pitching it somewhat lower than the official figure. It needs to take head-on the Accountant's contention that the Bureau of statistics is truly independent. Let the Finance committee summon the chief statistician Bajwa and pit him against that Martin Luther of our Economic Reformation, the durable Dr Hafiz Pasha. If that goes against the grain of parliamentary practices then let there be a commission of enquiry, consisting of eminent economists and statisticians, with full access to PBS data and authority to examine its officers. The government, having challenged the parliament to prove it wrong, cannot oppose such a commission.
We admire the Accountant's dissimulation prowess, but surely even he can't get away by saying that by approving the deficit budgets Parliament gave him the carte blanche to borrow. If you tote up the revenueexpenditure differentials submitted to the parliament in the last three budgets you will easily discover that he has borrowed much more. He just camouflages the numbers by showing them as percentage of a massaged GDP!
While we empathise with the Accountant on the debt situation that he inherited, surely that is not excuse enough to dig the hole deeper. Just look at the escalating mark up costs, despite record low domestic and international interest rates, that will consume 73% of net revenue receipts, compared to 50% in 2007-08 and 64% in 2012-13. Compare the accumulation of external loans by PML-N to that of the profligate PPP: respective averages of $7 billion and $3.4 billion, per annum.
Yes, the tax base needs to be broadened, but it won't happen with our complex tax system that discourages tax-filing. This has been brought out by the World Bank as well as the plethora of tax reform commissions. This has been validated by non-filers preferring to pay the penalty of staying out than coming into the tax net, and the traders rejecting the voluntary tax compliance scheme.
It appears both parties, the Accountant and the non-filers can live with the truce. The Accountant wants more money and doesn't really care where and how he gets it. He is obsessed with symptoms and quick fixes; not the cause of disease which requires an altogether different therapy. The non-filer will pay extra where he can't avoid, but largely deploy his considerable ingenuity to find 'workarounds'. If rumour is to be believed there is already a thriving 'unofficial' bank in Karachi.
A major factor contributing to the complexity of the system is the long finger of the taxman. Forget the humble beopari; even major companies dread the taxman's summons. Undeterred, we continue to make the system more 'taxpayer-unfriendly' and 'taxman-friendly'. How else do you explain the amendment to Section 68 (2) of the tax law that authorises the taxman to determine the 'fair market value of any property' without 'regard to the value fixed or notified by any provincial authority'?
In exercise of executive authority discretion sometimes becomes unavoidable. But the world over the emphasis is on reducing executive discretion to an absolute minimum; where unavoidable, it has to be used judiciously. We are moving in the opposite direction, providing for more and more executive discretion, despite full recognition that discretion is the breeding ground for corruption - not just the financial kind but also the kind that is used to make voters switch loyalties.
We are thus appalled at the opposition's failure to make the amendment to Sec 68(2) a test case to check unbridled discretion. How would the taxman determine the fair value of immovable property? The only legal instrument available to him is the price at which similar properties in the same area change hands, as recorded by the Registrar. Everything else will be essentially judgmental, providing a lot of space for 'negotiations' with the seller! Even if you provide for final determination (in the event of a dispute) through valuators appointed by the FBR the taxman will remain the major beneficiary, with the valuator becoming a secondary beneficiary. The amendment is tailor-made for the taxman's interests, and of course charity begins at home.
The sensible remedy would be to have the provincial governments substantially increase the 'collector's valuation'. That would also mean greater receipts for the provinces - except it might open up the Pandora's box of who has the authority to impose capital gain tax (CGT) on sale of immovable property: Federal government or the Provinces?
The CGT sword has the filers rushing to tax consultants, the non-filers refining the 'workarounds', and the Provinces just holding their heads. But the taxman wears a gleeful smile! And that real estate tycoon, whose development on the outskirts of Karachi is unaffected as he is selling files and not property, is laughing all the way to the bank - via FBR.
shabirahmed@yahoo.com