The ides of June are upon us, and Caesar is surely in trouble.
Belonging to the small segment of honest Pakistanis, very small actually, who have always disclosed their true income and their correct wealth; it is indeed heartening that the government intends to go after the dishonest lot - assuming one has correctly understood the undercurrent of the Finance Bill 2019.
And we, the honest taxpayers, can even digest, albeit with much difficulty and pain, the government bribing the dishonest through repeated Amnesty Schemes, thereby allowing them to become Mr Clean by paying a piddly amount of tax on properties they have forever concealed and evaded taxes on.
But a policy which pampers the corrupt and punishes the righteous can be anything but judicious and perhaps verges on tyrannical.
Imagine, an honest taxpayer and a tax evader purchasing property of similar area and value and at the same time a few years ago, with the former always disclosing his acquisition in his tax returns, and the latter availing the benefit of the Amnesty Scheme at market value before 30th June 2019. Now imagine that they both sell next year, and that the price has tripled by then. Do the math.
In the case of the honest taxpayer, he eats onions and gets whacked with slippers too!
The honest must also be worried sick about a policeman soon knocking at the door and insisting that the house is rented and that too at an exorbitant rent, unless and until that chap in the uniform is suitably looked after.
The intent is not to challenge the FBR Chairman's good intent and hard work, but initiatives may perhaps need to be thought more thoroughly through.
While it is wonderful that the Government has decided to go after the land mafia and thereby the black economy, is it seriously wise to go after them all guns blazing; the powerful are probably already brainstorming to devise solutions to circumvent the Government's proposed initiatives, dirty money is likely to look for safer havens.
The dollar is getting dearer every second - the current market rate of Rs 160 to the dollar is definitely going to make the bare necessities very expensive, and gold isn't getting cheaper either.
Slow and steady is said to win races.
Can the federal government collect income taxes on immovable property under the Constitution?
The strategy of threatening the entire Small and Medium Enterprises (SMEs) sector to pay taxes or go to jail is indeed also very curious; was not pursuing economic growth the prime objective?
Faced with a choice of paying historic taxes, being harassed by the tax collector, and even going to jail, the majority of family businesses may decide to shut shop altogether.
Someone is going to get rich on trying to get all those back taxes, but it is debatable if it's the government.
Undoubtedly, moving away from the final tax regime is a move towards progressive taxation, except that to the extent of minimum tax, income tax will remain regressive - and indirect taxes have been enhanced on multiple commodities, that too significantly.
In the case of importers at least, it is unlikely they will pay more taxes out of their own pockets; at best, they will pass on taxes or stop importing all together if they cannot.
The poor will continue to fund taxation.
And while at the end of the day, price signals will reduce consumption and the trade deficit, which is good, in the case of bare necessities this means more inflation.
All this inflation, high utility costs and more taxation will ultimately even suck the moths out of the common man wallets, completely marginalising their purchasing power; consequently resulting, probably, in low demand, recession and unemployment.
What will happen to everybody's favourite GDP?
They say that the economy will stabilise in two to three years with these monetary, fiscal and tax measures, but how?
I, for one, seem to be missing something.
Essentially, the tax policy seems to be at war with the economic policy.
Assuming the tax collector even meets the target of collecting an additional Rs 1.5 trillion in taxes, most all of it will be spent in paying for debt servicing, and not on infrastructure or industries; for the latter, we seem to want to rely on foreigners who obviously charge exorbitantly, friends or no friends.
CPEC is a game changer!
As per the Budget 2019-20, mark-up on all debt, plus foreign loan repayments, are estimated at a whopping Rs 3,986 billion, i.e., Rs 4 trillion almost, roughly more than three times the defence budget.
And of this, mark-up on domestic debt alone is Rs 2,532 billion; a logical question that, therefore, comes to mind is: why raise interest rates when you yourself are the biggest borrower?
How is that sensible? Why are real interest rates so important?
Admittedly, the government may not have dollars to stop the rupee slide, but the recent devaluation by Rs 10 alone has resulted in external debt ballooning by Rs 1,050 billion or more; external debt and liabilities at 31 March 2019 stand at US$ 105 billion.
How are we ever paying that back? What will we have to sell?
The IMF wants us to sell all State-Owned Enterprises (SOEs), and while probably, albeit maybe not, this may result in elimination of SOE losses and may even provide fiscal space, but it sure won't be enough to pay off the external debt; we tried that in better times before, and the debt kept on growing.
Considering all of the above, somebody from the finance team needs to explain the path to economic revival in layman's terms; historically an accurate Government narrative has always been a problem.
How exactly are we getting out of this mixed, if not confusing, Budget box of goodies?
(The writer is a chartered accountant based in Islamabad. Email: syed.bakhtiyarkazmi@gmail.com)