15.06.2013 Cap in hand
A large number of economists remain unimpressed by what is being dubbed as an ‘accountant’s budget’ presented by Finance Minister Ishaq Dar on Wednesday. They say it fails to address the structural reforms that are necessary if Pakistan is to have an equitably and fairly-taxed population. Unpicked, the budget is long on the talk but gives little to indicate that walking and talking will be matched. The ‘austerity’ measures, of which much has been made, are a political move rather than a fiscal one and the savings to be made in real terms are paltry in the context of the budget overall. The Federal Board of Revenue (FBR) has now been authorised to gain online access to information about bank accounts in an attempt to net up to half a million tax dodgers. Written-off loans will be tracked, ‘suspicious’ transactions examined in an attempt to prevent money laundering and credit card activity is also to be monitored. Quite apart from the matter of whether or not this is an invasion of individual privacy there is the question of how much revenue will be generated for the national treasury, the answer being speculative at best. The half a million people thought not to be filing tax returns will not be identified until December, which kicks the subject into the long grass for the time being.
Then there is the tricky subject of the IMF. With Forex reserves dwindling by the day, the bowl is being dusted off – despite the reality that any new loan will be taken with the intention of paying off the loan Pakistan defaulted on the last time it went cap-in-hand. Prior to the elections, the Sharif brothers were strident in their condemnation of international lending agencies and decrying Pakistan’s dependency. Scroll forward to June 10, 2013 and a meeting of donor agencies and bodies at Punjab House in Islamabad – and a different spin. The donors were asked for support and cooperation, and no doubt the representatives of the World Bank and the British Department for International Development (DfID) wondered where they had heard that song before. Unpacked, the 2013 budget tells us that there remains a fundamental resistance to taxing the rich and in that respect it is no different to virtually every other budget since the state came into existence. There is going to be no sequestration of tax-evaders’ assets, there is going to be no substantive broadening of the tax base – although the burden of taxation once again falls disproportionately on the poor – and presumptive and minimum tax regimes are going to prevail. Just as turkeys do not vote for Christmas neither do the very rich vote to tax their own selves. There is cursory – even derisory – compliance with tax legislation and the political will for reform is no more evident now than it was two months ago. For Pakistan it may, rather worryingly, begin to look like ‘business as usual.’
‘New’ moves
Ups and downs will keep coming our way as they always do, but right now is when the formation of new governments, new alliances and also new opposition setups may offer a sense of optimism about the future. As the wheels continue to turn after the polls in May, a 14-member cabinet has taken oath in Khyber Pakhtunkhwa. Of these members, senior ministers Sikander Hayat Sherpao, the provincial head of the Qaumi Watan Party, has been allotted the ministry of irrigation, power and energy, while Sirajul Haq, the deputy leader of the Jamaat-e-Islami, will take over finance. There has been criticism that the 14-member cabinet includes no women, but this may be rectified as new advisers are inducted. At any rate, far more significant than anything else will be the performance of the ministers as they begin their governance of the restive province. The way they go about it will be closely watched.
Elsewhere too the business of running the system continues. In the centre, the opposition parties – the PTI, the PPP and the MQM are reportedly engaged in talks on forming a joint opposition in parliament. This can be seen as a positive step towards a healthy democracy indicating that after a long struggle spanning some six decades, our political leaders seem determined to make democracy work this time. But whether it will really turn out to be so is the question. We wish these parties success only if they are not acting out of political opportunism; the noise emanating from the MQM-PTI conflict in Karachi has not exactly died down. The MQM still seems to be in an aggressive mood in the city, coming out strongly against the Amn Committee and accusing the PPP of harbouring and protecting murderers and extortionists. Ironically, the MQM stands accused of the same by the PTI which seems to have no love lost for the PPP either. Adding more to this interesting tale is former interior minister Rehman Malik who has, reportedly on the instructions of President Asif Ali Zardari, invited the MQM to join the PPP government in Sindh. He has also insisted that the party has nothing to do with the controversial People’s Amn Committee. It goes without saying that Malik’s credibility is rather low. The turbulent relationship between the PPP and the MQM has long been the subject of reflection and speculation, and it has yet to be seen what the final shape of things will turn out to be.