Lahore - “I am scared. I am scared this year too. I don’t understand budgetary terms, but when I see the finance minister on TV it looks like he’s trying to say that his government has moved mountains for us and life’s gonna be easier now. But I don’t believe him, and I am scared,” Ghulam Sarwar Khurram, a science teacher in a small town in remote Bahawalnagar district of Punjab said, when I asked him what national budget meant to him.
“Every year I am told my salary has increased but prices increase even more and I feel getting poorer. They say I am a nation-builder but this builder is collapsing himself,” Khurram said, who has been teaching Biology and Chemistry for the past 18 years. I myself felt scared too as I heard (Finance Minister) Ishaq Dar telling the nation that the government is targeting a 16 percent rise in tax revenues this financial year to fuel growth.
Without a viable plan for increasing tax base and curtailing tax evasion, this would simply mean putting more burden on the already heavily burdened taxpayers. Fewer than one percent of country’s 190 million people pay income tax, and as of now it seems they are going to follow the same plan as has already flopped.
The government in its previous three budgets increased tax liabilities for unregistered persons on electricity gas bills, cash withdrawals, purchase of properties and vehicles, hoping it will force them into tax net.
But that has not happened. Instead of showing any increase, the tax base in 2015 shrank by over 18 percent to just under one million. The total number of income tax filers slipped to just 980,155 in 2015 from 1.199 million in 2014. The policy of increasing the cost of non-compliance has thus backfired. Despite missing the economic growth target in the outgoing fiscal year by 0.79 percent, the minister said the 4.71 percent growth level was highest in eight years. But I wonder what would happen if the oil prices rose and stabilised at a higher level.
After all it is primarily the oil price crash that enabled government to keep inflation as well as the current deficit low. In the absence of more loans coming from the IMF - as Dar has promised - and in case of increase in oil prices, it would be impossible to meet the new target of fiscal deficit, 3.8 percent of gross domestic product (GDP), set for this financial year. The GDP grew by 4.7 percent in outgoing year and Dar told parliament, "The dangers to the economy are now far behind us… This would have been even better if it had not been for a 28 percent fall in the cotton crop." To fix the things, government is going to increase incentives for agriculture sector, he added.
Isn’t it a reactionary approach? Were the finance planners unaware that agriculture not only directly accounts for 21 percent of the GDP but other vital sector of economy also heavily depend on it – 60 percent of the manufacturing is agro-based and over 40 percent of trading and transport is of agricultural products. Then there are claims that the figures given in the Economic Survey have been grossly fudged. Maybe these claims are false in scope but I and Khurram believe they might not be entirely untrue. This belief is based on experience of living in this country.
Unfortunately, most of Pakistanis, if not all, do not trust governments – be it present one or the previous regimes. I wonder what would make people give tax voluntarily in this well-entrenched atmosphere of trust deficit. And, if coercive methods too are not yielding any success, is there any other way for the government to increase revenues than burdening the taxpayers even more.