At the post-budget press conference, Finance Minister Ishaq Dar lost his temper when asked questions by journalists, and went so far as to threaten a journalist. Sure, the journalist’s questions were populist in nature, but what was the Minister expecting when the budget has proposed to increase commodity prices and the Rs267 billion of regressive taxation in the budget?
There has been a lot of hue and cry over the budget being pro-rich, and Dar’s defence of the budge has bordered on the ridiculous. He said the government reduced the income tax rate on those whose annual income is in the range of Rs400,000 to Rs500,000, which is about the amount of money a low to middle class salaried person makes five to ten years into a professional career. The minister insisted that “packaged yogurt was not a poor man’s diet” and only rich people use this dairy product, over protest over higher taxes on packaged dairy goods making clean manufactured food even more expensive not just for the poor, but for the low and middle classes as well. The plan to make the budget “pro-poor” seems to be made on faulty assumptions about the nature of food consumption in Pakistan. There will be a the 0.6% tax on all banking instruments, including on cheques that will force people to “either stash their money in sacks or at least pay 0.6% tax.” Beyond a point, this may become counterproductive by increasing the incentive to engage in cash transactions and causing a fall in bank deposits. These are some examples of how Dar thinks the budget is “pro-poor”, when it punishes the middle class for paying its bills while many VIPs remain exempt from taxation.
Credit must be given for the budget being through in creating more taxation, even though the middle class will face the brunt. These measures include a higher rate of taxation of dividends, a surcharge for rehabilitation of temporarily displaced persons (TDPs) on the income of large taxpayers, direct taxation on commercial banks in large profits. The Government’s continued commitment to the Benazir Income Support Program is welcome, although the allocation for this program in 2014-15 was under-utilised by 6 per cent.
Is any relief for the poor promised? No. Import duty has been increased from 1 percent to 2 percent on items historically exempt from import duty, like pulses, vegetables, medicines, books and stationery, etc. There will be a reduction of subsidies to the power sector, a significant increase in tariffs and the imposition of a duty on furnace oil. There are no measures to tax foreign income of residents and the holding period for the capital gains tax on properties should have also been extended. The budget taxes whatever is easy to tax; that is its strategy.