Budget without ideas

Published
14

Yesterday's was one of the sleepiest and most lethargic budgets the country has seen in many years. Not only the mood within parliament, but the budget proposals themselves evoked little more than weary nods. The finance minister could not hold the attention of his own party that had to be reminded on a couple of occasions that the measure just announced deserved some desk thumping.

But the apathy showed mostly in the proposals to lift revenues and rejuvenate collapsing sectors. The budget sees growing recourse to withholding taxes, turnover taxes and transaction taxes, whereas income and consumption are dropping off the taxman’s radar. These are not only regressive measures, they signal defeat in the larger struggle the party saw as its own to broaden the base of taxation.

Examine: Budget 2016-17: New taxes added, some withdrawn

A more detailed examination of the new tax measures will show where the incremental revenue from next year will come from. But the budget speech left little doubt that the government has comprehensively run out of ideas on tax reforms, and broadening the tax base has been lost as a priority.

No vision is now at play. In the last full fiscal year of its term, the government intends to tread water and fight fires, buying little more time to make it past the finish line.

The PML-N began its term with loud promises to reform the power sector, to broaden the base of taxation, to bring more taxpayers into the net, and to stop the bleeding of public-sector enterprises. All that proved to be bombast, and in the closing years of its rule, the party presents a haggard look.

That itself would not be a problem if it weren’t for the fact that it feeds into an inherent contradiction. Faced with a daunting challenge to address the collapse in exports and agriculture, the government came up with nothing more than more price inducements in the form of reduction in fertiliser prices or incentives in the form of zero rating of sales tax on textile exports.

One can only hope that these measures help to lift these vital sectors from the doldrums, but doubts hang heavy in the air. The contradiction is that the revenue measures they are resorting to weigh down growth by squeezing existing taxpayers more, so whatever energy the price inducements can inject into these moribund sectors might be negated with the deleterious effects of the measures.

It is fair to hope that this will not happen, but we cannot build our future on such hopes. And that is where the PML-N has brought us all in the twilight of its term: it hopes that muddling through is enough, that CPEC will save us all.

It would have been easier to swallow this reality had we seen the government at least try to undertake some serious reform.

Published in Dawn, June 4th, 2016

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