IN his post-budget news conference, Finance Minister Muhammad Aurangzeb and his team members strongly defended some of the highly controversial and unpopular budgetary proposals for the fiscal year 2025-26 and even went to the extent of issuing a warning about possibility of a mini-budget if necessary legislative cover was not given to such harsh measures.
He categorically stated that the government would be compelled to impose a further Rs400 to 500 billion in taxes if parliamentarians failed to approve the sweeping enforcement measures proposed in the 2025-26 budget — as they were already cleared by the International Monetary Fund (IMF).
He also defended moves to tax e-commerce and imported solar panels and the decision of the Government to allow a token increase in pay and pension arguing relief has been given commensurate with the fiscal space available and that the increase has been indexed with inflation.
The Minister also stated that the tariff reforms would help increase Pakistan’s export competitiveness.
The justifications offered by the Minister might be weighty but others including parliamentarians are also entitled to their views and assessments and the logic demands a final decision is taken after thorough consideration of pros and cons of such proposals.
The Constitution vests powers with the National Assembly to approve or reject the entire budget or a part of it and we have seen throughout that the ultimate proposals are adjusted based on input from MNAs and Senators.
The Government, its understanding with the IMF notwithstanding, cannot claim perfection of its budgetary measures as some of them are viewed as clearly biased and non-transparent by some circles.
Take the example of agriculture tax, the Government takes the credit for convincing the IMF not to impose this elite-specific tax but has come out with a comprehensive framework to penalize even those who have no taxable income.
This is a classic example of robbing Peter to pay Paul.
Similarly, no one would oppose if the Government was fully transparent in its approach to link salaries and pensions with inflation but it is not the case.
Clearly two different formulae have been adopted to determine salary increase of parliamentarians and the Government employees.
It is also important that the Government should not adopt a policy of pick and choose when it comes to indexing pays and pensions to inflation.
The policy was introduced way back by the then Finance Minister Dr Mehbub-ul-Haq but abandoned when the inflation started rising.
The oil prices are also theoretically linked to the international prices of the commodity but the Government of Pakistan has consistently denied full relief to its consumers and instead adjusted the relief through imposition of different taxes.
It is also regrettable that the Government miserably failed to make retailers pay even a token tax but now intends to tax the budding e-commerce at full GST rate on the plea of creating a level playing field.
Similar flimsy excuse has been offered to impose 18% GST on the import of solar panels, a measure that would increase the cost of investment for solarization by homes.
It would take years to determine whether the tariff reforms plan has any positive impact on exports (the only justification for this unusual plan) but it would surely open a floodgate of imports widening the trade deficit, straining our limited foreign exchange reserves and strangulating local production.
The Government also takes credit and rightly so for containing its expenditure by over two trillion rupees for next year as compared to the outgoing year but details show major expenditures have increased significantly and the saving comes from a cut in development spending, negligible relief to some segments of the society and a reduction in subsidies.
There is, therefore, a vast scope for revision of the budgetary proposals and this should be done on the basis of input from the parliament and other stakeholders.
