MEASURES announced at the time of presentation of a budget remain just proposals until they are discussed, improved upon or amended during passage of the Finance Bill and, therefore, there is nothing extraordinary if the final budget for 2023-24 has quite a different shape than the one presented by Finance Minister Ishaq Dar on 9 June. However, the entire philosophy of the budgetary exercise has undergone a change in the Government’s bid to secure a deal from the International Monetary Fund (IMF) which had objected to the budget strategy and wanted changes to align it with the terms of the Fund.
The original budgetary proposals were widely hailed by the general public as well as representatives of different sectors of the economy as these focused on self-reliance and growth but now these have been aligned to meet IMF conditions, resulting in extra burden on masses. Winding up general debate on the budget in the National Assembly, the Finance Minister highlighted that the changes would not affect the development outlay as well as salaries and pensions. True, but it is also a fact that while imposing new taxes to the tune of Rs. 215 billion, which jacked up revenue collection target for the next fiscal year from Rs 9,200 billion to Rs 9,415 billion, traditional approach has been adopted to tax already heavily taxed segments of the society letting real tax evaders go scot-free. On the face of it, the decision to jack up income tax on registration of vehicles above 2000cc and increased tax rates on higher income brackets of salaried and non-salaried classes seems to be a right move but in practice it will unnecessarily burden those who are already contributing significantly to the national kitty. It seems the Government did not do its homework properly and had to adopt customary approach to meet the IMF condition for enhanced tax collection target. Why are those earning millions but paying either nothing or just peanuts as tax have not been touched? The pension reforms announced by the Finance Minister were surely understandable as there was hardly any justification for continuation of double or triple pensions as well as receipt of both pension and salary in case of re-employment. It is also justified to limit the payment of the pension to ten years in case of death of the pensioner or his/her spouse. Institution of a pension fund is also appreciable but the real issue is investment of the fund in profitable ventures to generate resources for payment of growing pension bill. Construction of homes has become a dream for a majority of the people because of unprecedented increase in the construction cost and in this backdrop the decision to increase the rate of tax on sale/purchase of property by hundred percent for filers is lamentable. The decision to increase the petroleum development levy from Rs. 50 to Rs. 60 would mean POL products would become dearer and consumers in Pakistan would not be able to benefit from the downward trend in the prices of oil in the international market. Similarly, the so-called exchange rate flexibility would further hurt the already inflation-hit people. The decision to put restrictions on non-essential imports was widely hailed by people of Pakistan as the country cannot and should not fund imports of luxury items from costly loans but the decision-makers have been forced to revise the decision under the pressure of the IMF. In a major move to document unregistered sales tax persons, the Federal Board of Revenue (FBR) has increased the rate of “further sales tax” from 3 to 4 percent in the amended Finance Bill 2023. This is important in view of the criticism of the business community that the new budget envisages more relaxation to the undocumented and unregistered retail sector and businesses and created more hurdles for the documented economy. There is no doubt that the IMF deal has much relevance to the ailing economy of the country and the Government had to accept harsh conditions to improve economic prospects but it should not lose sight of the fact that people have exhausted the capacity to absorb more shocks and pressure.
