burdening the people: The heavily taxed budget for the upcoming fiscal year, which parliament approved on Friday, will make life even more difficult for ordinary Pakistanis and widen the gulf in trust between the ruled and the rulers. This is because the budget imposes a number of new taxes that will primarily affect households with low to moderate incomes.
In order to fund its expanding spending and obtain a new, bigger rescue agreement from the IMF, the government has levied extra taxes totaling Rs1.7tr in order to reach its ambitious tax revenue target of Rs 13 Tr, up by more than 40% from the previous fiscal year.
Everyone in government, even the prime minister, has attempted to use this budget to paint a picture of a significant economic recovery in the upcoming years, but concerns have already been expressed about the goals and policies it includes. The government’s lack of confidence in its own aims is evident in the last-minute revisions made to the finance bill, which imposed additional tax measures worth Rs200 billion on top of the Rs1.5 trillion already included in the original bill before it was approved by parliament.
It is reasonable for many economists to think that the government will not be able to meet its tax collection goal. The budget has raised direct tax revenue by 48% without really broadening the current tax base.
Additionally, it exempts those who are not subject to taxes by maintaining the so-called “non-filers” category, which was created years ago by Ishaq Dar to exclude common tax evaders like dealers, real estate agents, property developers, etc. from income tax jurisdiction. Similarly, they argue that considering the present economic downturn and the diminished purchasing power of the majority, the projections of a 35 percent increase in indirect taxes for the upcoming year are inflated.
The current budget’s stated goals are to lower the budget deficit and increase the tax-to-GDP ratio from the current 9.5 percent to 13 percent over the course of the next three years, according to the finance minister. The rhetoric does not align with the fiscal details. The policies enacted have been in direct opposition to the promises made by the finance minister and prime minister.
While some reforms, like the removal of tax breaks for certain lobbies like exporters, have been implemented, the budget does not, in my opinion, inspire confidence in the government’s ability to carry out structural changes, particularly when it comes to cutting back on its own unnecessary spending and bringing politically powerful but undertaxed industries like retail, agriculture, and real estate under the radar.
In essence, the budget carries on the failed economic policy of the past, making small adjustments to programs here and there that are unlikely to have a significant impact. The government is merely making sure that the gap between itself and the people never gets any smaller by putting the middle classes under the greatest amount of taxes and levies without making any cuts to its own spending.