Of tax exemptions and sacred cows

The government is planning to withdraw tax exemptions worth roughly Rs80 billion in the upcoming budget, as it looks to keep its promise to the IMF to phase out statutory regulatory orders by July, 2016. The move will be the last phase of the government’s retreat from the concessionary tax regime, following exemptions worth Rs225 billion that have already been withdrawn during the PML-N’s tenure so far. The worrying aspect of the blueprint that has been unveiled is that, according to officials, some of the tax exemptions will be kept intact and the hugely profitable automobile sector is one of the ‘sacred cows’ that will continue to benefit from these. At the same time, import duties have been increased on medicines, agriculture machinery, power generation and equipment for LNG and LPG as well as the aviation industry. This comes shortly after the government was hailing its LNG import project that would, to some extent, relieve the public of persistent power outages and CNG shortage.

What has always confused us is the government’s lack of vision and failure to follow a clearly defined road map. Its randomly executed strategies are not part of a broader scheme to win a game of chess, but a headless chicken’s cry for guidance at the end of which it’s mostly left standing where it started. A few months ago, the government announced its aviation policy that, it said, would encourage investment in the sector, promote healthy competition and by and large, help the public as well. But a plan to raise customs duty on the aviation industry’s imports is a step in an entirely different direction, confusing most as to what exactly is the ‘vision’ here. This is just one example of the government’s confusion-infused strategies. Raising tax rates to increase revenue is, however, one strategy it has consistently followed. It’s easy for businesses to pass on the increase in cost to consumers and in the presence of expensive imports, people have no choice but to opt for local produce. At the end of the day, it is the public that pays the price for its elected government following a mind-numbingly confusing set of goals. 

Published in The Express Tribune, March 18^th, 2016.

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