Unconvincing arguments

Ishaq Dar has said government’s focus would now be on growth since country’s macroeconomic indicators had stabilised

In his post-budget press conference, Finance Minister Ishaq Dar has said that the government’s focus would now be on growth since the country’s macroeconomic indicators had stabilised. He explained that agriculture and export-oriented sectors were, therefore, being prioritised since they were not at the level they should be at. The finance minister declared categorically that the country was moving on from aiming for fiscal consolidation to measures that would encourage growth and increase investment. But how will this happen exactly? When around 40 per cent of the revenue the government generates will be spent on mark-up payments for the debt it has taken on, it will leave little room for resourcing other vital areas of the economy.

The key obviously is to increase the revenue the government generates, but how successful has it been in this area in the past? Mr Dar insists the government was successful in negotiating with traders over the issue of withholding tax on banking transactions. If that is the case, then why have the number of tax filers gone down and why was the deadline for this scheme extended till the very end of the fiscal year? Mr Dar highlighted that the government is not burdening tax filers. Why have tax rates for them gone up as well then? He said the increase in sales tax rates on mobile phones – from Rs500 and Rs1,000 to Rs1,000 and Rs1,500 respectively – was because people were “under-declaring” the category, getting away with paying Rs500 when the rate was Rs1,000. “To plug the gap,” he said, the rate was increased. At the same time, he unintentionally ended up admitting that the government was ill-equipped to handle this sort of corruption. These are exactly the kind of measures that push people towards remaining undocumented and not declaring their incomes. Mr Dar further said that concessions to the affluent class had been rolled back, but tax exemptions given on benefits to VIPs are being continued since their salaries were not high and the government was not sustaining big losses over these. In Pakistan, where one-third of the population is living below the poverty line, any loss is a big loss, Mr Dar.

Published in The Express Tribune, June 6^th, 2016.

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