Budgeting for Punjab

Punjab announced its Rs1.681 trillion budget on June 13 with one eye on increasing tax collection and the other on the social and agriculture sectors as the opposition continued to lament the province’s emphasis on infrastructure development. A massive allocation of Rs550 billion has been made for what the province calls investment in large infrastructure, transport, agriculture and water supply. Breaking down the ambitious annual development programme, backed by a revenue surplus and soft foreign debt, one sees that education has been given priority, which is welcome since the country has neglected this area for a long time. One thing that has been common across the budgets — federal and provincial — announced so far is emphasis on strengthening the agriculture sector with hefty allocations, but without a road map. Short-term cash grants to lift farmers out of their misery have been announced while input costs have been reduced and are to be financed by the budgets.

However, while a huge sum of money will be spent in this area, there is no coherent strategy that takes all provinces on board to increase agricultural income, while broadening the tax net on the sector. Much to the delight of parliamentarians with a stronghold in rural areas, Kisan packages as well as subsidies have been announced, but there has been absolutely no mention of increasing tax collection from the sector. The end result is simple — the entire country will be supporting the sector through increased tax rates. The Punjab government is also aiming to tap the real estate segment, stressing that the measure will curb speculative investment and re-direct money to productive areas that create jobs. On the face of it, this makes sense and we welcome the move. But increasing rates without cracking down on those who find ways to evade taxes will result in a hollow effort. When tax rates are raised, people find ways to avoid paying taxes altogether unless an enforcement mechanism is put in place. Sadly, attempts to enforce binding tax liabilities have fallen flat and we expect that to continue.

Published in The Express Tribune, June 15^th, 2016.

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