Tax breaks for all

Govt aims to strike a balance between consolidated,expansionist fiscal policies-a goal it failed to meet previously

The forthcoming election is pushing the government to compress time frames, and the annual budget round now finds itself slotted into the period prior to the formation of a transitional government; with the incumbents not wishing to entrust the budget to the uncertainties of temporary custodians. In what some may see as a shamelessly blatant effort to please swathes of the electorate, rich and poor alike, the government is to announce a tax-free budget and a cut in income tax and other regulatory duties in an effort to provide ‘maximum relief’. The numbers affected are tiny as the tax base is so small at an individual level, though the salaried class will be pleased to hear that their burden is to be reduced. Further, there are to be no new development projects announced nor is there to be an increase in the Public Sector Development Programme for 2018-19.

The government is saying that it is aiming to strike a balance between consolidated and expansionist fiscal policies by holding the budget deficit to 4.5 per cent of national output — a goal it has failed to meet in the past; and there is much to adjust since the less-than-stellar regime of Ishaq Dar. The export incentive schemes that were much trumpeted are to be axed, the rationale being that it is not for the government to provide concessionary loans for what it describes as a limited segment of society. Considering that our exporters are struggling against a tide of negative optics this must feel not unlike being chopped off at the knees.

The budget is to be announced on April 27^th, about six weeks ahead of schedule and whether it will in any way affect voting preferences is unknown and unknowable. Treading fiscal water is not going to take the economy forward, and is a gloomy indicator of what may be expected in terms of tax reforms once the new government is ensconced. In a nutshell, there is going to be more of the same, and the country will continue in its serial failure to create a realistic tax regime. Taxes? What taxes?

Published in The Express Tribune, March 15^th, 2018.

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