A pro-business mini-budget

The finance minister has presented a thoroughly pro-business mini-budget, a second by the five-month-old PTI government, winning the hearts of businessmen and industrialists as well as stock exchange traders. The government has literally fulfilled its promise of reliving almost all sectors of the economy, including industries, agriculture and small and medium enterprises. The rosy budget for the businesses has, however, made economic challenges bigger than earlier, as the policy document — the Finance (Supplementary Budget) Bill 2019 — lacks measures to create room for increasing the much-needed government income through tax collection, particularly through direct taxation.

To recall, the government has missed the tax collection target by Rs170 billion for the first half of the ongoing fiscal year i.e. FY19. The challenge of achieving the tax collection target has become even bigger in the wake of the mini-budget that has come at the expense of an estimated Rs6.8 billion relief to the industries. Surprisingly, the government has not revised down the tax collection target set at Rs4.39 trillion for FY19.

A budget comprises two major components: the income side and the expenditure side of the government. However, this mini-budget completely ignores the income side at a time when the income is already short of the target. It lacks measures for practically making agriculture an income tax paying sector. It was a golden opportunity for bringing the services sector under the tax net, but the government missed it this time too.

Not a secret it is that the government cannot improve governance without increasing the number of taxpayers and the tax-to-GDP ratio. The distorted development suggests that the government would continue its heavy reliance on bank loans to meet the budgetary expenditures — something that would augment the challenge of narrowing down the fiscal deficit.

While the FM has hinted at going to the IMF for a bailout package, the mini-budget he presented is in total contrast to meeting the IMF conditions. Through a pro-business mini-budget, the government of Imran Khan appears to have lofted the ball to go over the ropes, but in the absence of measures to raise the income, it is feared to be holed out inside the boundary line.

Published in The Express Tribune, January 25^th, 2019.

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