Provincial budgetary allocations

MCLEAN: This is with reference to your recent coverage on the various provincial budgets. Almost all the provinces coming up with deficit budgets is outrageous. Each of them is in a competitive dash to spend. Each has programmed large spending increases with no effort to raise revenue. I don't expect them to tax agriculture which is in their domain. But there are other easy-to-collect less ‘controversial’ taxes.

For example, my late parents’ home in Islamabad is valued at around Rs100-130 million and that is surely an underestimate. I pay property tax of Rs67,000 per year on it, a tiny fraction of the assumed market value. Why should I pay so little? Am I poor?

If each province would set property tax at a modest two per cent of true market value, they would all run huge surpluses. The federal fiscal deficit would also move into surplus since it is now a small part of the total consolidated fiscal picture following the NFC award. The fiscal impulse would turn negative reducing demand pressures, interest rates, inflation, and the external deficit. Growth would pick up creating new jobs. Poverty levels would fall. Fiscal surpluses would also allow paying off debt, reducing the debt-to-GDP ratio which would rally markets. Pakistan's risk spreads would narrow. The economic outlook would be transformed and brighten considerably.

But alas. I am being naive to think the rich will ever tax themselves. I recall the president of the World Bank visiting Pakistan some years ago saying something to the effect that Pakistan was a vibrant country with so much going for it but it also had a death-wish.

Published in The Express Tribune, June 25^th, 2010.