Missed targets

As the ongoing fiscal year comes to an end, the FBR sits fingers-crossed with a staggering deficit of Rs864 billion. This poor performance exposes, yet again, the inefficiency of the tax machinery as well as the rotten system under which it operates. Thus, the upcoming budget looms with massive tax hikes – particularly for those segments of the economy that are already reeling under an unbearable burden. The foremost among these segments is the salaried class that by and large contributes Rs500 billion to overall taxes, as promising revenue streams manage to conveniently get away under elite patronage.

A sheer volume of proposed taxes is enough to make one breathless. The government, reportedly, mulls increasing withholding taxes on imports; further tweak income tax rates on wholesalers; slap new sales taxes on fast moving goods at the market price; and raise the sales tax on hybrid vehicles to 18% against the existing 8.5 to 12.75%. Moreover, Rs400 billion are to be raised through taxes supposed to be imposed by provinces in an attempt to meet the IMF-dictated tax target of Rs15.264 trillion for the next fiscal year. And, not to forget, the next fiscal year's petroleum levy target has been set at Rs1.73 trillion. This is nothing but fleecing the common man and sending the economy in a territory where it finds itself stagnated to the core. The only sector that is supposed to remain off the hooks are small traders who will see a 1% tax for an annual turnover of Rs200 million.

It is worth noting that the economy has nosedived across almost all sectors, as it hardly grew at 3.2%, miserably failing to meet the 4.2% target. Likewise, figures related to agriculture, industrial production and exports also fell, with remittances entering an uncertain zone, given a plausible loss of jobs for expatriates in the wake of the Middle East conflict. The question is whether the government can pull off the delicate balancing act of complying with the IMF's rigid demands and rescuing sovereigns.