The mini-budget addiction

If govt is not allowing debate on changes to tax policy,how can it claim that its decisions have a democratic mandate?

Adhoc measures have always ruled in Islamabad, but Finance Minister Ishaq Dar appears to have made them his first choice of policy instrument. It appears that the minister is fond of trying to fix one problem by causing another, a trend most aptly illustrated by Q Block’s habit of issuing mini-budgets. The minister has now issued the fifth such mini-budget in as many months, this time focusing on increasing taxes on petrol and diesel as a means of trying to keep government revenues from these sources steady in the face of falling oil prices. We have any number of problems with this approach to governing, not least of which is that it fails to deal with the core of the problem: rampant tax evasion and a complete failure of the government to create an institutional mechanism that can crack down on it. But beyond that more fundamental issues are two further problems.

Firstly, the government tried to pass off the tax increase as some sort of a populist move, trying to divert attention on the decision to keep prices of high-octane blended component (HOBC) constant, when in fact Ogra had proposed increasing them dramatically. HOBC is used entirely by luxury cars. To even suggest that failing to increase prices of such a fuel, while preventing a price reduction of the much more necessary fuels like petrol and diesel, is at best disingenuous and at worst outright duplicitous. Our second problem with this tax is the fact that the finance ministry has got into a nasty habit of making changes to the tax code without so much as pretending to consult parliament. We have stated before that we believe that this is a violation of both the letter and the spirit of the Constitution, which gives the sole power of determining tax rates to parliament, specifically the National Assembly. If the government is not letting the elected representatives of the people debate and vote on changes to tax policy, how can it claim that any of its decisions have a democratic mandate? But to these institutional questions, it seems, nobody in Islamabad is paying attention.

Published in The Express Tribune, May 5^th, 2015.

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