Understanding the budget

The federal government is going to announce the budget for the next fiscal year within the next few days. A lot of us think a budget is difficult to understand and tricky to grasp properly. Contrary to this view, it is not that complex to understand. Rather, we must try to comprehend it as it affects everyone’s lives.

“Nothing will change until our people know what Pakistan’s budget is. Because none of the three main stakeholders -- the politicians, tax collectors and businesses -- will ever cede ground to the common people.” This was stated by renowned chartered accountant Shabbar Zaidi, while speaking to journalists during a recent budget discussion forum.

The federal government will be targeting tax collections of Rs2,810 billion for the next fiscal year. Even if the government succeeds in achieving this target, about three-fourths of this will go towards debt servicing and defence — the two biggest non-development expenditures. Zaidi stated that Pakistan should ideally be targeting tax collection of Rs3,800 billion and that it can even collect Rs4,000 billion. However, he argued, the highly problematic part is that the federal government does not show any willingness towards achieving this target.

It is time the government took drastic measures in the next budget, instead of manoeuvring numbers to balance its income and expenditures. Tax collectors are equally responsible, as they have failed miserably in collecting direct taxes, having promoted indirect taxes instead. Pakistan’s tax-to-GDP ratio — the percentage of tax collection with respect to the total annual income of a country — is just nine per cent compared with 17 per cent in neighbouring India. Why don’t our politicians, tax collectors and businessmen compete with India on this front? The answer is simple. All of the above stakeholders will have to sacrifice something to bring economic stability to Pakistan. The politicians will have to legislate sincerely (ignoring their personal interests), the tax collectors will have to forego what they are currently ‘getting’ in the faulty tax system. And, of course, businessmen will eventually have to pay higher taxes.

Who is facing most of the burden in the current tax system? Not politicians, tax collectors or businessmen. You and I, the ordinary citizens, are the most affected stakeholders in this faulty tax system, therefore, it is we who must understand the country’s budget and demand change.

Published in The Express Tribune, June 2^nd, 2015.