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By Farooq Baloch
Published: June 7, 2015
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Dar set a self-praising tone in the very beginning of his painfully long speech by stating, “The economic performance we have rendered in the last two years is unparalleled in the history of democratic governments.” PHOTO: EXPRESS
KARACHI:
Numbers don’t lie, they say. Agreed. But people (read ministers) can.
This is at least the feeling one gets after hearing Finance Minister Ishaq Dar who, while unveiling the federal budget for fiscal year (FY) 2015-16 on Friday, proudly took credit for almost every economic development during the outgoing fiscal year.
Whether the latest budget is pro-poor, pro-rich or balanced can best be described by economists. What is, however, obvious is that the minister took credit for things he didn’t do. Instead, he brushed aside major economic problems: structural reforms in the state’s taxation and energy apparatus.
In fact, Dar set a self-praising tone in the very beginning of his painfully long speech by stating, “The economic performance we have rendered in the last two years is unparalleled in the history of democratic governments.”
The minister was quick to take credit for ‘restoring the health of a broken economy’ and, rightly so, because that is what politicians are supposed to do – sell their work to general public to win the vote bank again.
However, there is one problem. The work you sell should be yours and yours alone.
The federal minister announced that the government has approved an investment of Rs12 billion for universal e-telecasters project. Under this project 500 telecenters would be established in all provinces including the Federally Administered Tribal Areas.
Dar also stated, “The government has decided to invest Rs2.8 billion [for] laying optic fiber cables. In consultation with provincial governments, 128 tehsils and towns have been identified nationwide, which do not have optic fiber connectivity. Rural telecommunication is another programme, which envisages investing Rs3.6 billion on connectivity of rural un-served areas with the rest of the country.”
To set the record straight, the aforesaid money belongs to the Universal Services Fund (USF), an independent body mandated to promote the development of telecommunication services in un-served and under-served areas throughout the country.
If someone deserves the credit for these projects, it is the private sector (IT and telecom firms) that funds the USF in its entirety by depositing 1.5% of their revenues.
In fact, the PML-N government, right after coming to power, transferred the entire amount of USF (close to Rs70 billion) to the federal consolidated fund and later on used the money to pay off circular debt.
Responsibility rather than credit
Rather than taking credit for these projects, the minister should take responsibility for delaying the same for more than two years.
Moreover, the minister hardly touched upon the more pressing economic problems that need to be fixed. For example, the country’s tax system and energy sector are two major challenges where structural reforms are needed.
Tax collection has remained the government’s biggest challenge for years. The country’s tax-to-GDP ratio – tax revenue as proportion of GDP – is appallingly low in the 10% range as less than 1% people pay taxes and even fewer file their returns.
Similarly, the government earmarked Rs156 billion in subsidies for power sector. But, the amount went up to Rs185 billion because of inefficient loss-making power companies.
However, the country’s economic manager hardly talked about structural reforms in these areas and rather continued their old policy of imposing more indirect taxes on those already paying duties as opposed to going after tax evaders.
For example, the government has doubled the GST on all kinds of mobile phones, a burden on the segment already paying their taxes. They have also proposed to increase federal excise duty (FED) on cigarettes from 58% to 63% in what Dar believes would discourage people from smoking, injurious to health.
The new tax rate on tobacco, according to industry estimates, may earn the government an additional Rs20 billion from the documented sector. But an equal amount could be earned in taxes from tax evaders involved in illicit tobacco trade, which is about one-fourth of the country’s tobacco market.
Imposing indirect taxes is easy and ensures guaranteed revenues while broadening the tax net or catching tax evaders requires some real hard work. The latest budget clearly indicates which way the government is headed.
The writer is a staff correspondent
Published in The Express Tribune, June 8th, 2015.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
Read more: Budget2015-16
Published: June 7, 2015
26SHARES
SHARE TWEET EMAIL
Dar set a self-praising tone in the very beginning of his painfully long speech by stating, “The economic performance we have rendered in the last two years is unparalleled in the history of democratic governments.” PHOTO: EXPRESS
KARACHI:
Numbers don’t lie, they say. Agreed. But people (read ministers) can.
This is at least the feeling one gets after hearing Finance Minister Ishaq Dar who, while unveiling the federal budget for fiscal year (FY) 2015-16 on Friday, proudly took credit for almost every economic development during the outgoing fiscal year.
Whether the latest budget is pro-poor, pro-rich or balanced can best be described by economists. What is, however, obvious is that the minister took credit for things he didn’t do. Instead, he brushed aside major economic problems: structural reforms in the state’s taxation and energy apparatus.
In fact, Dar set a self-praising tone in the very beginning of his painfully long speech by stating, “The economic performance we have rendered in the last two years is unparalleled in the history of democratic governments.”
The minister was quick to take credit for ‘restoring the health of a broken economy’ and, rightly so, because that is what politicians are supposed to do – sell their work to general public to win the vote bank again.
However, there is one problem. The work you sell should be yours and yours alone.
The federal minister announced that the government has approved an investment of Rs12 billion for universal e-telecasters project. Under this project 500 telecenters would be established in all provinces including the Federally Administered Tribal Areas.
Dar also stated, “The government has decided to invest Rs2.8 billion [for] laying optic fiber cables. In consultation with provincial governments, 128 tehsils and towns have been identified nationwide, which do not have optic fiber connectivity. Rural telecommunication is another programme, which envisages investing Rs3.6 billion on connectivity of rural un-served areas with the rest of the country.”
To set the record straight, the aforesaid money belongs to the Universal Services Fund (USF), an independent body mandated to promote the development of telecommunication services in un-served and under-served areas throughout the country.
If someone deserves the credit for these projects, it is the private sector (IT and telecom firms) that funds the USF in its entirety by depositing 1.5% of their revenues.
In fact, the PML-N government, right after coming to power, transferred the entire amount of USF (close to Rs70 billion) to the federal consolidated fund and later on used the money to pay off circular debt.
Responsibility rather than credit
Rather than taking credit for these projects, the minister should take responsibility for delaying the same for more than two years.
Moreover, the minister hardly touched upon the more pressing economic problems that need to be fixed. For example, the country’s tax system and energy sector are two major challenges where structural reforms are needed.
Tax collection has remained the government’s biggest challenge for years. The country’s tax-to-GDP ratio – tax revenue as proportion of GDP – is appallingly low in the 10% range as less than 1% people pay taxes and even fewer file their returns.
Similarly, the government earmarked Rs156 billion in subsidies for power sector. But, the amount went up to Rs185 billion because of inefficient loss-making power companies.
However, the country’s economic manager hardly talked about structural reforms in these areas and rather continued their old policy of imposing more indirect taxes on those already paying duties as opposed to going after tax evaders.
For example, the government has doubled the GST on all kinds of mobile phones, a burden on the segment already paying their taxes. They have also proposed to increase federal excise duty (FED) on cigarettes from 58% to 63% in what Dar believes would discourage people from smoking, injurious to health.
The new tax rate on tobacco, according to industry estimates, may earn the government an additional Rs20 billion from the documented sector. But an equal amount could be earned in taxes from tax evaders involved in illicit tobacco trade, which is about one-fourth of the country’s tobacco market.
Imposing indirect taxes is easy and ensures guaranteed revenues while broadening the tax net or catching tax evaders requires some real hard work. The latest budget clearly indicates which way the government is headed.
The writer is a staff correspondent
Published in The Express Tribune, June 8th, 2015.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
Read more: Budget2015-16
