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We missed everything, again
Tuesday, June 08, 2010
Huzaima Bukhari and Dr Ikramul Haq
Pakistanis were dejected after hearing the budget speech on the evening of June 5, 2010, and not only because there was no relief for the poor section of society. The real cause of disappointment was demonstration of lack of will to tax the rich and the corrupt--especially absentee landlords, rent-seekers and tax-evaders. The government failed to outline any measures for revival of the ailing economy. All the taxation proposals show that the poor will have to face more miseries--the sales tax rate has been raised from 16 to 17 per cent. On the contrary, the rich and the mighty have again managed to escape taxation on their colossal incomes and wealth. The members of the gigantic bureaucratic apparatus--a sign of bad governance--are given an enormous pay raise, but not a single step has been taken to curtail their monstrous wasteful expenditure and monetise all their perquisites and benefits received in kind.
Analyses done by independent economists and observers reveal that the government of the Pakistan People's Party has failed to meet the economic challenges of the day in its third budget. Is it the budget of the PPP, once a social-democratic party? Certainly not. It is, in fact, the same old IMF-dictated, bureaucrat-controlled budget, even if newly-inducted finance minister Abdul Hafeez Sheikh and Dr Nadeemul Haque, who joined as deputy chairman of the Planning Commission, possess good intentions.
What should Budget 2010-11 have been like? This question was never discussed by the elected government inside or outside parliament. Resultantly, the annual budget, as usual, was prepared in the same old mould--bureaucratic-controlled, IMF-sponsored and pro-rich. Nobody realised while preparing this important document that at this juncture Pakistan needs class stability to avoid chaos, civic strife, lawlessness and religious obscurantism. The tragedy of millions of internally displaced persons, burgeoning debt-servicing, increased military budget, high inflation, unjust tax system, wasteful expenses, industrial slowdown, recession, state inefficiency and bad governance pose serious challenges to our economic survival. But in the budget no serious efforts are outlined to meet these challenges. The budget-makers were more interested in balancing their books through foreign and domestic borrowings. What else could one expect from people having linkages with the IMF and the World Bank? But the question is: where are the stalwarts of the PPP? People like Chaudhry Manzoor Ahmad and Sardar Assef Ahmad Ali, who are known champions of pro-poor socialist economic policies.
Sadly, Budget 2010-11, like all previous budgets, provides too little for education: Rs3,174 million have been allocated for pre-primary and primary education, against the amount of Rs4,232 million allocated for secondary education. Rs25,210 million have been given for tertiary education affairs and services. Rs42 million have been allocated for social welfare and special education. The figures confirm that education finds no place in the list of high priorities of the government.
While the allocation for defence is over Rs450 billion, official data reveals that Pakistan allocated to the education sector only 2.5 percent of the GDP during 2006-07, 2.47 per cent in 2007-08, 2.1 per cent in 2008-09, and only 2 per cent in 2009-10. There is continuous decrease in allocation, and whatever is allocated is spent imprudently. If we cannot invest substantially on education today, at least seven per cent of the GDP, there is no hope for a better future. Nations thrive more than anything else on their intellectual wealth and innovations, which are not possible without quality education.
Allocations for the monstrous government machinery for day-to-day running are equally massive, whereas in development outlay the position is pathetic: education and the Higher Education Commission only Rs21.4 billion, which is 7.6 per cent of the federal PSDP, Rs14.5 billion for the Finance Division, Rs13.6 billion for the Railways, Rs9.3 billion for the Planning and Development Division, Rs1.08 billion for food and agriculture, Rs3.2 billion for the Industries and Production Division, Rs5.5 billion for the Interior Division, Rs3.8 billion for Defence Division, Rs3.6 billion for housing and works, Rs3.6 billion for the Cabinet Division, Rs4.11 billion for the Population Welfare Division, Rs1.6 billion for the Science and Technological Research Division, Rs885.6 million for the Livestock and Dairy Development Division, Rs1 billion for the Law and Justice Division, Rs1 billion for the Environment Division, Rs1 billion for the Special Initiative Division, Rs623.4 million for the petroleum ministry, Rs474.1 million for the Commerce Division, and Rs518.6 million for the Ports and Shipping Division. The government has earmarked Rs663 billion for development in the 2010-11 budget, which envisages Rs280 billion for the federal and Rs373 billion for the provincial share.
The burden of indirect taxes, which are nearly 70 per cent of total taxes, has been shifted to the poor. Yet, the PPP claims it has pro-poor economic policies. Have the PPP stalwarts studied the model of greater social mobility in the Nordic countries? Have they bothered to adopt their tax and welfare systems? The systems of these countries, unlike that of America which we follow with pride, deliberately try to help the children of the poor to do better than their parents. This is what pro-poor polices imply.
It is obvious that Budget 2010-11 is totally oblivious of redistributive fiscal policies and social-welfare programmes for social mobility. Our poor have been given a so-called "economic relief package" by way of mercy--the Benazir Income Support Programme. The "relief" is only of a cosmetic nature and there is nothing in the policies or budget that aims at helping the poor to move upwards. Education remains at the lowest level of priority in our state policies.
The federal and provincial governments not only allocate meagre amounts for this sector but also do not know how within the given resources through innovative means they can revamp the entire system to become an effective tool for social mobility. There is complete lack of understanding of this issue by the rulers and the result is that poor segments of society are condemned to remain mired in abject poverty and their children have no chance to move up, as education is either not available to them or is of no practical use.
Thus, by all standards, Budget 2010-2011 is yet another routine exercise of balancing the books, and that too through domestic and foreign borrowings. Pakistan needs meaningful redistribution policies that specifically benefit those at the bottom. There is nothing in this budget towards achieving this goal. It is, as usual, a disappointing document--prepared at the behest of the rich classes for the perpetuation of an exploitative economic system.
The writers are tax lawyers who are members of the visiting faculty of the Lahore University of Management Sciences (LUMS)
Tuesday, June 08, 2010
Huzaima Bukhari and Dr Ikramul Haq
Pakistanis were dejected after hearing the budget speech on the evening of June 5, 2010, and not only because there was no relief for the poor section of society. The real cause of disappointment was demonstration of lack of will to tax the rich and the corrupt--especially absentee landlords, rent-seekers and tax-evaders. The government failed to outline any measures for revival of the ailing economy. All the taxation proposals show that the poor will have to face more miseries--the sales tax rate has been raised from 16 to 17 per cent. On the contrary, the rich and the mighty have again managed to escape taxation on their colossal incomes and wealth. The members of the gigantic bureaucratic apparatus--a sign of bad governance--are given an enormous pay raise, but not a single step has been taken to curtail their monstrous wasteful expenditure and monetise all their perquisites and benefits received in kind.
Analyses done by independent economists and observers reveal that the government of the Pakistan People's Party has failed to meet the economic challenges of the day in its third budget. Is it the budget of the PPP, once a social-democratic party? Certainly not. It is, in fact, the same old IMF-dictated, bureaucrat-controlled budget, even if newly-inducted finance minister Abdul Hafeez Sheikh and Dr Nadeemul Haque, who joined as deputy chairman of the Planning Commission, possess good intentions.
What should Budget 2010-11 have been like? This question was never discussed by the elected government inside or outside parliament. Resultantly, the annual budget, as usual, was prepared in the same old mould--bureaucratic-controlled, IMF-sponsored and pro-rich. Nobody realised while preparing this important document that at this juncture Pakistan needs class stability to avoid chaos, civic strife, lawlessness and religious obscurantism. The tragedy of millions of internally displaced persons, burgeoning debt-servicing, increased military budget, high inflation, unjust tax system, wasteful expenses, industrial slowdown, recession, state inefficiency and bad governance pose serious challenges to our economic survival. But in the budget no serious efforts are outlined to meet these challenges. The budget-makers were more interested in balancing their books through foreign and domestic borrowings. What else could one expect from people having linkages with the IMF and the World Bank? But the question is: where are the stalwarts of the PPP? People like Chaudhry Manzoor Ahmad and Sardar Assef Ahmad Ali, who are known champions of pro-poor socialist economic policies.
Sadly, Budget 2010-11, like all previous budgets, provides too little for education: Rs3,174 million have been allocated for pre-primary and primary education, against the amount of Rs4,232 million allocated for secondary education. Rs25,210 million have been given for tertiary education affairs and services. Rs42 million have been allocated for social welfare and special education. The figures confirm that education finds no place in the list of high priorities of the government.
While the allocation for defence is over Rs450 billion, official data reveals that Pakistan allocated to the education sector only 2.5 percent of the GDP during 2006-07, 2.47 per cent in 2007-08, 2.1 per cent in 2008-09, and only 2 per cent in 2009-10. There is continuous decrease in allocation, and whatever is allocated is spent imprudently. If we cannot invest substantially on education today, at least seven per cent of the GDP, there is no hope for a better future. Nations thrive more than anything else on their intellectual wealth and innovations, which are not possible without quality education.
Allocations for the monstrous government machinery for day-to-day running are equally massive, whereas in development outlay the position is pathetic: education and the Higher Education Commission only Rs21.4 billion, which is 7.6 per cent of the federal PSDP, Rs14.5 billion for the Finance Division, Rs13.6 billion for the Railways, Rs9.3 billion for the Planning and Development Division, Rs1.08 billion for food and agriculture, Rs3.2 billion for the Industries and Production Division, Rs5.5 billion for the Interior Division, Rs3.8 billion for Defence Division, Rs3.6 billion for housing and works, Rs3.6 billion for the Cabinet Division, Rs4.11 billion for the Population Welfare Division, Rs1.6 billion for the Science and Technological Research Division, Rs885.6 million for the Livestock and Dairy Development Division, Rs1 billion for the Law and Justice Division, Rs1 billion for the Environment Division, Rs1 billion for the Special Initiative Division, Rs623.4 million for the petroleum ministry, Rs474.1 million for the Commerce Division, and Rs518.6 million for the Ports and Shipping Division. The government has earmarked Rs663 billion for development in the 2010-11 budget, which envisages Rs280 billion for the federal and Rs373 billion for the provincial share.
The burden of indirect taxes, which are nearly 70 per cent of total taxes, has been shifted to the poor. Yet, the PPP claims it has pro-poor economic policies. Have the PPP stalwarts studied the model of greater social mobility in the Nordic countries? Have they bothered to adopt their tax and welfare systems? The systems of these countries, unlike that of America which we follow with pride, deliberately try to help the children of the poor to do better than their parents. This is what pro-poor polices imply.
It is obvious that Budget 2010-11 is totally oblivious of redistributive fiscal policies and social-welfare programmes for social mobility. Our poor have been given a so-called "economic relief package" by way of mercy--the Benazir Income Support Programme. The "relief" is only of a cosmetic nature and there is nothing in the policies or budget that aims at helping the poor to move upwards. Education remains at the lowest level of priority in our state policies.
The federal and provincial governments not only allocate meagre amounts for this sector but also do not know how within the given resources through innovative means they can revamp the entire system to become an effective tool for social mobility. There is complete lack of understanding of this issue by the rulers and the result is that poor segments of society are condemned to remain mired in abject poverty and their children have no chance to move up, as education is either not available to them or is of no practical use.
Thus, by all standards, Budget 2010-2011 is yet another routine exercise of balancing the books, and that too through domestic and foreign borrowings. Pakistan needs meaningful redistribution policies that specifically benefit those at the bottom. There is nothing in this budget towards achieving this goal. It is, as usual, a disappointing document--prepared at the behest of the rich classes for the perpetuation of an exploitative economic system.
The writers are tax lawyers who are members of the visiting faculty of the Lahore University of Management Sciences (LUMS)
