The Federal Board of Revenue (FBR) figures speak of the failure of the government in achieving its revenue collection targets for the period July 2013 to Dec 2013.
Even after holding back refund payments, the revenue collection fell short about Rs95 billion of the Rs1.15 trillion target. The shortfall is expected to be Rs130 billions for the whole year.
The development budget for the current year will have to be slashed from Rs580 billion to Rs430 billion, as there seems no other head where expenditure can be cut.
However the most glaring letdown is in the collection of income tax, which stand at Rs375 billion even less than the IMF's conservative target of Rs380 billion. For a healthy economy we should have at least collected twice the amount in income tax; however, instead of moving in that direction, we are regressing.
When the impact of reduction in development expenditure and the trend to collect more in indirect taxes are considered together, they are a double whammy: The Rs130 billion cut in development expenditure of the government simply means work will be started on fewer social welfare projects like roads, hospitals and schools. That will translate into fewer temporary jobs for skilled and unskilled labourers employed by government contractors and the industries which manufacture products for these projects. These millions of labourers form the poorest segment of our society.
The inability of the government to widen the income tax net and collect due taxes from the four million taxable rich and increasing reliance on indirect taxes such as on sales, will enhance the distortion in our already imbalanced economy that is tilted in favour of the rich and against the poor.
Had the government any intention of taxing the rich according to their earnings, the annual budget would have set a much higher target of revenue in direct taxes. Our Finance Minister Ishaq Dar knows that FBR has listed four million potential income tax returnees and he also would know their potential to pay hundreds of billions in income tax. But he will do nothing about it.
The PML-N government has not changed the direction of our economic policy; instead, it has further speeded the process of the rich collecting more wealth at the cost of the poor.
Add to the above two factors of decreasing development funds and increasing the share of indirect taxes in our revenue collection the ever rising trends of inflation and we can easily come to the conclusion that neither in the short nor in the long-term there is any hope for the poor and even lower-middle income segments of our population to see better days; the system is against them.
Thursday, January 2, 2014
Pakistan: Double whammy for the poor
The Federal Board of Revenue (FBR) figures speak of the failure of the government in achieving its revenue collection targets for the period July 2013 to Dec 2013.
Even after holding back refund payments, the revenue collection fell short about Rs95 billion of the Rs1.15 trillion target. The shortfall is expected to be Rs130 billions for the whole year.
The development budget for the current year will have to be slashed from Rs580 billion to Rs430 billion, as there seems no other head where expenditure can be cut.
However the most glaring letdown is in the collection of income tax, which stand at Rs375 billion even less than the IMF's conservative target of Rs380 billion. For a healthy economy we should have at least collected twice the amount in income tax; however, instead of moving in that direction, we are regressing.
When the impact of reduction in development expenditure and the trend to collect more in indirect taxes are considered together, they are a double whammy: The Rs130 billion cut in development expenditure of the government simply means work will be started on fewer social welfare projects like roads, hospitals and schools. That will translate into fewer temporary jobs for skilled and unskilled labourers employed by government contractors and the industries which manufacture products for these projects. These millions of labourers form the poorest segment of our society.
The inability of the government to widen the income tax net and collect due taxes from the four million taxable rich and increasing reliance on indirect taxes such as on sales, will enhance the distortion in our already imbalanced economy that is tilted in favour of the rich and against the poor.
Had the government any intention of taxing the rich according to their earnings, the annual budget would have set a much higher target of revenue in direct taxes. Our Finance Minister Ishaq Dar knows that FBR has listed four million potential income tax returnees and he also would know their potential to pay hundreds of billions in income tax. But he will do nothing about it.
The PML-N government has not changed the direction of our economic policy; instead, it has further speeded the process of the rich collecting more wealth at the cost of the poor.
Add to the above two factors of decreasing development funds and increasing the share of indirect taxes in our revenue collection the ever rising trends of inflation and we can easily come to the conclusion that neither in the short nor in the long-term there is any hope for the poor and even lower-middle income segments of our population to see better days; the system is against them.
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