Implementation will speak louder than budget speech

Qudsia Kadri
14-06-08

 

The budget speech was short and concise. Many aspects were left unexplained and the days ahead shall perhaps make the picture clearer. Let us start on the premise that what the people of this country are waiting for is not a budget speech read out by the Minister Finance, but rather a fruitful implementation of policies and concession's announced. We in the world of finance know that budgets announced every fiscal year are not just balancing the income and expenditure of governments (as expenditures on budget over the years have yet to be balanced to actually have an impact). Governments have other objectives to incorporate rather than the actual procedure of putting forth the balance between income and expenditure.

Speaking to a wide range of professionals, who have made some very accurate observations it was stated by a well-known banker and economist that taxes, which have been imposed or reduced and exempted have not been quantified. The impact of an increase of 1 or 2% tax on luxury goods, the reduction from 16-15% on non-luxury items needs to be explained in detail.

Further, he added that an increase of 20% in the pay package of bureaucracy and the armed forces of course would augment well with the two most important components of Pakistan's ruling elite. Minimum wages of Rs. 6,000 in any organization, factories etc is a positive increment but last years budget, which fixed pay at 4,500 is yet to be implemented in many sectors on the industry and across the board.

Coming to taxation on real estate a well known cost and chartered accountant was of the view that tax of Rs. 100 per square yard on plots and Rs. 50 per square yard in under-construction houses, will not resolve the issue of taxation. He further added that this will only be a token money government is charging indirectly. Money will be taxed on the buyer's, developer has no tax imposed on him, and this once again is a form of indirect taxation. It would have been better that parallel economy should have been finished by making amendments in the provincial duty structure. Although it is a provincial subject but the change in the structure would have perhaps eliminated the black money from the real estate sector. This can be done he suggested by reducing the stamp duty from 4% to 1% which will consequently increase the collectors value to bring at par with the prevailing market value. Which is 5 times higher than the collectors value. Although this change in tariff could not have made any significant impact, but it makes transparent the real estate dealings.

He further said that the introduction of the 2 % investment tax is a welcome addition. However certain very pertinent questions arise here. When no questions are asked by the State Bank and related departments on big amounts of monies being transferred to local accounts in Pakistan, than the obvious question, which will arise is the scope of black money or black economy being legalized. Particularly in the back drop of pressures on Pakistan as far as terror financing and drug money involvement is concerned. It is being voiced by many segments of the society that the government should have put forth the clause of an undertaking to be signed by transferee that if at any stage the monies transferred are traced back to any such link, amounts shall have to go through the investigative process by concerned agencies.

Bringing investment into the country should not be a scott free process at the cost of the country facing further shame and no accountability process.

On the budget allocation of subsidy on Ammonia phosphate (DAP) of Rs. 1,000 per bag on a Rs. 3,000 bag was welcomed by the agriculture sector. However some small and medium growers we spoke too, were of the opinion that DAP is basically imported, infact 70% and only 30% is produced in the country. So, a small grower or farmer would not really be able to afford a Rs. 2,000 bag. DAP is said to increase the productivity of crops.

Lastly, the "Benazir Fund", which could be a positive and effective method of addressing the very poor & needy segment of society, leaves many loopholes. The poor will be identified by a report from 'Nadra' from where the poor shall be chosen. Many were surprised as they felt that since when has 'Nadra' been able to identify the poor. No one remembers filling a column when getting an I.D, made as to what ones income per month or annually stands at. Much needs to be clarified in this good proposal and fund, but one would not like to see only handpicked people getting help and money from the fund. And similarly the people's work program which the budget proposes will be identified by MNA's and MPA's. We hope it will not be left soley to their discretion as the ever-increasing segment of the poor, and poverty-stricken people has multiplied over the years, and the level of poverty is not restricted to any one political party.

We hope to see more in the form of explanations in the next few days so that a vast set of questions shall be hopefully answered. In the end when we spoke to many small investors and small businessmen, they felt that a further exemption on capital gains tax for 2 years was totally uncalled for as only the 4 or 5 big brokerage houses were hell-bent on this exemption. The many small investors who have been crippled being in doldrums over the past many years and being manipulated and played by the "Big Fish" in the market, who have managed to keep and make money for big players including big wigs such as beaurcrats, the military, the politicians, the bankers and many many more.