Daily Times

A budget is an estimate of revenue and expenditures, which means the federal budget is an estimate of the federal government’s revenues and expenditures. The revenue can be collected by the Federal Bureau of Revenue (FBR), as well as certain other agencies. The FBR can collect revenue, either through direct taxes or indirect taxes. There are two broad types of federal government expenditures; discretionary and non-discretionary.  Development expenditures are discretionary in nature, whereas debt servicing, defence, day to day administration and pensions are non-discretionary expenditures, which need to be made in any case.

In the above mentioned context, the Prime Minister (PM) of Pakistan has already announced the revenue part of the budget. Relaxation of upper lower taxable sealing and lowering the tax rates for individuals, reducing the adjustable advance tax on purchase of property, and announcing an attractive amnesty scheme (I wrote last week on why this initiative may not take off) are all the tax proposals which would be a major part of next budget.

Miftah Ismaeel and Rana Afzal have been talking of tightening the noose around non-filers, to begin with barring them from purchasing property above a certain value, and barring them from opening foreign currency accounts. A few other measures will be announced in the next budget, through which it would be easy to distinguish non-filers from the economically inactive. If implemented correctly, the use of CNIC as NTN number would be another step towards documentation of economy.

Looking at PML-N’s manifesto for the 2013 elections, one can see that the party had promised reduction in tax rate and slabs, as well as documenting the economy and opening it up. This manifesto could not be implemented for the last four years. However, PML-N’s new economic team, under the new Prime Minister (PM) have partially implemented its economic manifesto. One of the things that it has promised to do was lowering the ratio of indirect taxes in the revenue.

The PML-N’s view point is that it has a mandate to complete its five year term, and logically it would keep working till its last day in power

While time will tell where the economic reform package stands in terms of broadening the tax base, its safe to say reliance on indirect taxes will remain in the short to medium run.

The expenditure component of the budget is quite simple. The federal government has already made clear that it will not announce any mega project, and priority would be given to complete the existing projects to reduce the throw forward. Thus the Federal Budget 2018-19 has already been announced.

There is a lot of criticism by opposition parties on the Federal government’s decision to prepone the budget and announce its sixth budget a month before its term ends. It’s a unique situation. The PML-N’s view point is that it has a mandate to complete its five year term, and logically it would keep working till its last day in power. Thus it is its legitimate right to present next budget.

The opposition, especially the Pakistan Tehrik-e-Insaf (PTI), claims that on moral grounds, the PML-N should not present a budget for the tenure for which it may or may not be re-elected. Their demand is that a caretaker set up may function within the budget provisions for the current year until June 30, 2018. Whereas, for next month until elections, it may use the provision of article 86 of the constitution to carry out expenditures. Those expenditures would have to be endorsed by the next elected parliament.

The Pakistan People’s Party (PPP) government in Sindh has announced that the next provincial budget would be presented on May 5. Whereas the PTI government in Khyber Pakhtunkhwa has decided not to present the full years’ budget. Instead, they will only announce an interim budget for the next four months.

Along with the morality argument, the opposition parties criticize the federal government that it would present an ‘election budget’ and would try to lure voters through announcing popular initiatives. The PML-N claims that because it has the mandate to run the federal government till the completion of the tenure of current assemblies, it has all legal and moral grounds to present its economic road map. There is weight on both sides of the argument. However, the point to be noted is that if PML-N hopes to get re-elected then it will not announce the types of economic measures that would further increase the fiscal and current account deficit. After all, it would have to take care of the economy in its next tenure if voters are brought in.

On the other hand, if PML-N loses, and an opposition party or parties form the next federal government, then the new government would be able to present a‘true picture’ of Pakistan’s economy (as has been done newly elected government after 2008 and 2013 elections) and present a mini-budget. The new government would be able to reject PM Abbasi’s economic reform package, roll back its amnesty scheme (which would be over by June 30, in any case) and give its own vision for how the economy of Pakistan ought to be run.

Right now, the constitution does not stop the PML-N from presenting its sixth budget. If the opposition parties want to amend the constitution to avoid such a situation in the future, then they can do it after the next elections. Thus, we should not waste our time debating this issue.

PML-N gave an economic package and it is the opposition’s democratic right to reject it. However, besides criticising it, they ought to present an alternative economic agenda. In fact, in the run up to the election, each opposition party should present a shadow budget, with a detailed roadmap for revenue and expenditures. They would have to do this in any case, if they are optimistic of winning the election.

If all political parties including the PML-N present their budget, then the voters would be in a much better position to assess who has a better plan for taking the economy forward, and vote accordingly. It is about time we move on from rhetoric and take some well informed decisions.

The writer heads sustainable development policy institute. He tweets at @abidsuleri

Published in Daily Times, April 19^th 2018.