Daily Times

Welfare and budget making are the two interlinked core concepts determining the strength of the relationship between a country’s government and people. The welfare which people expect from the government does not refer to ease in cost of living. The cost of living is determined by the number of taxes and provision of basic facilities which can ensure minimum standards of living.

Prior to the recent general elections in Pakistan, all major political parties including the Pakistan Tehreek-e-Insaf, Pakistan People’s Party (PPP) and Pakistan Muslim League-Nawaz (PML-N)talked about provision of welfare in their manifestos. PTIs manifesto in this regard revolved around components of inclusive economic growth and social services by linking them to governance. Similarly, PPP focused on components of social services and rebuilding the economy so it could work for all sectors of society (Model of Economy for all) and PML-N from its previous regime tried to come up with sustainable economic growth while building on the economic model more inclined towards infrastructure development.

When the PTI came into power, it narrowed down its agenda to short term goals to determine a long term agenda based on the manifesto. Therefore, the 100 days’ agenda to set long term goals was put on the table. One of the key action of these 100 days was to revisit the existing finance bill and amend it accordingly by setting targets till the end of fiscal year 2018-19.

The amended finance bill which was presented in the assembly recently, was a road-map to clear many uncertainties but it didn’t work out for the government as was expected. There were some positive developments with results more linked to long-run policies. In some cases however, the policy framework given adversely affected people belonging to the middle income group.

In this amended finance bill, the government came up with some positive developments, such as health initiatives including initiation of card schemes in Federal territory and FATA, which was first tested in the Khyber Pakhtunkhwa government. Similarly, on building new houses for the middle income group, a significant amount is allocated in order to meet up the target defined in manifesto and also to provide easy shelter.

Another move which may significantly improve the revenue side is the tax by parliamentarians to be paid for accommodations and benefits. These things, along with some other minor actions will signify the welfare concept and other actions may be able to bear fruit in the long run.

These steps may signify the long run impact. In the short run, there was pressure on the people of minimum income groups with increase in prices such as that of gas and no significant change in tax structure.

Those paying taxes should not be made targets and be made to compensate for the
losses caused by non-tax payers

Further measures introduced include increase in the tax rates for those earning above Rs 2,400 thousand annually. This will cause the amount of disposable income in this country to drop further. Similarly, for those earning Rs 400 to 800 thousand annually, a fixed rate of Rs 1000 was retained as introduced by the previous government in their last budget presented. This will also cause a significant loss of disposable income to certain sections of society. With other forms of indirect taxes, this decrease in disposable income become more significant. The amended finance bill failed to address these challenges, thus the core approach to welfare was left out.

Furthermore, looking at the prices in amended finance bill reveals gas prices could rise significantly. The claim in this regard made by the government is that pressure will be mostly on commercial users, where the price has been increased by up to 143 percent. But looking at the bigger picture, it is consumers buying common foodstuffs who will be the most severely hit. The consequence of this increase in gas price can also lead to further inflation. Other impact itself comes in the form of further decrease in the income for domestic consumer with the change in price from minimum 10 percent to maximum 143 percent.

These steps and measures taken by the government has resulted in pressure on welfare side of the tax payer in general with severe pressure on lower and upper middle income groups. Further losses of disposable income may result in poverty incidence for those people earning below minimum wage.

The discussed steps covered the revenue side but nothing has been proposed from the structural and administrative side. There is no mention of the management structure for public sector enterprises.

To carry on with business and running state affairs, the government needs to revisit the bill and take out those points where those paying taxes should not be made targets and be made to compensate for the losses caused by non-tax payers and other non-payments. As promised in its manifesto strict accountability should be ensured for those becoming reason of losses in these public enterprises. This amended finance bill should bring in a mechanism to recover from non- tax payers and non-payers of utility bills. These will not only help those who are paying taxes in the long run to sustain but will also result in welfare gain achieved through budget.

Author is associated with Sustainable Development Policy Institute

Published in Daily Times, October 1^st 2018.