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Importance of Budget for Common Man

The budget brings now fear of the expected inflation and new taxes on different goods and service.

The budget in Pakistan is an important event because it alters the economic outlook for the common man. Government steps especially subsidies, tax breaks and employment and income generating schemes bring positive change in their living standard. While withdrawal of subsidies, increase in tax and other austerity measures adversely affect the economic conditions of these people. The government also announces measures to be taken to put economy on growth path and achieve economic and social targets. In the past, the measures announced by the government in budgets did bring some recipe for people but largely the relief did not trickle down to common man. The budget brings now fear of the expected inflation and new taxes on different goods and service. The failure of economic policies and budget measures are the reasons for higher level of poverty, unemployment and inflation. The current budget is also not different from the previous ones when it is analysed from the perspective of common man. A number of harsh measures are announced which are deemed to adversely affect the life of public. Finance Minister Dr Abdul Hafeez Sheikh mentioned in his budget speech the national and international issues that have adversely affected the economy and it became necessary to take some difficult decisions to put economy on track. The global financial meltdown, energy crisis, security situation and devastating floods of last year were some of the reasons for bad economic conditions. In the pretext of these conditions the budget simply means no freedom from rising inflation, unemployment and poverty in the near future for public.

The finance Minister presented the budget with a total outlay of Rs2.504 trillion having a deficit of Rs975 billion. The tax revenue target was set at Rs1.952 trillion which the analysts dubbed as an ambitious and unrealistic. A number of tax measures were announced which the Finance Minister, in his post-budget address, claimed will simplify the taxation system to facilitate and benefit people.  He announced one per cent reduction in the GST rate (estimated reduction of Rs 36 billion in revenue collection), abolition of Special Excise Duty on 100 items and Regulatory Duty on 392 items out of 397. The regulatory duty is now imposed only on cigarettes, ammunition, betel-nut, big vehicles and imported tiles and sanitary-ware for bathrooms. The minister said that the Federal Excise Duty is going to be completely abolished in three years. As a first step it is removed from 15 items. The 50 per cent duty is also reduced on soft-drinks along with reduction of Rs 200 per metric tonnes on cement. Withholding tax on cash withdrawal has been reduced from 0.03 to 0.02 per cent. These taxation measures clearly show the resolve of the government to provide relief to people even in difficult times. It is expected that these measures will have soothing impact on overall price situation.

The global financial meltdown, energy crisis, security situation and devastating floods of last year were some of the reasons for bad economic conditions.
 
Another important step that is going to positively affect the common man is the exemption limit for income tax that has been raised from the existing Rs 300,000 to 350,000. This step is going to increase the income level of low income groups. The Minister indicated to widen the tax net by brining those sectors in the tax net which were previously out of this net. This will also pave the way for moving towards a regime where only Income and Sales Tax would be in place.  These steps also sent a clear signal to tax evaders and those who were able to shift the burden of tax on existing tax payers to pay their fair share in the development of the country. The other important step announced by the government is to increase the targeted subsidies instead of general subsidies. This is a better way of providing relief to people who deserve such measures. The purpose of subsidies is not to benefit those who already are at a comfort zones as far as their income is concerned. This has been the past practice but now with changing economic scenario it is difficult to continue with these subsidies. So the impression that the withdrawal or reduction in subsidies would add to the difficulties of the people is wrong. The allocation for Benazir Income Support Programme (BISP), which was 35 billion rupees this year, has been increased to 50 billion rupees is the example of targeted subsidies. Along with BISP, the government also increased the subsidies through Baitul Maal and micro-finance schemes.

Although government announced some tax relief to low income groups, it is expected that the rising inflation will continue burdening masses with the removal of subsidies. The centre point of the budget was seemed to be expansion of the tax net and relief to the government employees rather than other problems. In the wake of rising inflation, the 15 per cent increase in government employees’ salaries and pensions of retired government personnel is only an eyewash and real relief is yet to be seen. The employees in the private sector do not see the relief got by their counterparts in the public sector. However, the increase in pension of private sector employees will increase the tax burden and cost of production thereof. The reduction of one per cent in the GST is good but it is not expected to bring major relief because of the removal of subsidies meant for the poor masses.

The most important criticism on the current budget is the inadequate allocations made for important sector such as power and internal security and that shows priority of the government. The unrelenting loadshedding is adversely affecting every nook and corner of the country and economy is facing an uphill task to retain its growth at the present level. The electricity is generated at so high cost that it is becoming unaffordable. Many industrial units are either closed or facing closure. The loadshedding is causing major unrest in the industrial cities of Faisalabad, Lahore, Kasur, Hyderabad and other cities where industries could not operate their plants due to long loadshedding hours and rendering their employees jobless. The government would have allocated adequate funds for water and power sector to address the energy crisis. This would have provides some relief to common people in the long run.

The allocation for education and health play a pivotal role in the development of human resources necessary for higher productivity and economic growth. Except for near past few years, this sector was always neglected and inadequate resources were provided for education, skill development, health and nutrition. The current state of education and health are reflective of this fact. This sector is also important for the employment point of view. Educated young people get more chances to get employed in these sectors. This time again this crucial sector is being ignored and allocation have been reduced for them. This also negates the claim of the Finance Minister, who said that despite difficult circumstances the new budget contains maximum relief for the common man.

At overall level, one analyst put this year’s budget as populist in tone, inflationary in substance, neutral for the agriculture sector, pro-corporate in general, disappointing for the textile industry and largely irrelevant for the common man, although it offers some relief to government employees. While there has been no significant policy change, it is an attempt to address some of the most pressing issues.

By: Dr Zafar Mueen Nasir

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