Finance Minister on Wednesday formally announced Rs. 170 billion mini-budget, which was passed by the National Assembly yesterday under the IMF dictation. Mr. Dar claims these taxes are unavoidable. Before the passage of the bill, the government had already implemented Rs. 115 billion in taxes through two notifications issued on 14th February. The mini-budget consists of highly inflationary measures, which will make the lives of the middle and lower middle classes more tough and difficult given the current state of our economy. The fuel has been added to the misery of people due to an increase in petrol, gas, and electricity charges. The mini-budget has been announced on the dictation of the IMF agreement at the staff level for the generation of additional taxes. The burden of taxes has mostly been imposed on the common man as indirect taxes, which are shared by all segments of society. The rich have no issue, but the poor masses will mostly bear its impact. Raise in GST across the board will impact the consumers. The raise in petrol price will further add to their misery as the increase in transportation will increase the prices of products of daily use.
The country is already undergoing tough economic governance, law, order, and climate change issues. The mini-budget will crease unemployment as the major industries are cutting down their production due to a shortage of raw material due to import restrictions and the dwindling foreign exchange reserves which have decreased to a record low level and can only cater for three weeks of imports.
The additional imposed taxes have been stated to offset the projected Rs. 755 billion of circular debt, which is expected to reduce to 336 billion, but the insiders are of the view that the net impact is roughly 550 billion. The situation of the power is precarious. Our cost of producing electricity is 3000 billion. We only collect 1550 billion and the cost of power theft. line losses and nonpayment of bills is Rs. 1450 billion, said Mr. Dar.
Besides, power losses, taxes on marriage halls, sugary drinks, cement, tobacco, and an increase in taxes under the sales tax regime are the main components of the mini-budget. The mini-budget has been criticized at almost all the forums because it mainly imposes indirect taxes which are very easy to collect and this exposes the poor performance of the Federal Board of Revenue which has failed in collecting the revenue targets. Although Mr. Dar has clarified that the additional taxes of Rs. 170 billion have not been imposed to offset the revenue shortage but on the contrary, the revenue target of FBR has been increased from Rs. 7470 trillion to Rs. 7640 trillion which seems to be a daunting task the FBR. The mini-budget being inflationary will render more people jobless and unable to meet their daily requirements of livelihood to talk including their education and healthcare. The people, particularly in Sindh, have yet to come out from the sufferings inflicted due to the rains. The poor are becoming poorer, and the middle class is coming under the circle of the poor. This dangerous trend will further affect our fragile law and order situation, the people, particularly the youth, will resort to street crimes.
The withdrawal of subsidy to the exporters and farmers will also affect our export sector which is already on a lower trend and due to an increase in the cost of production it is unable to compete in the international market and the farmers who not only bear the increase in the electric charges but also a soaring prices of seed, pesticides, and urea.
Almost all segments of society have been affected by the mini-budget which is evident from the fact that the share of indirect taxes which remained constant at 60% over the previous decade has increased by 7%. Instead of taxing the main sectors, the government could have broadened the tax net on those persons who are able to pay their due share.
The government, on the contrary, did not tax the income of the traders surprisingly, which is highly under-taxed due to its linkage with the ruling elite. The case of commercial banks was more glaring because the Finance Minister himself announced that he is going to impose heavy penalties due to their CURRENCY MANIPULATION as they made Rs. 50 billion in undue profit, but the same was not implemented.
Now, let us consider the budget from the public perspective. The Pakistani rupee has depreciated to almost all currencies, Inflation has soared and is present hovering around 20%, an increase in GST from 17 to 18%, and the increase in energy prices have added miseries to the life of the poor and downtrodden. The middle class is struggling for its survival, and the general public is finding it difficult to meet their bare necessities of life. The underperformance of the FBR and the energy ministry is being met with the additional burden on the common man through these additional taxes and price increases. Particularly energy prices have added fuel to the fire. The prices of essential commodities, particularly essential products like wheat, rice, sugar, and edible oils, have skyrocketed and put the general public under tremendous pressure, and made it difficult to make both ends meet.
The writer is Customs, Tariff and Trade Expert