Another budget full of ambiguities
Every year, the budget formulation exercise provides an opportunity to set the economy on a path of expedient structural reforms, which in turn can spur private investment, job creation and overall human development in the country. While the Economic Survey 2016-17 suggests that the economy is now moving towards higher growth rates in agriculture and industry, it contradicts several economic outcomes mentioned in the same document and also highlighted in Finance Minister’s budget speech.
Firstly, rising growth is not accompanied by a significant increase in local investor’s confidence. This is endorsed by the low levels of private investment to gross domestic product (GDP) ratio. Secondly, if the growth is real, why is it not translating into export gains? In fact, exports have been decreasing since 2014. Thirdly, if growth numbers are correct, why is it not translating into higher tax revenues (at least in the manufacturing sector, which is most taxed)?
Unfortunately, the budget proposals if passed by the parliament may not provide significant respite to the business community, in particularly the small and medium enterprises. To start with this can be attributed to the increased level of indirect taxes on industry, particularly steel, cement and heavy machinery sub-sectors.
While the Economic Survey 2016-17 suggests that the economy is now moving towards higher growth rates in agriculture and industry — it contradicts several economic outcomes mentioned in the same document
A minimum turnover tax, also applicable to loss-making entities, has also been increased. There is also no proposal to gradually phase out the federal excise duty as earlier promised in the manifesto of PML-N. On the exporter’s refunds, currently stuck up at the Federal Board of Revenue (FBR), the finance minister has again promised another deadline for clearance — something which was also done in the previous budget.
Perhaps another missed opportunity this year is the state’s inability to divert greater resources for agriculture — home to largest number of unskilled labour. It is unfortunate that only a minor decrease in input taxes has been proposed. This is in contradiction to peer economies where agriculture inputs are not taxed. The farmers have already pointed out that the benefits of low international oil prices were not passed on to them and they still continue to use relatively expensive diesel as a key farm input.
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The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.