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Dr. Ikramul Haq
A student has asked to outline as to what should be the ideal budgets for Pakistani people at federal and provincial levels. My answer is simple: an ideal budget is one that has long-term vision of prosperity by doing justice with all economic classes within the society. It must ensure growth with equality. Such a budget deplores the idea that citizens should remain mired in poverty. The federal and provincial budgets must focus on welfare programmes by helping those lagging behind, enabling them as well as all those suffering from the economic toll of Covid-19 endemic, to move up economically.
Fiscal policy, as part of budget, must be used as a tool of distributive policy that must be indignant towards rich families holding the reins of political control through money power. Taxation must be aimed at collecting taxes at lower rate from the broadest possible base along with spending the same for public welfare programmes, especially empowering people through education and facilitating free markets for employment generation. This is the only way to ensure socio-economic mobility in the society and not mere cash handouts. On the contrary, all our budgets, under successive governments, military and civilian alike, have been designed for benefitting the affluent classes. In other words, in an elitist economy, these are the “budgets of the rich, by the rich, for the rich.”
After announcement of every national budget, the instant reaction of most of the Pakistanis invariable is: “No relief for the poor”. The budget for fiscal year 2021-22—fourth of the coalition government of Pakistan Tehreek-i-Insaf (PTI) as three earlier were—will be no different. Every year, tax liabilities of the lower income groups are increased even if rates are not enhanced as their purchasing power dwindles because of double-digit inflation. They bear heavy cost of education and health while the governments conveniently violate command of Article 25A of the Constitution. After 11 years of 18th Constitutional Amendment, millions of children are out of school. The poorest of the poor are compelled to have more children as means to sustain. Child labour is never addressed as an issue in any budget. More indirect taxes by the federal and provincial governments in the name of restricting fiscal deficits only result into burdening the poor and middle class. On the other hand, the rich and mighty get tax-free benefits of plots and perks to amass more and more wealth. In the last 13 years of democratic governments, tax evaders have been given 10 amnesties to whiten their untaxed assets at home and abroad.
About 3 million super-rich families, identified by National Database and Registration Authority (NADRA) skillfully avoid taxes, thus, our economic woes continue unabated. Federal and provincial governments are unwilling to sit together and take necessary steps to help revive businesses, help the poor by moving towards growth and then tap the real tax potential. The entire economic system needs restructuring.
Unfortunately no serious effort has ever been made in Pakistan to devise rational economic and tax policies by all governments for encouraging economic growth. The sole stress on irrationally-fixed revenue targets—with main incidence on the weaker segments of society—has created an ugly fiscal mess. The most damaging part of revenue-generating exercise is high rate of sales tax on goods and services that were hurting the industry and hampering job creation even before the Covid-19 endemic. The persistent failure of successive governments to broaden the tax net, confiscate untaxed assets and ill-gotten wealth, spend public money prudently and remove socio-economic imbalances has pushed Pakistan into a ‘debt prison’. It was claimed by the Premier that once a leader of his caliber is power, things would get fixed. After three years all are convinced we need competence and not clichés. We have many able people having capability and unshakeable determination to pursue a pragmatic reform agenda to transform Pakistan into an egalitarian State—true social democracy with justice for all but they cannot get elected under the present system of electioneering where parties give tickets to electables who, later exploit the system for self-aggarndisement. Nothing will change unless we have democratization of election process and reforms within political parties.
Federal and provincial governments are least bothered to devise policies for social mobility and economic justice. Education has long been recognised as the most important single trigger of social mobility. Our budget makers never seem inclined towards promoting social mobility by taking tough redistribution policies, particularly benefitting those who are on the lower rung of the ladder. There is no desire to introduce a uniform educational system that is neither class-ridden nor discriminatory in any respect so that constitutional guarantees of equality and opportunities are ensured. Education in Pakistan has not only become a flourishing industry but is also pathetically poor in quality and is definitely class-ridden.
Faulty lockdowns have exposed the rationale behind saving economy—these resulted in greater human causalities and more unemployment. The federal and provincial governments do not realise that it is not allocations of funds on education that really matters but how to use the entire system as an effective tool for social mobility and inculcating a sense of dignity for human beings in particular and humanity in general.
There is a complete lack of understanding of this perception on the part of our politicians and the result is that poor segments of society are condemned to remain ensnared in abject poverty because their children have no chance to progress as education is either not available to them or is of no practical use. Our economy will remain in mess unless we change its focus and framework. Our federal and provincial budgets lack this perspective and are merely routine and ritualistic exercises of balancing the books. Pakistan needs meaningful redistribution policies that can uplift the downtrodden. This year too there would be nothing in federal and provincial budgets towards this goal—like all previous ones, these will be disappointing documents devoid of any vision for making Pakistan prosperous and self-reliant.
Federal and provincial governments must consider fundamental reforms for accelerated growth and social mobility, based on principle of Article 3 of the Constitution of eliminating all exploitative structures, providing equal opportunities for all citizens and ensure “from each according to his ability to each according to his work”.
Pakistanneeds at least 7-9% growth rate to provide 2 million jobs every year to young people alone. Existing system at all levels of government are anti-growth. We need to replace these with the one mentioned in the Constitution. The economic system should be people-oriented and cost of voluntary tax compliance must be less than cost of evasion or avoidance. It is possible only through a national agency that can ensure: We collect money to fund the public services as our duty fixed by Parliaments. We give you a service that is even-handed, accurate and based on mutual trust and respect. We also want to make it as easy as we can for you to get things right.
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The writer, Advocate Supreme Court, is Adjunct Faculty of Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).