The honourable Supreme Court has lately been active to bring justice. One of the strongest political figure was convicted, a strong verdict against biggest and strongest real estate tycoon, and now the money laundering of tens of billions rupees is under investigation involving banking senior executives and a big leader.
All these steps are commendable and in the right direction to bring justice for common man. The apex court must move forward and continue to work against mega corruption. They should also continue working on improving justice system across all levels of judiciary.
However, the apex court needs to slightly alter its view while talking matters of economic policy making in own hands.
That is the job of government and it should involve economists and experts in making policy seeing the economic reality and business operating conditions of the country.
In an ideal scenario, the judiciary has little business deciding the fairness of taxes on petroleum products. The fiscal policies or taxation are not merely for revenue collection but taxes are also levied to discourage consumption or to promote investment.
For example, the idea of higher taxes on tobacco is to discourage consumption due to its adverse impact on health. The green field projects in certain sectors are tax exempt to encourage investment in much needed sectors, non-essential imports are taxed to discourage consumption and there can be numerous other examples of fiscal measures where the taxes are relaxed or imposed for other than revenue generation reasons.
The caretaker government has reduced the prices of petroleum products on the directive of Supreme Court. The petroleum prices in Pakistan, even before the recent reduction of prices, were lower than many oil importing countries including developing economies like India, Bangladesh and developed economies such as UK. (Read: Petrol price is not unfair, July 3, 2018).
And giving relief to consumers is subjective; for example patrol prices in Pakistan were around Rs115 per liter in 2014 versus highest price of Rs100 per liter in 2018. Adjusting to inflation and increase in real wages, petrol prices are already low enough to reduce the burden on consumer.
Petrol prices are taxed high to discourage too much consumption which would strain the import bill, and to lower the consumption to reduce the carbon foot print to the environment. Plus, there is no free lunch. In a country like Pakistan which is facing huge external imbalances created by slippages in fiscal account, the cost of lower taxes on petrol and mobile phone consumption has to be paid by masses in one form of the other.
If too much consumption is encouraged by lowering the prices through taxation relief, the strain on fiscal and external balances would eventually translate into inflation and currency depreciation. And inflation is the worse form of tax. This means broad based implicit tax for all.
There are other areas where the prices have increased substantially in the last decade or so which has discouraged consumption of essential goods. For example, the wheat support price set by government in 2008 and continued to date has cascaded into the increase of food items across the board. Today wheat, milk and many other food items in Pakistan are expensive than many developing and developed economies.
The support price benefit is mainly assumed by big farmer while small farmer is forced to pay at discount to middle man. And the brunt of higher prices is faced by urban and rural poor alike. The SC must continue protecting the masses against any wrongdoings, but decisions of price fixing and fiscal policy are best left to the economic managers.
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