No representation without taxation!

Federal Finance Minister Dr Hafeez Sheikh, while winding up the budget debate, urged parliamentarians to begin to pay tax honestly. Exhortation, his supporters maintain, is the only avenue available to him with respect to taxing the income of the rich landlords, a socio-income group with an inordinately high representation in both the provincial and national assemblies, as farm tax is a provincial subject according to the country's constitution.
There is little doubt that the country's parliamentarians at the federal level (by not considering amending the relevant clause in the constitution during more than a year's debate on the 18th Amendment excepting the MQM) or the provincial level as, is indicated by the three provincial budgets already presented to parliament which, as usual, make vague promises of imposing a tax on the income of the rich landlords at some future debate after due consultations. The Boston Tea Party movement, the harbinger of American independence was based on the slogan 'No taxation without representation', unless our feudals among the legislators heed to the call of the times and stop their opposition to 'Tax on all incomes' the public outcry may culminate in 'No representation without taxation'.
However, what is within the Finance Minister's control is the tax measures proposed in the budget 2011-12 as well as the tax structure that these measures support. The country's revenue targets, as contained in the budget documents, reveal that there was a significant shortfall between budgetary estimates and the revised estimates in 2010-11: tax revenue witnessed a shortfall of 99 billion rupees, non-tax revenue of 76 billion rupees and the provincial share of revenue receipts suffered a shortfall of 36 billion rupees by the end of the ongoing year. Thus the performance of this year bodes ill for the credibility of the budgetary targets set by the Finance Minister and noted in the budgetary documents.
There are daily reports that the Federal Board of Revenue has issued many a notice to tax defaulters in recent weeks leading many an analyst to conclude that the way forward in terms of realising the revenue targets for 2011-12 is to ensure that the taxpayers begin to pay tax honestly.
In this context, it is relevant to note that when Business Recorder queried the Chairman of FBR whether the bulk of these non-filers belonged to the farm sector that legitimately paid no tax on their income (as opposed to inputs) he chose not to respond.
What is further disturbing about the entire exercise is the fact that the federal government has typically relied on increasing taxes on those already paying tax in its budget for the next fiscal year and not made any effort to either reform the tax system with the objective of rendering it more equitable and less anomalous or to proactively seek to tax the rich and the politically influential, as exhorted by Pakistan's major bilateral donors (with Hillary Clinton, US Secretary of State publicly stating that the Pakistan government must not expect the US taxpayers to foot the bill, while its own rich remain exempt).
The budget also envisages a provincial surplus of 125 billion rupees that one would have assumed was agreed after consultations with the provincial governments. Three provincial governments have already tabled their budgets in their parliaments (Punjab, Sindh and Khyber Pakhtunkhwa) and their joint surplus is about a billion rupees. Unless Balochistan and Gilgit-Baltistan can come up with a combined surplus of 124 billion rupees Pakistan's budget deficit for next year would be far in excess of the 4 percent target set by Dr Sheikh.
On the other side of the budgetary spectrum is its expenditure. Here, too, typically the government overspends on current expenditure. The fact that the government is spending considerable amounts on the war on terror, over 67 billion rupees according to the Economic Survey, cuts no ice with either the international community (with the US extending support for this purpose under the Coalition Support Fund) or the people of this country (who have been paying a massive price since little after independence to maintain a war-ready military).
In this context the PML (N) did take the military to task and argued that there must be greater accountability of the defence budget than was evident in this year's budget debate, mainly due to a number of recent events that brought the alertness of the armed forces to internal security threats into question.
The major casualty of overspending and lower revenue generation than targeted in the budgets has been and remains the development expenditure. Last year over 200 billion rupees was slashed, a cut that had major implications for the country's already severely deficient physical and social infrastructure. The country's budget has become an exercise in futility as it is focused on balancing the books without resorting to any realistic estimates of revenue and expenditure.
Such a budget convinces neither the donors, and we fear that the Stand-By Arrangement of the International Monetary Fund is likely to remain stalled subsequent to the July meeting, nor the people of this country who have begun to come out on the streets in protest against the failure, third year running, to ease the power crisis. What is ironic is that the budget debate remained lacklustre, with the opposition focused on the establishment of the commission post-bin Laden and the coalition partners remaining largely indifferent to the unrealistic targets.