EDITORIAL: The Institution of Chartered Accountants of Pakistan’s (ICAP’s) initiative of preparing a Model Federal Budget 2021-22, along with proposals for economic growth, and presenting it to the ministry of finance is a very praiseworthy professional exercise. The existing pool of knowledge contributing to the budget-making process can only result in a win-win situation for all. The contributions made by more and market professionals will certainly help the government articulate a better approach to the budget-making processes in what are clearly very demanding times. ICAP’s proposal is the first of its kind and it can only be hoped that it will prompt other professional bodies to do the same. In fact, such proposals should not only come from industry- and sector-specific outlets but also opposition political parties so the finance ministry is able to have a thorough understanding of what different segments of the economy are expecting from the next fiscal’s policy.
While it’s true that the government doesn’t have much leverage when it comes to setting some of the more important targets, it is still important to point out, as ICAP’s document has implied, that there is no point in setting targets that cannot be achieved. And it’s not very likely that tax revenue expectations of Rs 6,000 billion can be met next year. This is a very important point and for some reason no administration takes it seriously, regardless of whether we are in an International Monetary Fund (IMF) programme, because by setting unrealistic targets they only set themselves up for a bigger fiscal deficit figure for no reason at all. The budget proposal goes on to suggest ways of expanding the tax net to sectors that offer little or nothing to revenue. Agriculture and wholesale, for example, contribute a mere 1.5 percent to direct taxes even though together they make up for about 42 percent of country’s GDP. Similarly, exports give only one percent to taxes while accounting for 10 percent of GDP.
These are smart ideas that ought to get the government thinking. There is after all a very urgent need to sort out inequities in the tax regime while also increasing overall revenue; and these can be the first few steps in the right direction. The proposal also mentions ways to protect and advance the agriculture sector because “whatever growth was achieved earlier was because of it.” The recommendation that under the aegis of the federal government a coordinating body should be formed to oversee and implement “farm-to-market” authority with respect to provinces should be considered very seriously because something will have to be done about so-called middlemen and other inefficiencies that sideline farmers and corrupt product prices. And option seems as good as any on the table at the moment.
There’s not much time left before next year’s budget and the finance ministry must already be putting the final touches on the document. Hopefully, the government will receive more such proposals next year, and much earlier, to enrich and add flavour to the long thinking process that goes into preparing the annual budget. A good way to encourage such activity could be making this process interactive and letting ICAP know what relevant authorities make of its observations and suggestions. The government will no doubt already be aware of a lot of smart ideas that will come forward, which is only to be expected, but it will still learn something about how to prioritise some of the points that it was already thinking about. If a lot of market leaders and stakeholders ask for the same things, then on occasion the government might feel forced to make certain changes in some policies that it might otherwise not have considered too seriously. And that, in many ways, is the very essence of policymaking in a functioning democracy.
Copyright Business Recorder, 2021