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It’s a typical Dar budget with some populistic flavor. Penalize anyone who makes money legally and wants to grow their business in the formal sector. “That is Dar’s philosophy of life”, lamented a businessman. Taxing those who are already taxed is the only trick in Dar’s playbook and it seems this time he has swallowed all its pages.

Beyond the 10 percent increase in super tax on those who are making money and already documented, and an additional unclear measure of windfall tax on the same group; there is nothing to take home on tax policy or collection measure.

Rest, populistic touch includes adhoc increases in salaries and pension. The budget is as ad hoc as Dar’s landing in finance ministry last year.

Some had expected tax on real estate (though it is a provincial subject), but on the contrary, the feelings are that there may be some reliefs for the segment. The finance minister’s speech showed zero resolve to tax retailers and wholesalers, supposedly the traditional vote bank of PML-N, which is heaving its last breaths anyway.

No measures have been taken to bring the agriculture sector into the tax net. Again, it is a provincial subject, but do you expect any sense of obligation or responsibility from provinces, when most of the country is governed by encroached caretakers, and rest by those whose philosophy is to make people rich first and tax later. In the process, growing poverty and falling middleclass are mere externalities.

The speech was boring and anticipated – like a broken record, Dar first played the tape of his supposedly glory days – i.e the golden age of bees tera bees sola (’13 to ’16), followed by an imaginary narrative of economic destruction during 2018-22.

Never mind the all-time high inflation and negative growth (which Dar continues to contradict) happened under his watch. And zero thought on the future direction of the economy.

Dar and his team cannot think beyond taxing further those who are already taxed. The only thing he can get himself to focus on are subsidies doled out to textile, or taxing profits of banks. The biggest sector of the economy is wholesale and retail trade (around 20 percent) which contributes one percent of income tax.

The second biggest is livestock (12 percent) which is almost completely undocumented. Then construction and real estate are not even a significant part of recorded GDP.

Historically, manufacturing has paid the lions share of direct taxes. And last year, additional super tax was levied on its profits. Now, the highest slap (or slabs) of super tax is being proposed at 10 percent which would reduce the net income of companies by 9 percent.

The message to documented businesses is that they are fools for having entered a documented segment of the economy. Go grey and live a happy life.

But greys are penalized too. The WHT on banking transactions has been imposed at 0.6 percent for non-filers. Last this was in place was back in 2015-16, and since then currency (cash) in circulation has been on an endless rise. And its growth is unprecedented this year. Instead of trying to lure them back into the sector, they are being pushed to go further down the road of informality.

The question is how many will continue to pay tax honestly, considering they are already an endangered species in the land of pure. That is the story.

The budget is a confused statement by a frazzled finance minister, trying to pretend that he still has everything under control. But the facade won’t last for too long.

Going to the IMF is being willed and denied simultaneously. The way things are an IMF program will remain hard to come by. Either way, private sector participants should prepare themselves for an even harsh mini-budget immediately post elections.

Copyright Business Recorder, 2023

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Ali Khizar

Ali Khizar is the Head of Research at Business Recorder. His Twitter handle is @AliKhizar

Comments

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KU Jun 10, 2023 10:46am
The stupidity and greedy ability of our politicians never cease to amaze the people of this country. This budget is a fairy tale meant to put everyone to sleep and when you wake up, nationalist propaganda awaits your senses, and if you question these utopian narratives, you are branded as unpatriotic. In any case, the budget has left out 180 million people living in rural areas, their welfare, and their future survival. It would be very fair to say that we are in the clutches of the most unqualified and being led towards certain demise.
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Martian Jun 10, 2023 12:27pm
Don’t just blame Dar . Question is why do powers that be continue to support him when he is doing a horrible job ?
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Abdullah Jun 10, 2023 01:03pm
@KU, Those 180 million dont contribute to the economy else than doing gossip and watching TV.they have bought this misery on themselve. This universe does not reward such people except all they get is misery and than more misery.
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KF Jun 10, 2023 02:46pm
I believe that he spoke of his “glory days” based on the results provided by the then government. People then were able to eat and afford an acceptable lifestyle. PTI on the contrary, didn’t have much experience of running a country, they were poised no doubt but inexperienced.
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Tulukan Mairandi Jun 10, 2023 03:03pm
Dar is the best trojan horse to destroy Pakistan from within. -PM Narendra Modi
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KU Jun 10, 2023 04:01pm
@Abdullah, Actually they are farmers and people associated with the cottage industry which depends on agriculture. And no, they don't watch TV or sit idle as city dwellers are led to believe. They are the ones who work at 45 degrees Centigrade in fields and feed the country. Unlike the rest of the industry, they do not have access to modern technology nor do they get the much-publicized subsidy by the government, and are always at the mercy of a middle-man or agent, who buys their produce at a pittance and sells it in cities with 200 percent profit. Do spend some time in a village to understand the reality.
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IMTIAZ CASSUM AGBOATWALA Jun 11, 2023 01:16pm
He has failed on many counts. If only he would realize that key economic indicators are worse than a year ago .
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sajid Jun 12, 2023 08:23am
Very blunt analysis. please be careful because in this land of pure even speaking truth aloud is consider a crime.
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Shafiq Jun 16, 2023 10:14am
Garbage In Garbage out....GIGO...effect continues as country's economy heads south...
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