A mans word isn just his commitment; its his credibility as well. When the finmin announced a three month extension in the introduction of a reformed indirect taxation system, most stakeholders breathed a sigh of relief.
The VAT issue had overheated and passions were running high against it. The cool down period was supposed to be employed effectively for the implementation of a
eformed GST. The clock is ticking away fast; its now down to weeks. Of the 12, 9 weeks have already elapsed and nothing significant has been gained.
On his recent trip to Washington, the Finance Minister was reminded that unless conditions of the Stand-By Agreement are met (read: implementation of VAT), Pakistan will not receive the pending funds.
It seems a sanity check delivered by Dr Shaikh regarding the vulnerability of Pakistans economy has finally registered with PM Gilani. In Mondays meeting of Council of Common Interests, the premier highlighted the urgent need to cut expenditure to keep the economy afloat.
With all four chief ministers in attendance, perhaps the PM could have wrung out a resolution on the long standing dispute between Sindh and the Centre over the collection of tax on services. Consensus of opinion is the hallmark of the present regime. Yet, it eludes the dispute over the collection of revenues between two units of the federation where the government is formed by the same party.
"Mobilizing domestic resources is vital to support any development of the economy," remarked an economist quite close to the government in Islamabad. Until the tax net is equitably distributed over the entire economy, those already in the system are not likely to pay up their dues.
And as far as pressure from the business community is concerned, they were equally aggressive about the withdrawal of subsidies for utilities, but they eventually understood the gravity of the situation. And so, with effective persuasion, the business community will likely accept the reforms as well; blaming stakeholders for extensions in the implementation of a reformed GST is no longer acceptable.
The government and its policymakers must wake up and smell the coffee. Further delays not only pose a threat to their remaining in power, but also put the economy on the road to derailment, a measure this country can ill-afford.