EDITORIAL: The post-budget press conference held by the federal finance minister Muhammad Aurangzeb, flanked by Chairman FBR and Secretary Finance, was initially boycotted by a section of the independent media in protest against the cancellation of the traditional technical briefing given by the Federal Board of Revenue (FBR) Chairman immediately after the budget speech.
The protesting journalists returned after an apology was tendered by the Information Minister with the pledge that a technical briefing would be given though no date has yet been scheduled.
A technical briefing provides details of how much revenue is projected to be generated from each proposed new and/or additional tax measure or through improved enforcement or through higher growth or higher inflation. It also provides the estimated decrease in collections as and when a tax is reduced.
Given that FBR has been unable to meet the projected targets in previous years, partly due to lower than projected growth rate and inflation or through a contraction in aggregate demand or when on an International Monetary Fund programme being set unrealistic targets, data released during a technical briefing enables tax experts to assess the possibility of meeting targets.
The Finance Minister and the Chairman FBR appeared on several private channel talk shows on Wednesday but shared only partial data that is shared in a technical briefing.
One data shared by the two men was the claim that enforcement measures had been very effective in the outgoing year and had generated around 390 billion rupees, which was the root cause of the IMF agreeing to the authorities’ proposal that a similar amount, if not more, would be generated from this source. This measure must be fully supported because without strict enforcement of fiscal measures contained in a Finance Bill increasing tax collections in this country have been at the cost of the existing taxpayers’.
Be that as it may, the fact remains that the enforcement measures identified by both the Finance Minister (who in one interview no doubt inadvertently indicated that the farm tax on the income of rich landlords, effective from January this year to be implemented from 1 July 2025, may be included under the head of improved enforcement though this tax is a provincial tax) and the Chairman FBR relate to indirect taxes including sales tax/federal excise duty, which are passed on in their entirety onto the consumers.
The Chairman FBR mentioned better enforcement at sugar mills, which he claimed had increased collections manifold but did not follow through to the rise in sugar prices. One would therefore hope that enforcement gains are not limited to sales tax/FED but extend to the rich who currently operate in the informal sector.
He also referred to the need for the legislature to approve laws and amendments to strengthen FBR’s enforcement capacity and cautioned that if this is not implemented the government has agreed with the IMF to levy around 500 billion rupees in additional taxes. However, laws can and have been challenged in the past and one would assume that a time lag in implementation is taken into account when projecting collections under this head.
The Finance Minister also claimed that taxes on the salaried class had been reduced in an attempt to inform those who were impacted in the 2024-25 budget that the government is aware of their problems and would continue to reduce rates subject to a widening of the currently narrow fiscal space. He referred to the success in reducing inflation but sadly did not touch on current poverty levels having reached a high of 44.7 percent as per the World Bank’s recently revised global income thresholds (poverty line for Pakistan as a middle income country now set at 4.20 dollars per day instead of the previous 3.65 dollars per day).
True; that the increase in Benazir Income Support Programme (BISP) is sizeable in percentage terms — 21 percent — yet the actual amount of 716 billion rupees next year against 592 billion rupees provides little comfort level, given the rise in unemployment (inexplicably not tabulated by government’s statistical body since 2020-21), which is being cited at over 20 percent by independent experts based on negative large-scale manufacturing sector and poor growth of the farm sector that are major sources of employment.
The Finance Minister’s comment on the National Finance Commission award must be fully appreciated as the population component needs to be further revised downward. However, he surely must be aware that as the finance minister he has to create the consensus to reach an agreement. The last time an award was agreed in 2010 and a new award is long overdue.
And finally, the Finance Minister noted that overall there are 7,000 tariff lines and additional customs duty has been removed on 4,000 lines and removed on 2,700 of those the customs duty has been reduced with 2,000 lines directly linked to raw materials and intermediary goods used by exporters. This action needs to be fully supported; and while reducing tariffs, a primary source of tax collection in many developing countries, including Pakistan, is a multilateral objective premised on a slowly receding globalisation policy, yet as repeatedly acknowledged by the economic team, Pakistan is currently operating under severe financial constraints and does not have the luxury of resisting IMF diktat at present.
Copyright Business Recorder, 2025