Writing a budget piece sympathetic to the government for a magazine whose readership primarily consists of businessmen is tough; the odds are always stacked against you. But writing a budget piece sympathetic to the government when writing for a farmers’ magazine is as tough. Or a housewives’ magazine. Or a trade journal. That is because it is really not you that the odds are stacked against, it is the government, any government. Years upon years of military rule and truncated democratic tenures have resulted in a polity uneducated in the nuances of governance. Bad governance has, counter-intuitively, given people unreasonable expectations of the government. Nothing governments will do will be good enough; all budgets are to be decried. This does not just hold true for the great unwashed, as it were, but also many of the Ivy League scions of the captains of industry and commerce.
All businesses, all interest groups, all demographics imagine the budget to be a document drafted with only them in mind. It isn’t. Hacks like us who have hung around long enough in Finance departments know the government’s myriad predicaments. Every June, the government lays out a list of ends and receipts of the seventh largest nation on earth. It is a huge and daunting balancing act. But they have to do it. Even a criminally slow assembly, one that does very little legislating, has to at least pass the Finance Bill. This is because by June, government departments simply run out of enough cash to stay afloat. This does not only mean projects but also salaries, stationary: the works. Scores of government departments fight over development funds. An increase in the funds for health might take away from education; and increasing the quantum allotted to irrigation might take some away from roads. The classic Economic Problem: unlimited wants and limited means. Every trade-off could be debated ad infinitum; one can’t keep everybody happy.
Matters are further compounded by the fact that not only is there a global recession but also the fact that we are fighting a war within the country. The rather unique style of combat that our armed forces employ has resulted in huge collateral damage and a mass migration of more than 3 million people, unheard of even in Iraq and Afghanistan, two countries where, one assumes, the conflict is much greater than ours. The Rs 50 billion that the federal government is going to dole out for the IDPs and their return could definitely have been spent elsewhere.
The law and order problem, one that scares away direct investment and raises the costs of doing business in the country, is also something the government is stuck with. Granted, the government has to proactively manage it. But the predicament that we are currently in is a result of more than three decades’ worth of skewed policies and unfounded concepts of strategic depth. We have to cut the government some slack.
Another thing that wasn’t the incumbents’ fault is the power crisis. With a huge circular debt, the state’s power distributor cannot afford to give the output that industries and households across the nation rightfully deserve. The power minister’s promises of ending loadshedding by this date and that are notorious for passing by without the situation changing. He should have shown more candour and been more honest with the people on this front. But, as much as the detractors of the government would want, this isn’t something one can pin squarely on the current political dispensation.
But one wouldn’t want to overcompensate in an attempt to be understanding.
The government has set an unrealistic tax revenue target. We weren’t able to meet our tax target for the fiscal year 2008-09. How we are going to cover a much higher target in a year further entrenched in an economic recession? The tax revenue target has been widely accused of being based on assumptions that don’t have facts to back them up. The problem here is that when there is going to be a revenue shortfall, corners are going to be cut in the Public Sector Development Program (PSDP). This happened last year and the year before last. This gives further credence to the feeling amongst the general public that the budget is, in fact, just a document read out for public consumption that doesn’t have much to do with the facts on the ground.
The state’s revenue collection tools need to be revamped. The government’s penchant for ease has resulted in a lopsided, tail-wags-the-dog ratio of indirect taxes to direct taxes. Instead of taxing the undertaxed, we go about increasing the burden of those who are already paying whatever they are taxed.
The Advisor’s initial idea was to tax four new sectors: services, real estate, the bourses and agriculture. No one expected for the last one to be followed up on; a consequence of the large proportion of the landed elite in our legislative houses. But services could have been followed up on. We need to stick it to the lawyers, doctors, engineers and architects. Through a streamlining of the income tax service, we could have granted these professionals a rebate upon the service tax if the rebate could incentivise, in some way, for them not to cheat on their income tax. The bourses could have also been taxed better. The said tax might have reduced trading activity but would have weeded out day traders and kept the long-term portfolio investors in.
Desperate times call for desperate measures. This was truly a time for some really innovative, out-of-the-box thinking on the tax collection front. The government hasn’t done that. With the near certainty that one acquires when dealing with the physical sciences, it is to be predicted that the government is going to miss the revenue target, cut on its development spending and miss a lot of the targets set for the current fiscal year, at least the one for the fiscal deficit as a proportion of GDP. This wouldn’t make for cheerful dinnertime conversation but they don’t call it the dismal science for nothing.