Federal Budget: A daunting challenge for Imran Khan

President Dr. Arif Alvi has summoned a National Assembly session on 10th June 2019 for presentation of the federal budget for the next financial year. The opposition parties are planning a strong protest inside parliament on several issues, including non-issuance of production orders of two arrested MNAs from the country’s tribal areas and filing of references against two senior judges.

The last sitting of the assembly on May 31 had ended in a ruckus when the treasury and opposition members had come to blows after Deputy Speaker Qasim Suri refused to give floor to Bilawal Bhutto, Chairman, Pakistan People’s Party (PPP), who wanted to respond to the fiery speech of Minister of State for Parliamentary Affairs Ali Mohammad Khan on the North Waziristan incident.

This can make smooth presentation of its first budget a daunting challenge for Imran Khan led coalition government. It is still not announced who will make the budget speech after the ouster of former finance minister Asad Umar from the federal cabinet. The National Assembly is required to approve the budget before 30th June, the last day of each financial year.

According to informed sources a meeting of the parliamentary group of Pakistan Tehreek-i-Insaf (PTI) will be held soon after Eid, to be chaired by Prime Minister Imran Khan, to devise a strategy for smooth presentation of the budget in the house on 11th June. Senior party leaders like Foreign Minister, Shah Mehmood Qureshi and Minister for Professional Education, Shafqat Mehmood might be asked to engage the opposition parties before presentation of the budget. However, political analysts believe that it would be a difficult task for the senior leaders of the PTI to seek cooperation from the opposition at this juncture.

A ruling coalition partner, Balochistan National Party-Mengal, has also decided not to cooperate with the ruling regime due to “non-implementation” of the six-point agreement that had been signed by the party with PTI at the time of the BNP-M’s joining the ruling alliance.

Maulana Fazlur Rehman, Chief of Jamiat Ulema-i-Islam-Fazl chief has already announced to convene a multi-party conference of the opposition parties in the second week of June to devise a joint strategy to hold anti-government protest.

At the time of announcing date for the presentation of Federal Budget, Special Assistant to Prime Minister on Information and Broadcasting, Dr. Firdous Ashiq Awan said that the guiding principles of the budget set in light of Prime Minister Imran Khan’s directives prioritized, first and foremost, the government’s desire to steer the economy on to the path of stabilization. “Our focus will be the stabilization of the economy, managing external deficit by decreasing imports, reduction of fiscal deficit through revenue mobilization and expenditure control, setting the path for public debt reduction,” she said.

The government seems adamant at reversing tax concessions extended by the PML-N government to benefit high-earning salaried and non-salaried individuals substantially more than the middle-class workforce. The PTI-led coalition government has already reversed some incentives through the amended Finance Act 2019 given to business enterprises and individuals through the Finance Act 2018. While it has been proposed to withdraw the tax exemptions given on new industrial undertaking and for those in the existing industries.

One may also recall that a recent meeting of Prime Minister Imran Khan with leading businessmen and industrialists of the country ended without any decision on the grant of zero-rated status to the manufacturers of products that are exported. Although the meeting could not take a final decision on the issue of zero-rating of exportable products, it was emphasized that their sale in the local market will be taxed. The export-oriented industrial sectors enjoyed the facility of zero-rating from 2005 to 2009, when the government led by the Pakistan People’s Party withdrew the incentive. The facility was revived in 2015 by PML-N government.

While FBR wishes to introduce new taxes, World Bank has a contrary view.  Pakistan has substantial potential to increase tax receipts without imposing new taxes or increasing the rates. According to a document prepared by the World Bank titled ‘Pakistan Revenue Mobilization Project’, published recently, the gap between actual and potential receipts is 50%. This means that Pakistan’s tax authorities are currently capturing only half of this revenue potential. Therefore, the focus has to be on improving collection rather than new introduction of taxes.

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