‘Mini’ budget chatter

RUMOURS are a dime a dozen in a volatile, uncertain economy. No wonder the rumour mills continue to generate reports based on half-fact, half-gossip and speculation. For the last several weeks, the media and markets have been abuzz with reports of the government preparing to introduce a ‘mini’ budget to meet the tax revenue targets for the present fiscal year agreed with the IMF. These reports have gained traction over the last few days in the wake of a shortfall of nearly Rs100bn in the tax collection target during the first two months of the ongoing fiscal year. Tax collection is not the only sore point for the government, which is awaiting the IMF Board’s approval of the new $7bn loan later this month. The prospects of non-tax revenues, especially petroleum levy, falling short of the estimates are also looming large. That is enough fodder for economists and analysts to predict additional revenue measures in the form of a supplementary budget over the next several months, even if not now, unless the state drastically slashes its burgeoning expenditures.
The new FBR chairman has more or less confirmed these reports in an interview carried in this paper on Saturday. Sticking to bureaucratic conventions, he minced his words as much as possible to hide the details of the planned tax measures, saying the FBR would focus on structural reforms, enforcement measures and parliamentary approval for strengthening tax compliance. For now, he has ruled out a hike in tax rates or imposition of new levies to achieve the fiscal deficit target set by the IMF. Though he promises that the plan aims to squeeze 700,000 high-net-worth individuals, who either do not pay their taxes at all or underreport their actual income for tax purposes, we know this story will not end at their doorsteps alone. A government that was too afraid to tax traders and other powerful lobbies, and too extravagant to slash its own wasteful spending in the budget, despite a massive financial crisis is likely to train its tax guns on ordinary people sooner than later. Such policy ad hocism is widening the trust deficit between the ruling elites and middle-class citizens, who continue to pay the price for the former’s lavish lifestyle. It, thus, is not surprising that no one is ready to believe what the authorities tell them.
Published in Dawn, September 15th, 2024