A student recently asked me to outline an ideal people-friendly budget. My answer was and remains this: it should boast long-term vision for growth and prosperity while doing economic justice by all social classes. It must ensure equitable growth and prioritise lifting people out of poverty. Thus, here in Pakistan, the federal and provincial budgets must focus on welfare programmes that provide a safety-net to catch those who would otherwise fall through the gaps. All the while enabling those suffering from the economic fallout of Covid-19 to be economically mobile.
Fiscal policy, as part of budgetary practice, must be used as a tool of distributive policy that safeguards against the wealthy having a monopoly on political control via financial power. Taxation must therefore focus on collecting taxes at a lower rate from the broadest possible base; while providing the same tranches for public welfare programmes, especially those geared towards empowering people through education and facilitating free markets to generate employment. This is the only way to ensure upward socio-economic mobility and to reduce reliance on mere cash handouts. However, this has not happened in Pakistan. For successive governments, military and civilian alike, have always designed budgets to benefit the affluent classes. Ours, therefore, is an elitist economy with “budgets of the rich, by the rich, for the rich”.
Whenever a national budget is announced, the immediate reaction of the majority is that it offers no relief to the poor. The budget for fiscal year 2021-22 — the fourth presented by PTI coalition government – is expected to be no different from its earlier submissions. Every year, lower income group tax liabilities are increased even if rates are not enhanced as purchasing power dwindles due to double-digit inflation. This group then bears the heavy cost of education and health while governments conveniently violate Article 25A of the Constitution, pertaining to free and compulsory education. Yet 11 years after the passing of the 18th Amendment, millions of children still remain out of school. The poorest of the poor are compelled to have more children just as a means of future income. Astonishingly, child labour has never been the focus of any budget. What we see, instead, are additional taxes in the name of restricting fiscal deficits that only result in burdening the poor and middle-class. On the other hand, the rich and influential have access to tax-free plots as well as other perks that allow them to amass more and more wealth. During the last 13 years of democratic rule, tax evaders have been cushioned by 10 amnesties to whiten their untaxed assets at both at home and abroad.
So-called smart lockdowns have been implemented to save the economy, not lives, and ended up paradoxically triggering more unemployment
About three million super-rich families, identified by NADRA, skillfully avoid taxes, thereby exacerbating our economic woes. Federal and provincial governments are unwilling to sit together and take the necessary steps to help revive businesses, help the poor by moving towards growth and then tap real tax potential. The entire economic system needs restructuring.
Unfortunately, no serious effort has ever been made in Pakistan to devise rational economic and tax policies to encourage economic growth. The sole stress on irrationally-fixed revenue targets — unfairly targeting the poor – has created tremendous fiscal mess. The most damaging part of revenue-generating exercises has been high rate of sales tax on goods and services that hurt industries and hamper job creation, even prior to Covid-19. The persistent failure of successive governments to broaden the tax net, confiscate untaxed assets and ill-gotten wealth, spend public money prudently and remove socio-economic imbalances has pushed Pakistan into a ‘debt prison’. Prime Minister Imran Khan previously boasted that that once a leader of his calibre came into power, things would improve. After three years, we need competence – not clichés. Pakistan is home to many skilled and capable people with unshakeable determination to pursue a pragmatic reform agenda to transform Pakistan into an egalitarian state: a true social democracy with justice for all. Yet none can get elected under the present system of electioneering where parties give tickets to ‘electables’ who go on to exploit the system for self-aggrandisement. Nothing will change unless the election process is democratised and reforms within political parties are undertaken.
Federal and provincial governments are least bothered about devising policies for social mobility and economic justice. Education has long been recognised as the most important single trigger of social mobility. Yet our budget makers seem averse to strict redistribution policies, particularly when it benefits the working-class. Neither is there will to introduce a uniform education system that does not discriminate along class or any other lines, allowing constitutional guarantees of equality and opportunity to fall by the wayside. Education in Pakistan is now treated as a big business enterprise with scant attention paid to either quality or levelling the playing field.
So-called smart lockdowns have been implemented to save the economy, not lives, and ended up paradoxically triggering more unemployment. Neither the Centre nor the provinces realise that allocation of education funds alone will not make a positive impact. Not unless the entire system becomes an effective tool for social mobility and inculcating a sense of dignity and shared humanity.
Sadly, this is something that our politicians simply refuse to understand. The result is a vicious cycle of poverty whereby the children of the poor have no chance to progress since education is either not available to them or is of no practical use. Our economy will never manage to perform at its optimum unless we change its focus and framework and do away with budgets that are just a means of balancing the books. Pakistan needs meaningful redistribution policies that can uplift the downtrodden. This year, too, we should not expect anything on this front. There will be no vision to make Pakistan prosperous and self-reliant.
Federal and provincial governments must consider fundamental reforms for accelerated growth and social mobility, based on principle of Article 3 of the Constitution, pertaining to eliminating all exploitative structures, providing equal opportunities for all citizens and ensure “from each according to his ability to each according to his work”.
Pakistan needs a growth rate of at least 7-9 percent to provide 2 million jobs every year to young people alone. The existing system at all levels of government are anti-growth. The economic system should be people-oriented and the cost of voluntary tax compliance must be less than cost of evasion or avoidance. This can only be done through a national agency that can ensure: collection of money to fund the public services; the provision of a service that is even-handed, accurate and based on mutual trust and respect. Above all, this should be user friendly.
The writer, Advocate Supreme Court, is Adjunct Faculty at Lahore University of Management Sciences (LUMS). Email: firstname.lastname@example.org; Twitter: @drikramulhaq