Some thoughts on the upcoming budget

 By Zia-ul-Haq Sarhadi

All the previous governments used to talk about economic revolution but the economy continued to slide down despite their claims of improvement in the macro and microeconomic indicators. The past governments paid little attention to expand the tax base to generate more revenue. The structure of custom duty was not revamped to make it more realistic in view of the global tends in foreign trade. Likewise, concrete measures were not taken to increase the productive capacity of the economy to enhance the supply position of essential commodities to stabilise their prices. Hence, the increase in salaries and wages did not improve the purchasing power of low income groups. Similarly supply augmenting measures were either avoided or delayed thus leaving the consumers at the mercy of hoarders and profiteers. The frequent raising of POL prices followed by increase in the power and gas tariffs further pent up the galloping inflation.

The budget document on the one hand envisage the relief package for common man and on the other hand offers incentives for the growth of industry and expansion of trade. Here are some proposals for the upcoming budget to make it not only people friendly but also address the problems of businessmen.

The economic environment for the industrial growth and trade expansion is not favourable. The taxation system has become week as it has raised the cost of doing business. The businessmen expect that the new democratic government will thoroughly review the taxation policy to reduce the rates of different taxes in general and that of sales tax in particular.

The rate of sale tax needs to be reduced and the procedure for the registration of the sale tax should be simplified and the amount of penalty on the delayed submission of nil sale tax returns be reduced. The tax base needs to be expanded by exploring more sources of direct taxes. Especially, the high income groups should be brought under an effective tax net.

The situation in the manufacturing sector is far from satisfactory. Proper attention is not given to growth of small and medium size enterprises despite their high potential of generating income and employment. Attractive fiscal and monetary incentives have to be given to enhance the level of investment in these enterprises. Moreover, the sick industries have to be revived to provide more and more employment in the private sector.

It seems that local car assemblers are misusing the facility of subsidy and other fiscal incentives. They are least interested in manufacturing bulk of the auto components and spare parts to reduce the value of locally manufactured cars.

The deletion program has to be implemented swiftly so that like India 95 per cent of auto components and spare-parts could be manufactured locally. Meanwhile it would be worth while to increase the time limit for the import of used cars from three years to seven years in the next budget. Moreover, the import of cars under the gift, transfer of resident and baggage scheme should be further facilitated. It will help the buyers to get better quality of cars at a reasonable price. It will also bring sufficient revenues on account of customs duty.

The trade policy needs some more changes to increase the quantum of exports. For this purpose the rate of withholding-tax should be lowered and the export development surcharge on export to Afghanistan be minimised. The role of trade development authority should be made more effective for exploring new markets.

Finally, opinions from all sections of the society, business and industry should be checked investigated and if found reasonable and beneficial then to be adopted in the budget.