Mini-budgets are undemocratic: Senator Sherry Rehman
Islamabad, December 3, 2015: Vice President PPP Senator Sherry Rehman criticized the federal government here today on issuing another mini-budget to make up for its failure to expand the tax net. Terming ‘mini-budgets’ a “regrettably regressive practice” to comply with IMF conditionalities, she said that the federal government continues to evade parliamentary consultation on economic affairs of the country. “Our entire economic policy ignores public input, regardless of how the common man gets affected, nor is the annual budget of any significance anymore” said the senator.
The federal government issued a mini-budget this week, introducing Rs40 billion in additional taxes to meet conditions set by the IMF before the next tranche of the Extended Fund Facility is released. “Despite the different explanations given by the finance ministery about the recent tax moves, it is clear that the real objective is to bridge the FBR’s revenue shortfall ahead of the next IMF tranche. The government has repeatedly failed to meet its own revenue targets, despite a significant shuffle in the tax bureaucracy. With little to show in terms of actual performance, the finance ministry continues to rely on symbolism,” Rehman observed.
The move has been criticized extensively by economists and has stoked concerns about the regressive turn that the federal government’s taxation measures may be taking. Failing to meet deficit targets under the Extended Fund Facility of the IMF, the federal government has been under pressure to increase revenues. “There is little visible effort from the federal government to expand the tax net, while it continues to rely on indirect taxes that are choking the middle income and salaried classes,” the senator noted.
Experts also note that there has been no significant improvement in fundamentals of the economy, with only exogenous factors – such as historically low international oil prices – providing some relief. Commenting on the performance of the finance ministry, Rehman said that the federal government’s policy stance is a reversal of its own agenda. “How can they expect to spur growth by increasing tax burden on those who are already in the tax net?” she questioned.
While continuing to increase the incidence of tax through mini-budgets, the government has also increased domestic borrowing. Contrary to expectations from a historically low discount rate, private sector investment has failed to pick up pace. “Clearly, the only beneficiary of low interest rates is the government itself. The private sector, on the other hand, continues to suffer from increasing costs of doing business,” Rehman said.
As many as five ‘mini-budgets’ were introduced during the last fiscal year by the federal government, without any parliamentary approval. In most cases, the announcement was preceded by a failure to meet quarterly revenue targets set by the government. The IMF has also directed the government to refrain from issuing statutory regulatory orders with the objective of bringing down the fiscal deficit. “Changing the nomenclature of SROs will not make a difference to the practice of using executive authority to impose or exempt taxes,” she concluded