The budget 2013 holds imperial importance as it is supposed to set the direction of the country and PML N is right. But what the economist failed to mention and the media failed to expose is that this budget would set the direction of the country towards economic slavery.
Economist are aware of the term Economic Hitmen. By the time of Mushrraf-regime’s demise from the presidency, I thought that economic hitmen have done their job in this country but Pakistan sustained the pressure. Now the next line of offense would be footsoldiers, Raymond Davis and independent contractors. But they were already here. They were in the watchful eye. They didn’t got an open playing field.
What are economic hitmen, that is not the part of todays tap dance. But for the general audience a brief introduction of this breed is a must.
When the west wants to control a country that is thriving, independent or there think tanks suggest that in some year’s time this country would grow out of their influence they send the first line of defence, that is economic hitmen.
Hitmen are also used to do certain strategic interest. Let’s say west doesn’t like the ruling regime in any country or they want a share in the natural resource of the country. Or they want to mislead
any state from any nuclear ambition, they send hitmen.
They have fabricated a system, a technique which is mastered during the last five decades. They successfully applied this strategic force on various countries like Nigeria which is the 12th largest producer of petroleum in the world and the 8th largest exporter, and has the 10th largest proven reserves, but it is one of the most underdeveloped country in the world. It’s not even a country, it’s a bunch of 500 tribes that fight and kill each other and bake cookies out of dead bodies. Ever wonder why Nigeria with its rich oil source can’t stand up as a nation to the world.
Many nations can be mentioned that were brought to economic slavery by the hitmen and each of them is a case study to study, but as I mentioned today is not that day.
Just understand that economic hitmen are the soldiers of wall street, they don’t fight the ordinary fights. They are like corporate bankers. They come from global financial institutions. They were here in the Mushrraf’s era, they lured him to privatize strategic assets like PTCL and Steel Mill. It’s all in the text-book. They do the same everywhere they go.
In the case of MR Daar, with him around we don’t actually need a hitmen in the country. Mr Daar is almost one of them.
Coming back to budget, Pakistan is in the gravest financial bankruptcy ever, the financial deficit that builds on national exchequer is 7 billion PKR daily and loans that are beyond calculations.
But the measure suggested in the budget put the country on a different direction. The need of the time was to increase the income of the government, curtail the lavish expenditures (PM is going to perform Umrah on our tax money, though he can afford to take the entire cost of Pakistani Haji’s) and create an environment that promotes exports, manufacturing sector, FDI (Foreign Direct Investment) and government savings.
Tax To GDP Ratio
Governments generate revenues through taxes and channel them in various development funds. The case with Pakistan is very different, here the government needs money to repay the loans and there installments.
The increase in the income of government was supposed to be done via direct taxes and broadening the tax base. Tax to GDP ratio of Pakistan is among the lowest in the world, an appalling 8.9 percent. This should have been somewhere around 17 percent for a sustainable
The way to do that was to tax the untaxed segment of the economy. In laymen’s terms, the rich, those who were living beyond their means or those whose income tax does not prove their lifestyle, should have been taxed. FBR has identified 3 million people in Pakistan whose lifestyle doesn’t justify the amount of tax that they pay. Measure should have done to tax the service sector, which pays dime to the national exchequer. But nothing mentioned above was announced.
Measure should have been done for SMEs and other businesses that thrive on tax evasion despite being seriously lucrative industries. Industries such as plastic, plastic recycling, local restaurants, bakers and confectioners, printing, cable Tv service providers, pirated CD manufactures graphic & animation design houses, TV production houses, imported and local electronics markets and a lot more could have been a great source of revenue for the government.
Capital gain tax should have been placed on property sales. Not only it could have discouraged the monopolization in real estate, it would also have controlled the hiking real estate prices and would have given more venues for the low-income middle class to either buy a house or to invest in this sector.
The reorganization of FBR and Tax houses should have been the part of the policy. Calibrating them with the new and emerging businesses, underground economy, black markets and empowering FBR on modern standards would have been the cure for massive tax evasion.
But what announced in the budget was contrary to the needs of the country.
Rise in GST
In a year’s time, this would prove to be the last idiotic decision a businessman makes before filing for bankruptcy.
It is not just the rise in 1 percent or it is not just like GST is going from 16 to 17 percent only. When this one percent would trickle down to a local consumer it would range from 17 to 30 percent rise in actual price hike. The actual existing inflation rate of 13 percent would soar up to 18 percent because of this fact and the predicted growth rate of 6 percent would not be achieved. In fact it would fall under 2 percent.
How would this happen is an amazing story, for laymen an example is given.
Let’s say I am a chocolate bar manufacturer, I sell my bar at rupees 116 per piece, my expenditure on the bar plus my profit makes it of 100 rupees and 16 PKR is what I take from my consumer as GST.
What happens now is that the sugar I buy from the market is sold to me with 1 percent increase in the tax, so is the coco that I purchase and on the plastic packaging. It is 4 percent increase in my cost of doing business. I won’t pay that from my pocket. So what I would do is I would raise the price of my bar to 104 rupees and add 17 percent gst to it and it to be sold to you for 121.5 PKR. So in this particular case 1 percent rise in GST has cost my consumer 4 percent hike in price of my product.
The critical part is that this rise would vary on various items. It would not only have effects on price, but in this day and age of China, this would be the death of the large and small scale manufacturing sector. China is selling everything that is to be sold in Pakistan. Most of it comes from means that evade tax. Port customs is a master of making money for themselves and not for the government. There is no major tax on importing items as such, so ultimately the imported item would be available much cheaper to the audience rather then something manufactured in Pakistan. This would create more inflation, more unemployment and a lot more unrest in the society.