The Verdict
Federal Budget 2013-14: More business friendly than people friendly

Federal Budget 2013-14: More business friendly than people friendly

The government has mostly focused on fiscal discipline, development and power generation- what about the common man?

Tahir Akbar June 14, 2013

I still remember my Economics professor’s words,

“The political cost of economic decisions is the worst nightmare for the policy-making circles particularly political parties and this is what plays the most significant role in budgetary allocations.”

The federal budget 2013-14 has proved this statement correct. With the new political administration at the helm of affairs, the situation is surely somehow different than the past five years, though not an ideal one.

A short glimpse of the budget document clearly shows that the budget is more business friendly than people friendly.

We find that the government has focused on fiscal discipline, development, power generation, political economic initiatives and has assisted in creating a business friendly environment.

Why are we even surprised? The PML-N loves businessmen. This is a budget suited for them not the common man. #budget2013
— ST (@shobz) June 13, 2013

Lowest cc hybrid car is Toyota Yaris and that is 1371cc #budget2013 is a joke
— shah waqas the Bot (@ShahTirmizi) June 14, 2013

Positive aspects of the budget:

There are many things in the budget, which made me happy, particularly the few austerity measures that were announced by the prime minister in his maiden speech.

For the first time in the country’s history, a prime minister has abolished his discretionary fund, which was worth more than Rs42 billion. Similarly, secret funds of 12 ministries (used mostly for political lobbying) have also been abolished.

Merely declaring that secret fund & discretionary funds end is not enough, check & declare where & how they were spend #budget2013
— 1975_1947 (@1975_1947) June 12, 2013

Finance Minister Ishaq Dar announced a 45% cut in the expenses of the prime minister’s office and a 44% cut in the budget of the Prime Minister House. According to him, Pakistan needs a strong fiscal discipline, where every department has to perform efficiently and within the available means.

The PML-N government announced it will not keep more than 40 ministries in order to curb expenses alongside announcing a 30% reduction in non-developmental expenses of each ministry.

According to Dar, if we were to comply with the economic vision of the PML-N, the development funds will be increased by 50% to Rs540 billion.

Announcement of Karachi circular railway, continuation of the Iran-Pakistan Gas Pipeline, Nandipur power project, and Ashiana housing scheme for the entire country are a few glimpses of how the development budget will be spent.

Furthermore, the government announced an increase in the percentage of income tax for people earning more than seven million annually.

Amid protests over power outage, the government has rightly allocated Rs225 billion for various power projects. Rs59 billion are allocated to invest in the water sector projects that include Katchi Canal Katchi Canal (Dera Bugti and Nasirabad), Rainee Canal (Ghotki and Sukkur), Kurram Tangi Dam (North Waziristan), Gomal Zam Dam (South Waziristan), Ghabir Dam (Chakwal), and Mangla Dam raising.

Moreover, the announcement to eliminate circular debt in 60 days is good news for the industry and people, and will surely result in some relief for the common man.

Circular debt to be resolved within 60 days. It will be revolutionary if implemented. #Budget2013
— Sohaib Nehal (@Sohaib_Nehal) June 12, 2013

The defence budget has been jacked up to Rs627.2 billion for the financial year beginning July 1, compared to Rs545.3 billion allocated in the outgoing fiscal year. This shows an increase of Rs82 billion.

Finally, my prime concern, the Higher Education Commission is allocated Rs57.4 billion. You can find Javed Laghari’s statement in The Express Tribune.

Though allocation is at minimum in Education Sector, still its commendable to see HEC finally getting attention in #budget2013.
— Usama Bin Ahmed (@shiranti2000) June 13, 2013

Looking at the initiatives, that are mostly criticised for their political motives we find various successful programs pursued by Shahbaz Sharif’s Punjab government spread all over the country. The Free Laptop scheme, the national internship program, cheap loans for young entrepreneurs and the Qarz-e-Hasana program are a few particularly youth welfare projects.

The continuation of the Benazir Income Support Program has been a good development, though the government changed its name. I wish they could retain the original name alongside developing a transparent mechanism to ensure fair distribution of the money to people who deserve it.

Reservations and few disappointments:

Every educated Pakistani understands that the economic performance of the previous government has been more than dismal. While recognising the change and a few important initiatives of the government, Ishaq Dar disappointed us on a few but very important notes.

For instance, the government has increased the General Sales Tax (GST) by 1%, this will definitely effect everyone. However, why did they skip imposing capital gain tax on rich stock brokers?

Moreover, if a professional earning more than Rsseven million a year is taxed, why are you skipping “the feudal lords” earning billions from their agricultural lands?

Nobody denies that Pakistan needs a sound tax culture, where the burden of the running state is endured by all. However, the strong lobbies of industrialists and “zamindars” once again succeeded in not allowing their incomes to be taxed.

We provide subsidised urea, fertilisers and seeds to them, which is more than enough of a reason to tax them!

Similarly, we find that the ‘wealth tax’ has been revised, but do not understand the mechanism and its effects. Above all, we have seen that Federal Board Revenue (FBR) has been missing its tax collection targets for the past three years, is it guaranteed that it will achieve ambitious targets this time?

The bottleneck in tax collection is administrative corruption in various departments that cause a whooping loss of around Rs500 billion.

I do trust that the new leadership will address this problem seriously. Similarly, the booming housing sector and luxury apartments are still out of the tax net. We are encouraging the import of hybrid cars at a time when we are unable to supply power to homes and industries!

The last but not the least important point is about the salaries of government employees. Increasing minimum pension to Rs5000 is very good, but what about their pay?

Pensioners are more in number and hence, necessitate greater investment as compared to salaried employees. At least a 10% increment in the salaries should have been made to help people avoid the shocks of the official 13% inflation rate.

Conclusively, economic decision making in Pakistan has always been crippled by the lack of vision, short-sightedness, political expediencies and weak governments. With a stable and strong government in the centre, we do believe that the government will take all possible measures to restructure the economy.

The documentation of economy, taxing rich, targeted subsidies, the elimination of non-development expenditures and focusing on long-term plans are a few possible measures that can help Pakistan achieve economic freedom and sustainable growth.

In short, the budget has its pros and cons, we can debate everything; however, I believe that every Pakistani will have to support the government for its difficult but correct economic decisions.

This is a golden opportunity for the PML-N leadership to make their ‘Asian Tiger’ slogan a reality.

Political maturity and economic wisdom has to be compatible in order for it to work. This can also be done by promoting education and not hiding anything from the public.

Follow Tahir on Twitter @mtahirakbar

WRITTEN BY:
Tahir Akbar A digital marketing professional based in Lahore. He loves to writes about business, technology and digital trends. He tweets @tahirakbr

The views expressed by the writer and the reader comments do not necassarily reflect the views and policies of the Express Tribune.

COMMENTS (19)

MUHAMMAD ZUBAIR CHISHTI | 10 years ago | Reply A well wisher says, if we have educated leaders,then we can make a long short in development field.But if we have uneducated leaders, we never can make progress. So look your national assembly, and search how many our MNAs are educated.ALAS a metric pass person is our leader in the shape of MNA and MPA. The best way for development is to impose more and more tax on the rich and to impose less and less tax on the poor. to follow the best laws of GOVT derived by HAZRAT UMAR FAROOQ R.A as followed that laws by UK GOVT. to follow the policies of developed countries etc. I have so many suggestions for the development of my country.Anybody contact me at chishtimz92@yahoo.com OR at facebook zaib ch zaib ch

Tahir Akbar | 10 years ago | Reply @Y.H: I agree with the logic behind your comment. Yes, govt enterprises are overstaffed and under-performing entities; however, we should never forget that govt institutes are "mostly" not for profit entities with some exceptions. There are two solutions to this issue, either go for downsizing or training; however, when you have them as your servant, their yearly increment is their right. I share your concerns about being granted by our taxes with zero results. Don't forget the first line of my blog- in countries like Pakistan, any political govt cannot afford to lose public support in the pursuit of given economic agenda.

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Y.H | 10 years ago | Reply @Tahir Akbar Dear I understand your point but the reason I am against any increase in Govt employee salary is only this that we have over employment in govt sector we all know what last government did in inductions in govt. A non revenue generated institution based on tax collections (and even they are not religiously collecting taxes) demanding for higher salaries and other benefits and comparing them self with private employee those this make any sense ? I hope you get my point. Allah bless our Nation

Bilal Saeed Ahmad | 10 years ago | Reply After much thought, one could see the glass being half full here but sadly that side of the of the glass looks opaque at best. The wealth simply has not trickled down like it should have over the years. The rich are getting richer and the poor are getting poorer. There has to be a stringent imposition of progressive income tax specifically targeting the elite. Starting from the PM himself and then working its way down. It goes without saying that if this was done properly we would not be in this dire state in the first place. I must admit that the entire budget seems tailor made to what the current government wants and not what is actually required.

Tahir Akbar | 10 years ago | Reply @safdar: Brother, govt isn't here to spoonfeed people. It's not a standard practice anywhere in the world that govt build homes for every resident of the state; instead, the state is responsible to provide opportunities and resources to people, helping them make their own living. While endorsing your frustration, I would also like to remind you that Ashiana Housing Shceme, Income Support and Qarz E Hasana, programs are for the same stratum of society, you are hinting at. One should also keep eye on the economic survey of Pakistan while analyzing the budget as when you do not have anything in the pocket, you have to make a tough choice, where the opportunity cost is higher sometimes.

Tahir Akbar | 10 years ago | Reply @Nauman: Who runs business? Aren't they people? When a budget is business friendly, the ultimate beneficiaries are the people. Reduction in certain corporate taxes will reduce the cost of manufacturing, which will ultimately benefit people :)

Tahir Akbar | 10 years ago | Reply @Y.H: Your comment is contradictory to each other :) See, on one hand you are saying that the budget is not poor friendly and imposition of additional 1% GST will affect them. While on the other hand, you are supporting not hike in govt employee's salaries :) See, Govt servants below grade 17 are the worst victims of the inflation. See, the point is simple- If we are to run the state, we have to make a choice; either print money or increase revenue. But yes, I share your concern on tax collection and hybrid cars, which I have already conveyed in the post. Stay blessed !

safdar | 10 years ago | Reply One thing that i feel is that gov can never provide homes to majority of the poor population but it can provide necessities of life at the cheaper rate.unfortunately over feudal and elite class to whom we vote and send them in assemblies are unaware of our needs.Laptop scheme and ASHIANA Housing may be good if we have enough money in our treasury but at present more important than laptop and ashiana are our basic needs which are required to keep the relation of body and soul together.Govt should first try to fulfill basic needs of poor and needy.The amount allocated for both these schemes can be used to wave off 1% GST..Perhaps the advisers of govt and wealthy technocrats have mislead to PM .Budget has made this govt unpopular among the masses.

Y.H | 10 years ago | Reply Overall the budget is not very much in favor of Individual, but as far as longer perspective is concern this seems to be a favorable budget towards stabilizing falling economy, increasing GST by 1% will effect middle class and poor spectrum of society which is not a good decision. Corporate tax and income tax are the two main revenue streams as we have seen in past decades that tax collection has always been a problem and it is some thing that government has to fix by hook or crook. No duties on Hybrid car will eventually benefit the upper class not the middle class or people below that. There are no plans/leverages/facilities (tax free zones, Tax free policies e.t.c) to welcome foreign investors and setting up new industries, beside that no focus on law and order situation which is directly effecting our tourism which is another big source of revenue. Last but not least I appreciate the decision of no increments in government employees salary as we all know what our government institutions are doing.. as in develop countries they should be responsible for generating revenue i.e municipal corporation should be responsible to collect the imposed fees rather than taking bribe and make sure services are provided timely and efficiently e.t.c.

Tahir Akbar | 10 years ago | Reply Guys, all of your points are very logical to some extent and I tried to cover them in the post as well. See, the point is simple: if you are to spend money, it has to come from some source. The source is either revenue or printing press. The direction of the govt is good as it is trying to increase revenue instead of printing more money. Yes, this may lead to certain unpopular decisions like increasing GST by 1% and certain other taxes. If we really want our economy to be self-reliant, we will have to support these unpopular but vital decisions of the state alongside pointing out the loopholes. At the same time, the lower middle class and poor spectrum of society will have to be taken care of by taking certain calculated decisions like targeted subsidies etc. The irony of current economic model in the country is that the people who either ride a Mercedes or bicycle enjoy equal subsidies. We have to introduce and maintain financial discipline and behave like responsible citizen. Last, I share your reservations on not taxing rich and elites in some way. However, we can see that highly paid professionals have come into tax net, which is good. It is interesting to see TV anchors crying over imposition of this tax because most of them will have to pay a hefty amount on their handsome salaries :)

Raheem | 10 years ago | Reply This is business friendly budget….but it will facilitate only middle class and upper middle class and elites of the country…some indicators are very clear in this regard. major source of revenue is still sales tax being paid by poor of the country. Income tax is still below 1000 billion which mean the people those who are beneficiaries of this injustice economic system is still stealing tax. That is the reason tax ratio of GDP is 10% in Pakistan and in India this ratio is 17%.

ahmed | 10 years ago | Reply @shar, Stock Market is almost on the same place where it was once in Mush's era if you consider the inflation in mind, still there are many stocks which are still undervalued. Plus one thing can only be done either make people happy by increasing the salaries across the country and put more people into OGDC, r opposite of it

dr Imran | 10 years ago | Reply wow...what a budget, PM will not get any new cars , All big gammer got bullet proof cars and pardo , and luxury cars by pay minimum custom in March 2013, and pay custom as a non bullet proof cars for bullet cars without any checking and varification by excise deptt....do they need any other new car in next year....cutting down expenses PM house , how much we safe ........just 40 million but we have given security that cost 60 M , with 750 people and 100 cars......wow, we r saving.........

Nauman | 10 years ago | Reply Being is business friendly is good but this is businessman friendly unfotunately.

J | 10 years ago | Reply It

s disappointing budget.... For past 60 years the landlords and rich people do not come in tax bracket and if they do they don

t give tax... Where is the change? People had high expectations... No tax on capital gains its like telling rich people you can make some more money go ahead.... I doubt its business friendly budget in a country where FDI is almost is nothing ... A country which is high in corruption, incompetency in every public sector.... No secure environment for business people .... Oh yes they can get cheap labor which will pay GST tax.... Again poor will suffer....... So sad................ And MR Dar said they will dictate terms with the IMF......

shar | 10 years ago | Reply @Waqas Mehmood: The reason the Stk Mkt has reached such highs is the weakness off the Rupee,the economy is a shambles led by a mafia

Waqas Mehmood | 10 years ago | Reply Its a very informative article. Surely, its a business frieldly budget as I can see stock market hitting all-time high. Focus on salary amount has not helped anyone in the long run, lets see the outcome of the focus on policises by PML(N) govt.

Ali Jehanzeb | 10 years ago | Reply A wealth tax is never a solution for a developing country, corporate tax and income tax are the two main revenue streams, however in terms of taxes, tax collection has always been our problem, and that is what this government has to fix. In terms of the economy, the biggest thing it needs right now is the curbing of terrorism and improving national security. An economy's biggest need is stability, sound structure and demand and supply, you can't have stability without an overall secure environment, and lack of security is the major reason behind the slowing of demand, hence supply, which leads to rising prices and what not. Pakistan's economy doesn't need development, infrastructure or any expansionary fiscal or monetary policy, it needs a secure environment, Government needs to focus on stopping, or at the very least, reducing terrorism, and let the market do the rest.

Barooq | 10 years ago | Reply Given the condition the economy was in, this was an excellent budget. Lets hope government doesn't buckle under the pressure of 'outraged anchors' to increase government officer's salary. We, as individuals talk a lot about sacrifice, as long as we don't have to make it ourselves. I am actually surprised that government allocated to HEC, what they did. Over all, this would go a great way to stabilizing our economy finally.

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