Huzaima Bukhari and Dr Ikramul Haq
Budget for FY 2017-18 is in line with the growth strategy for a prosperous Punjab. Projects supported by the budget and included in Annual Development Plan seek to attract private investments to maximize employment opportunities for the people of Punjab. The focus of this budget is on social sector, production sector, industrial sector and skill enhancement and job creation and improving law & order in the province. The combination of policy and development initiatives are intended to improve the quality of life of citizens of Punjab and create greater economic opportunities by attracting the private sector, especially small and medium enterprises, and provision of safe and secure living environment—White Paper Budget 2017-18, Finance Department, Government of the Punjab
Punjab, the most populous province, with the largest financial resources, has the biggest budget size after the Federal Government. Due to sheer population size, it gets a lion’s share from the National Finance Commission Award (NFC Award), which is commonly known as Divisible Pool—sharing federal taxes with the provinces under Article 160 of the 1973 Constitution of Pakistan. On June 2, 2017, while presenting the Budget for fiscal year 2017-18, it was proudly claimed that record allocations of Rs 335.9 billion and Rs 226.7 billion were made for education and health respectively.
The school and health systems are on the verge of collapse in the Punjab. People here have been thrown at the mercy of the private sector to buy what is actually part of their fundamental rights (Articles 9 and 25A of the Constitution). People do not want to send their children to government schools due to their pathetic state of delivery. Even after a raise in salaries, teachers are dissatisfied, like employees in other government departments. The list of their complaints is long. The same is true for hospitals that present a most horrifying picture. The issue is not that of more money but how to reform the systems. More funds mean more wastage and corruption as there is no desire to improve efficiency and standards of service. The budget is silent as to how to make government schools the first choice of parents. There is no denying the fact that buildings alone are meaningless in the absence of well-trained and dedicated teachers and modern schooling environment to promote innovation, creativity and skills, and not merely rote centres for passing and scoring record marks in examinations? Budget-makers have neither vision nor inclination to extend basic facilities of life to the far-flung and backward areas and also do not have workable, result-oriented plans to uplift the economically-deprived people.
Apart from book-keeping, the budget is an important document that reflects policies of a government. The self-styled Khadim-e-Aala of Punjab, even after ruling the province for nearly 16 years, is completely indifferent towards the much-needed structural reforms to dismantle elitist structure of economy and make justice and administrative apparatuses to actually deliver. The goals of self-reliance, inclusive growth and socio-economic justice are alien to him. He is least pushed to empower millions of illiterate and house-slave women. His focus is not on welfare of landless tillers, urban labour force, children out of school, undernourished and multi-dimensional poor of the poor.
The budget 2017-18 has no relief for low and middle income groups. It favours and protects the rich. The landed aristocracy of Punjab paid negligible agricultural income tax as in the past years while the common people were forced to pay exorbitant indirect taxes on use of mobiles, which has become a necessity and not luxury any more.
The allocations, all-time record (sic) are: Rs 635 billion for the Annual Development Programme, Rs 172 billion for infrastructure development, with major focus on construction of roads (Rs 90.7 billion) and irrigation (Rs 41 billion), transport Rs 97 billion that includes Rs 93.5 billion foreign-aid component, Rs 51.69 billion for cooperatives, forestry, wildlife, fisheries, food, livestock, industries, etc. Strangely, rather shockingly, only Rs 15 billion for Kissan Package and partly Rs 5 billion for less-developed districts. This confirms the apathy and approach towards the less-privileged segments of society. Two years back in the document titled, The Citizens’ Budget 2015-16, it was promised that through equitable taxes, the government would establish a system in which “resources are collected from rich and used to provide services to all citizens, especially poor”. Nothing has been done for achieving this goal. Rather, the opposite is true—the poor are being fleeced for the benefit of the rich.
The point nobody has highlighted is that this year too there is a downward revision in tax revenues from Rs 184.4 billion to Rs 175.2 billion. Poor tax governance and reliance on loans continues as in the centre. The target of Rs 160.6 billion fixed for 2015-16 was also lowered to Rs 150.8 billion. Punjab, like other provinces, heavily depends on the divisible pool to meet its expenses. In fiscal year 2016-17, Punjab showed a Rs 1.040 trillion as share in NFC Award. The revised figure is now Rs 1.013 trillion and for fiscal year 2017-18, the estimate is Rs 1.15 trillion.
Historic data shows poor tax collection by the Punjab: Rs 111.789 billion in 2013-14, Rs 164.680 billion in 2014-15 and Rs 160.6 billion in 2015-16. For the largest province this level of collection is pathetic, it ultimately lowers national tax-to-GDP ratio. On the contrary, the current expenditure increased from Rs 729 billion to Rs 900 billion and estimates for 2017-18 are over Rs one trillion.
Budget 2017-18 depicts the same morbid story, repeated every year. There is no will to tax the rich absentee landlords, owners of palatial bungalows, farm houses and expensive imported cars. In the wake of the Eighteenth Constitutional Amendment, progressive taxes e.g. wealth tax and capital gain tax on immovable property, estate duty (known as inheritance tax in the West) and gift tax are with the provinces, but the Punjab has shown no interest in reviving these taxes.
On the fiscal front, the lethargy of Punjab is exposed again. It has failed to collect even Rs 180 billion. But target for 2017-18 is fixed at Rs 230.9 billion. This is what can be termed ‘the Dar-strategy’, ugly window dressing: overstate revenue in budget and understate the expenses, then show downward revision in revenues and upward trends in expenses! This “magical” accounting, aimed at hoodwinking the masses, is simply loathsome. The elected members are also accomplices in this dirty game since they never raise objections while giving approval to such maneuvered figures.
The Punjab, like all other provinces, is not interested in using taxation as a multifaceted instrument to help society attain its economic and social goals through a delicate balance between rewarding entrepreneurship, innovation and risk-taking on the one hand, and finance important public expenditures on the other, including education and social programmes, as well as the traditional public works.
There is no desire to make the tax system efficient and judicious. Presently, incidence is on the less privileged through indirect taxes whereas the rich are not paying any worthwhile direct taxes. The target for agricultural income tax in 2016-17 was Rs 2.3 billion but Punjab collected only Rs 1.2 billion and now target for 2017-18 is fixed at just Rs 1.53 billion. A meagre collection of agricultural income tax proves the point that the government lacks the determination to tax the rich and mighty landowners who dominate the political scene of Punjab. While the rich landed class is not paying due taxes, the permanent debt of Punjab has surged to Rs 568 billion—foreign Rs 554 billion and domestic at Rs 14 billion. Curiously, this aspect of fiscal (mis)management remains unreported in the media!
(The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences)
