- Reuters
- 55 Minutes ago

Pakistan’s upcoming budget sparks pre-budget jitters
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- Afshan Subohi
- Jun 10, 2024

Pre-budget anxiety is more intense among Pakistan’s asset-owning classes with access to power corridors than among ordinary citizens, and for good reason. The general populace is too occupied with daily survival to concern themselves with a complex document filled with jargon and numbers beyond their comprehension. The elites, however, are acutely aware that their perks, privileges, and concessions may be at risk.
The situation in Pakistan, burdened by unsustainable liabilities, has reached a point where completely shielding special interests is no longer viable, even if the government tries. The unfairness of the taxation system, which disproportionately punishes law-abiding citizens—salaried people and the documented corporate sector—is glaringly apparent. The government will need to introduce measures that demonstrate its commitment to a more equitable system. With dependable data from sources such as the National Database and Registration Authority (NADRA) and access to bank account information, the government now has the capacity to significantly expand the base of direct taxation. According to the Pakistan Economic Survey 2023, the contribution of direct taxes to total revenue collected was 40.7 per cent, while the share of indirect taxes was a high 59.3 per cent.
The extent to which the government is willing to move in this direction will become clear when the budget is presented this week. Budgets can never please everyone anywhere, but in democracies, they almost always have populist overtones, even if they don’t necessarily serve the interests of the majority. Experts assert that, besides other factors, what PM Shahbaz Sharif and his high-powered delegation, including Army Chief General Asif Munir, achieved in China may also influence the final contents of the budget.
Additionally, the pursuit of stabilization policies over the past two years has resulted in stagflation, nearly exhausting the potential yields from increasing indirect taxes and levies. Families enduring rising living costs and eroding incomes have reached a breaking point, where further price increases in utilities and consumer goods lead to disproportionate demand suppression and lower revenue collection. This is evidenced by declining demand for electricity, petroleum products, and non-essential consumer items. Consequently, hiking the general sales tax (GST) rate from 18% to 19% is unlikely. The potential public backlash, amid growing class and regional disparities, might deter the already wobbly government from taking this step.
Some legislators in assemblies are voicing the public’s plight and their aspiration for a dignified living, demanding relief measures. In contrast, the voices of others on the defensive, such as feudal lords, property barons, and cash-based service providers, are relatively meek. Traders and manufacturers, however, project their demands through chambers, federations, and other collective forums. This year, they not only submitted their wish lists directly to the government but also launched media campaigns portraying their interests as national interests.
Aware of the IMF’s pre-condition for the 24th programme, which includes the mobilization of significantly higher resources through stringent implementation of taxation policy and fresh steps towards taxing all rich adults regardless of their income and wealth sources, the elite class, both rural and urban, are skeptical. In Pakistan, the elite typically include businessmen, traders, property tycoons, top-tier executives, public works contractors, brokers, and other service providers. Many exploit the cash economy and loopholes in the tax framework to evade and avoid contributing their fair share to the national treasury, while the regulators often turn a blind eye.
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A close examination of budget proposals from various business forums reveals the diverse and regionally specific interests within Pakistan’s business class. Traders’ demands are more prominent in Sindh than in Punjab. In Karachi, key constituents of the city chamber, including the five industrial area bodies (Sindh Industrial Trading Estate Association, Korangi Association of Trade and Industry, Landhi Association of Trade and Industry, Federal B Area, and North Nazimabad Association of Trade and Industry), prioritize security, infrastructure, high production costs, and harassment by state and non-state elements.
Proposals from the Karachi Chamber of Commerce and Industry and the Federation of Pakistan Chambers of Commerce and Industry focus heavily on sales tax and duties. The corporate sector emphasizes fair and simple taxation, documentation, digitization, privatization, and further liberalization to foster a conducive environment for investment and industrial growth. Sectoral bodies such as textiles, sugar, cement, auto, fertilizer, power companies, and pharmaceuticals lobby for continued concessions and reduced costs for government levies, credit, raw materials, and utilities. They emphasize the potential of job creation and tax contributions, warning of risks if their demands remain unmet.
Ehsan Malik, CEO of the Pakistan Business Council (PBC), remarked on the private sector budget proposals, stating, “Due to the Federal Board of Revenue’s (FBR) inability to relieve the over-taxed or tax the under-taxed, annual budget proposals from chambers are largely wishful thinking with little expectation of actual change.”
He acknowledged that there is little difference between this year’s private sector budget proposals and those of previous years. “Our fiscal regime is stagnant, and the FBR, driven by IMF-imposed short-term revenue targets, can only increase taxes on those already taxed.”
Abdul Aleem, Secretary General of the Overseas Investors Chamber of Commerce and Industry (OICCI), added, “Our proposals prioritize national considerations, aiming to boost investment, attract foreign direct investment, and create a level playing field. Key themes include broadening the tax base, adopting automation, reducing the cash economy, and simplifying regulations to enhance compliance and make Pakistan a more attractive investment destination than its regional peers.”
