Think Tank says Federal Budget Lacks in imagination and realism
Islamabad: In its quarterly assessment report, PRIME Plus, the Islamabad based think tank Policy Research Institute of Market Economy – PRIME, emphasized on the need for regulatory, structural and public sector reform, and said that the budget does not offer much in those terms.
PRIME states that The federal budget lacks any imagination apart from unrealistic and overambitious revenue collection targets.
The think tank noted that Taxes on salaried individuals as well as businesses and companies were raised and the tax burden on existing taxpayers has increased; while the government is failing at broadening the tax base.
PRIME judged this budget to be more complex than its predecessor. The budget is full of new tax exemptions, and not many previous exemptions have been removed. Tax enforcement will become more challenging, and the collections process will be costly and inefficient.
PRIME suggested that higher Taxes on existing base will hamper compliance, and will discourage new tax filers to enter the system. Companies are now more incentivized to find ways to minimize their tax liability
The report predicts that the privatization agenda has again been sidelined, and there does not seem to be much hope for SOE reform over the next 12 months. Efforts related to foreign direct investment seem to suggest that the government is interested in privatization after election year, but not much will feasible in the short run.
On a positive note, the think tank highlighted that the government has incorporated expenditure cuts into the budget, after insistence from IMF. The budget has a primary surplus. Process to decouple pensions from the budget has also been initiated.
Government has made major efforts to keep itself afloat. Help from friendly countries and IMF will help country get through election season and till the appointment of the new government. Pakistani Rupee should stabilize in the short to medium term.
Global and domestic Inflationary pressures persist, but are now slowing down. Further decline in macro-economic indicators might be stemmed.
For inquiries, please contact farhan@primeinstitute.org or call 0331-5226825