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Sunday June 16, 2024

Spending disease

By Dr Farrukh Saleem
May 26, 2024
Shoppers crowd at a market area in Lahore. — AFP/File
Shoppers crowd at a market area in Lahore. — AFP/File

It’s budget time. And that only means one thing-additional taxes. Currently, every Pakistani family pays an average of Rs350,000 per year into the government coffers through tax and non-tax revenue. Currently, Pakistani families only have the obligation to pay taxes, the government has no responsibility for a full disclosure of how the Rs12,000,000,000,000 collected over the past year has been spent. I estimate that the upcoming budget will bring an additional burden of Rs100,000 per Pakistani family.

In June, the honourable federal minister for finance & revenue will stand on the floor of the National Assembly and tell us that the government’s gross revenue collection target will be Rs16 trillion, give or take a trillion. Lo and behold, that would mean a 30 per cent year-over-year increase. Imagine, in 2010 the government had set a gross revenue collection target of Rs1.5 trillion; that’s an increase of 11 times in 14 years, or 973 per cent. Imagine, in 2010 every Pakistani family paid an average of Rs54,000 per year into the government coffers. Imagine, by 2024-25, every Pakistani family will have to cough out an average of Rs450,000 per year to satisfy the government’s growing expenditure demands.

The mathematics of it all is not difficult to comprehend. Here’s what I do not understand: Of the 193 member states of the United Nations, why do Pakistani leaders stand out as the only ones to make assertions such as 'Pakistanis are tax thieves'? Why only Pakistani leaders? What about the Rs350,000 paid into government coffers by every Pakistani family last year? What about the 973 per cent increase in tax collection over the past 14 years?

It’s not about taxes, it’s all about government expenditure. High taxes are a symptom, government expenditure is the disease. The real issue isn’t how much Pakistanis pay in taxes, it’s about the government’s wasteful spending. Taxes are the fuel, government spending steers the car. Shifting the focus from government expenditure to taxes means trying to suppress the symptoms, not even trying to cure the disease.

Next. The National Finance Award (NFA) is the culprit behind the great ‘Federal Fiscal Famine’. At the risk of repetition, in June, the honourable federal minister for finance & revenue will stand on the floor of the National Assembly and tell us that the government’s gross revenue collection target will be Rs16 trillion, give or take a trillion. Of the Rs16 trillion, Rs6 trillion will be distributed among the provinces and Rs10 trillion for debt servicing.

With nothing left in the federal treasury, the federal government must borrow to fund: Rs800 billion to ‘Run the Civil Government’, Rs800 billion for the so-called ‘Development Programme’, Rs1.4 trillion for the so-called ‘Grants’, Rs1 trillion for the so-called ‘Subsidies’, Rs2 trillion for ‘defending the country’, and Rs1 trillion for ‘Pensions’.

Meanwhile, fueled by Rs6 trillion from the federal government, provincial governments have little or no incentive to raise their own revenue. To be certain, as long as the NFA is there, the ‘Federal Fiscal Famime’ shall continue. And, as long as the focus remains on tax increases rather than spending cuts, unrealistic, unbalanced, and illusory budgets will persist.


The writer is a columnist based in Islamabad. He tweets/posts @saleemfarrukh and can be reached at: farrukh15@hotmail.com