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June 12, 2019

Tax-centric, relief-shy budget to set inflation on fire: economists


June 12, 2019

LAHORE: The budgetary measures announced by the government will increase the inflationary pressure, besides it is questionable that how the government will achieve the uphill task of collecting Rs5.5 trillion tax revenues through the existing machinery of Federal Board of Revenue (FBR), economists said on Tuesday.

It was unanimously stressed that interventions of the information technology in tax collection by minimising the human interactions between the taxpayers and collectors are need of the hour to meet the revenue collection task.

Dr Naved Hamid, director Center for Research in Economics and Business (CREB) at Lahore School of Economics, said the government had announced revenue collection measures by removing exemptions to different sectors and ending zero-rating regime for five exporting sector; however, no step had been announced to increase the productivity of production sectors including agriculture and industry. “Without production sector economic activities are impossible, while revenue collection and production sector move hand in hand,” he observed adding that the government’s primary focus remained on the revenue generation measures.

Dr Hamid also said the exporting sector would not be able to perform until the long-standing refund issue was addressed by developing a proper mechanism as removing zero-rating regime was not the solution.

“Establishment of a refund payment mechanism for the sales tax paid by the exporters on the purchase of raw material (on exporting consignments) to ensure availability of liquidity to them is vitally important,” the economist said. He observed that refund bounds announced by the government would clear the exporting sectors’ two years’ old pending claims, while refunds would continue accumulated.

Dr Hamid also questioned the ability of tax bureaucracy for collecting revenue worth Rs 5.5 trillion. “[For that] interventions of Information Technology (IT), Artificial Intelligence (AI) and minimising human interactions are the solution”, he said. On permitting the purchasing of property to non-filers, he believed that it would help gather information of non-filers and the government could send notices to them.

Dr Pervaiz Tahir, another distinguished economist, said the government talked about difficult steps, despite the fact that successive regimes were also aware of those facts. “Further, by announcing these difficulties, the government reduced the relief to the public along with the removal of tax exemptions, which will lead to inflationary pressures,” Dr Tahir said. However, he added that nothing was announced regarding what steps would be taken to cross these obstacles as Rs 5.5 trillion revenue collection target was huge and achieving it with same tax machinery was questionable. “The government will need institutional reforms, human resource development, training of the officers to achieve this target,” he added.

Additionally, he pointed out that it was hoped that new sectors would be brought into the tax net which were out of it but no such announcement was made. Dr Tahir believed that big players always influenced the decision-making process, which was evident as they had once again been successful in getting away with relief in the budget. He also mentioned that adverse inflationary impact of the budget would be borne by the public and economy.

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