“Inflation is taxation without legislation—Milton Friedman—Editorial of November 11, 2009 in Wall Street Journal, titled, Taxation without Legislation
Federal budget 2024-25, announced on June 12, 2024 by banker-turned Federal Finance Minister for Finance and Revenue, Muhammad Aurangzeb (his maiden, also first of the incumbent coalition government), is based on market-driven economic model and oppressive/regressive tax regime, lacking redistributive fiscal policies. Thus it is bound to widen an already terrifying rich-poor divide in Pakistan. Obviously, our budget-makers have never bothered to study the economic models of the countries that deplore the very idea of seeing people mired in poverty.
The successive budgets of civilian and military rulers have been ritualistic, focusing mainly on erratic taxation rather than envisioning well-designed programmes to help those lagging behind, enabling them to move up economically and socially. Budgets of welfare states ensure redistribution of wealth and income so that everyone gets the fundamental needs. On the contrary, our successive governments through their pro-rich tax policies and elitist structure of economy have been giving unprecedented opportunities to the rich and mighty to amass more wealth, and this year’s budget is no exception. The tax expenditure as per official report was as high as Rs. 3879.20 billion for tax year 2023—see its impact on economy, fiscal deficit and tax collection in Anatomy Of ‘Tax Expenditure’, The Scoop, June 12, 2024.
Budget is not just a book-keeping exercise. It is an exposure of socio-politico-economic policies of a government. Since coming taking the oath of prime ministership for the second time, Shehbaz Sharif and team selected by him, showed apathy towards well being of the marginalised sections of society as well as paid no attention whatsoever for structural reforms for overhauling dysfunctional judicial and administrative apparatuses, and dismantling elitist structures. Unless we do this, Pakistan cannot become a member of G20 by 2030 (sic) as was once claimed/predicted by Muhammad Ishaq Dar, now 4th time Deputy Prime Minister and 39 foreign minister of Pakistan!
How a Finance Minister in Pakistan, while making a budget, can ignore that 90 million women are illiterate, condemned to domestic slavery, 25 million children are out of school, 60 million are undernourished, 80 million plus live below the poverty line—just to mention a few.
Everybody loves to quote figures about burgeoning fiscal deficit, unsustainable public debt and debt servicing, monstrous government expenditure, declining exports, rising export, trade deficit despite import restrictions, immense pressure on foreign reserves, injudicious indirect taxes, rising cost of life etc. But nobody is interested to talk about equitable growth, jobs and decent wages for all.
There is no debate on any TV channel about Article 3 of the Constitution of Islamic Republic of Pakistan as cornerstone of our economic policy, which says: “The State shall ensure the elimination of all forms of exploitation and the gradual fulfilment of the fundamental principle, from each according to his ability to each according to his work”.
Budget 2024-25 has nothing to fulfil the promises made in Article 3 of the Constitution. It is not possible as today’s Pakistan is captive in the hands of militro-judicial-civil complex, landed nobility (sic) sitting in assemblies and industrialist-turned politicians—they have an unholy alliance against the common people. These elites openly indulge in vulgar ostentation of money and power and flout the rule of law. The poor do not even get the promised minimum (shamelessly-fixed) low wage and judiciary keeps mum.
Knowing years-old habit, rather disgust, about writing a routine analysis of budget, a friend presented a challenge, “then outline as to what should be an ideal budget for Pakistan”. The answer was, of course, very simple: “The one that has short and long term goals to deal justly with all economic classes within the society and having emphasis on social mobility”.
We should not waste precious man-hours on quoting and analysing meaningless figures and indices presented every year as “budget documents”—when mostly fudged and tinkered? Finance Bill 2024 as usual is protecting the rich and mighty and increasing incidence of taxes on the middle class and the poor and that too using the pretext of preconditions of the International Monetary Fund (IMF). The reality is that the IMF chief said publically, “we want Pakistan to tax the rich and protect the poor”. We need a new policy framework for the budget that can ensure prosperity for all and not for the privileged classes alone. My friend readily agreed. There is no occasion to debunk Muhammad Aurangzeb et al for what they presented. Let us discuss what they did not present—their main sin is omission of what they should do.
Pakistan’s economy serves the privileged classes—representing less than 1% of the entire population but enjoys unprecedented perks, perquisites and benefits at the expense of taxpayers’ money. The mighty landowners exploit labour of landless tillers and unscrupulous industrialists and traders exploit poor urban workers to amass more and more wealth. Additionally, they create artificial hikes in prices of essential items to snatch back whatever little is earned by the poor and the fixed-income classes.
Unfortunately, there is nothing in federal and provincial budgets about reducing wasteful government expenditure, right-size the monstrous size of government machinery, monetize all the perquisites of civil servants and make taxes simple and low-rate. State lands, lying unproductive owned by the federation and provinces by elites, should be leased out for industrial, business and commercial ventures. It will generate substantial funds, revenue (through public auction 10% as full and final tax can be collected amounting to billions) and facilitate rapid economic growth.
Way back in 2006, The Economist (May 27-June 2, 2006) published two studies showing how the Nordic countries achieved social mobility and economic justice by taxing the rich to raise money for a welfare state. These countries “help the children of the poor to do better than their parents”.
Of course, redistributive fiscal policies alone cannot bring such results. If they could, Nordic countries would not do as well as they do (their welfare states are not appreciably more generous than Britain’s). One explanation is their superior education systems. Education has long been recognised as the most important single trigger of social mobility—and all four Nordic countries do unusually well in the school-appraisal system.
Our budget makers, both at federal and provincial level, after insertion of Article 25A in the Constitution, have failed to establish education systems that can uplift those at the bottom. In a State where the Constitution guarantees the fundamental right of “free and compulsory education to all children of the age of five to sixteen years”, there unfortunately exists an exploitative “education industry”—expensive, pathetically poor in quality and class-ridden. If we judge economic policies of federal and provincial governments in the perspective of Article 3 and Article 25A of the Constitution, these are simply loathsome.
Under the constitutional contract between a state and its subjects, wherein citizens are supposed to commit their loyalty, the state in return is duty bound to facilitate them with all the necessary essentials of life, a few of which are free while others are on the condition of compensation as elaborated in Ms. Shela Zia and Others v WAPDA [PLD 1994 Supreme Court 693] by Supreme Court of Pakistan.
Our governments are totally oblivious of redistributive fiscal policies and social welfare programmes for social mobility. The poor are given so-called “economic relief packages” by way of mercy. The relief (sic) is only of cosmetic nature and there is nothing in the policies or budget that aims at helping the poor to move upwards.
The federal and provincial governments must realise that it is not only spending more money on education that matters but how to use the entire system as an effective tool for social mobility. There is a complete lack of understanding of this perception on their part and the result is that poor segments of society are condemned to remain mired in abject poverty and their children will have no chance to move up as education is either not available to them or is of no practical use.
Budgets 2024-25 of federal and provincial governments are yet one more routine exercise of balancing the books (that too by window dressing). Pakistan needs meaningful redistribution policies that can uplift the downtrodden. There is nothing in the budgets presented so far by the federal government and provinces towards this goal—like all previous ones, these are utterly disappointing!
