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Daily Times Editorial 2 July 2020

Revenue problems

 

Nobody, not even anybody within PTI (Pakistan Tehreek e Insaf), would be surprised that the original revenue target was missed by a record Rs1.58 trillion, even though the nearly Rs3.981 trillion collection by the end of the fiscal was a little higher than the four-time downward revised target of Rs3.9 trillion. This was the third consecutive year, which include two PTI years, that tax collection could not cross the psychological barrier of Rs4 trillion. And this year is particularly bad because this time the government also paid Rs100 billion tax refunds from the budget for the first time, which effectively amounts to inflating total revenue. There are a number of reasons for this state of affairs.
One, the coronavirus pandemic not just baffled the medical fraternity but also gave a lot of sleepless nights to economic managers all over the world. The shutdowns that practically all countries employed devastated economies, not to mention the fact that a lot of tax collectors, FBR (Federal Board of Revenue) being no exception, lost personnel to the virus. Plus, with businesses shutting down and cumulative earnings dropping significantly, it was only natural for tax collection to take a hit as well. Two, the target was ridiculously high to begin with. It is understandable that the Extended Fund Facility (EFF) with the IMF forces certain decisions upon us, but what really is the rationale of setting a target that everybody knows cannot be achieved? But even the IMF is only partially to blame. We are in the habit of setting targets that are unachievable. Perhaps that explains why no important revenue or expenditure target has ever really been met by our finance ministry.
And three, sheer mismanagement on the part of the government. Even before the pandemic growth was plummeting, inflation was unbearably high, and unemployment was not very far from historic levels. The virus and everything it brought with it only hastened the demise of the economic program. The government made no real effort at all to restructure or, like it likes saying, “revitalise” the FBR – all it really did was replace one FBR head after another – and simply did not realise how unrealistic it was to expect the some inefficient, corrupt machinery to do a stellar job and raise unprecedented revenues. That is why now they are doing all they can to sell the final number as some sort of an achievement, since after all it did cross the target that was set after revising the original one down throughout the fiscal year. Unless the FBR is overhauled, these problems will occur at the same time every year.

 

The mafia syndrome

 

The way senior government ministers have defended PTI’s performance, especially with regard to their inability to reationalise sugar, wheat or petrol prices, is rather concerning. For one thing, they still seem to think that the best answer to every tough question is blaming practically everything on previous governments. But that leaves them looking a little unaware of how things are really progressing and what actually caused some prices to rise so significantly. In the case of petrol, for example, when asked about the recent decision to ban oil import even when the price in the international market was the lowest it has been in a very long time, all they could really say was that the system was in the hand of some sort of mafia and it would take two-to-three electoral cycles to set things right.
And when asked why they couldn’t bring down sugar prices, or wheat prices, despite all the noise they made about teaching every villain in the supply chain a lesson, once again they spoke of mafias that control everything and implied that the PTI government was going to set things right but such things took time. How far and lost those promises seem now, when PTI first claimed it would clean the house in the first 90 days of its time in office. Then it thought it would need six months, then one year. But now that two years have passed they seem to require two to three terms, things are not really looking on track. And all their arguments about mafias do not even begin to explain their own incompetence and mismanagement. The bit about banning oil import when the price was low cannot reasonably be blamed on any mafia or previous administration. It was the ruling party’s own grave miscalculation, and lack of oversight, that brought things to such a pass.

Also, blaming so-called mafias and previous rulers for everything, and asking for a number of terms in office to sort out all the rot, effectively means that consumers can forget about any rationality in prices anytime soon. It also means that the ruling party is now lost in terms of policy and the best it can hope to do is outdo others in the blame game. But that is hardly the right strategy to adopt if it really wants the people to bring it back to power time and again so it can help them in the long term. It seems all ministers also share the prime minister’s feeling that they are indispensable. *

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