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A Mature Exercise with Credit to Both Businessmen and Govt

In response to the tough conditions imposed in the proposals for the Federal Budget, the nation’s business community observed a token two-day’s strike throughout the country. The protest was largely successful and remained peaceful. Transport plied normally, banks remained open and small businesses such as restaurants, bakeries, pan shops, medical stores, etc., were not affected. On the government’s part, except for some ludicrous attempts at disinformation and the occasional threat, there were no real ham-handed attempts to break the strike call. Within the limits imposed on its credibility parameters, Pakistan TV grudgingly acknowledged the success of the strike. All in all, this was a very mature exercise on which credit must go to both the sides, the businessmen in maintaining unity in registering its protest in a civilised manner and GoP for restraining its normally more baser urges. Notwithstanding the open-ended provocative threat made by the PM the night before the two-day strike, the expected bite did not follow.


The Federal Budget – Mixed Nuts

At the best of times, balancing the Federal Budget is a Houdini-like thankless exercise in any country of the world, the populace yearning for more services and facilities while the national exchequer has less and less (on a pro-rata basis) to pay for them. The Federal Finance Minister (or of State) is thus usually faced with a Catch-22 problem and it is rarely that innovative changes providing genuine relief to the common man have been proposed or enacted. Makhdoom Shahabuddin’s plight reminds one of the various examinations of the Army where it was required that the officer certify that he did not know the contents of the Question Paper BEFORE he took the Examination. Capt (Retd) Asghar A. Jilani, pushed into doing his “Lower Urdu” Examination, “certified that he did not know the contents of the Question Paper BEFORE, DURING or AFTER the Examination”. So let it be with the Makhdoom, who did a reasonable task of presenting the Budget but remained blissfully oblivious of the real facts, as did most of us, contained in his eloquent Presentation.

In the economic circumstances prevailing, successive Finance Ministers over the years, barring the salutary and honourable exception of Senator Sartaj Aziz, have been fairly predictable in providing the bureaucratic recourse of draconian answers to the mounting column of red ink as regards the Federal Debt. For political governments to take tough steps that would alienate the masses is a difficult proposition and as such an exercise in camouflage routinely becomes more important than the substance of the Budget propositions. In sum, while the economic circumstances were bad enough to warrant stringent measures, the political circumstances are worse. Given such overtones it is hard to condemn such tactics, all being fair in love and war! In a neat PR ploy, the rhetoric of the PM had prepared the masses to be ready for the worst, by not going the orthodox route with her implied threats she temporarily diverted the attention of the masses and thus stole the thunder from the Opposition. This has only delayed the inevitable, both with respect to mounting deficits and street reaction. What we have is much less in perceived taxation than we had expected but certainly much more than what is presently prevalent. For the moment the battle is one between perception and reality, for the moment perception has won out but reality will catch up sooner than later. If Ms Benazir cannot hold the line in the face of mounting Federal Debt we may eventually end up far worse than we would have been than if she had taken the avowed tough road. However even the greatest cynic has to acknowledge that she seems to have drawn first blood by not giving the Opposition immediate tangible evidence, in the first-reading the taxation is so well camouflaged that even experts have had trouble unravelling them even many days later. The PM gambled with the fact that by the time the people finally get to read between the lines as well as the fine print and begin to feel the sharp edge of the hidden steel it may be too late for the Opposition to take the masses to the streets. It shall be interesting to see whether Ms Benazir gets away with it. However A’s are in order to the PM both for packaging and sheer audacity. Whether she can sustain her proposed indirect taxation measures through the NA and “Special Interest Groups” is another matter. If she fails in getting her indirect measures approved, she (and the country) will have a splitting red headache. The Catch-22 is that if she manages to get it through the NA, the economy will suffer.


Life without Coke

Pakistan’s Beverage Manufacturers have got a stay order from the Court preventing CBR from implementing the GoP decision to replace capacity tax imposed on 01 July 1990 and revert to the levy of central excise duty at the factory gate on actual manufacture as was once the practice. It may be remembered that it was during the first Ms Benazir Regime that the Beverage Manufacturers lobby had capacity tax implemented. To quote Seth Mohammad Aslam, then Member Provincial Assembly as well as owner of Leghari Beverages (Pvt) Ltd and Multan Beverages (Pvt) Ltd, from his letter of May 11, 1990 to the then Finance Minister, “Simple taxation system will ensure government revenues and will facilitate the tax payer also. It is requested that summer season is on, kindly survey the present installed capacity in the Industry and levy tax per operating valve. By adaptation of this simple system of taxation, the Government revenues should increase between 25 — 30% in the first year. This simple taxation system will not only enable the government to increase the revenue but will also relieve a large number of staff members from all the beverage factories and vigilance and intelligence agencies. I hope all these relieved staff members will be utilized on creative jobs i.e. finding new assessees for the government or assisting people to understand new forthcoming general sales tax”, unquote. In short, the Pakistan Beverage Manufacturers’ Association lobby maintained that they would be liable to pay Rs.1291.60 million, an addition of Rs.200 million which they were paying as “bribes”. Besides the fact that it is amazing for Pakistan entities of US companies to accept that they were in violation of the US “Foreign Corrupt Practices Act” or had knowledge thereof making them accessories, the fact that anyone would openly confirm the corruption within the system seems to have gone unnoticed in the laissez-faire attitude of GoP toward accountability.