The message from the International Monetary Fund (IMF) has always been clear and consistent: if you borrow from us, we want to make sure you pay us back as per the agreed repayment schedule, and for this you need to live within your means, reduce consumption, cut down on wasteful expenditure and ensure all incomes are properly taxed without any exemptions.
What is the counter response of the Pakistani nation? The government doles out monetised favours to the rich and the powerful, who, in turn, flaunt their wealth and power which in many cases is a vulgar display of illegally obtained wealth, and does not visibly curtail the government expenditure. It does not tax a number of incomes, most notably agriculture income, and is generally very laggard in identifying and getting hold of tax-evaders.
The annual federal budget, for as long as I can remember, and I clearly recall for the last five decades, has been a deficit budget. In other words, the expected income has always been significantly less than the proposed expenses, with the expectations that the IMF, the World Bank, the Asian Development Bank or some friendly country, or countries, will lend us the money to bridge the gap.
To comply with the IMF demand, the government has put most of its focus on the tax-compliant businesses and the salaried individuals. The super tax, which was already in place for the banking sector for the last several years, has been reintroduced for all businesses, whose profit before tax is more than Rs300 million annually.
As a result of this super tax, the affected companies will not pay any dividend at all or pay very restricted dividends, which will, among others, hurt the retired pensioners who have invested most of their lifetime’s worth of savings and their retirement funds in stocks, expecting to meet their household expenses from these dividends.
The salaried class, not for the first time, has been made to suffer the most. They have been hit by a double whammy. On the one hand, tax slabs have been raised considerably for those earning more than Rs200,000 per month, while, on the other, the tax credits available for investment in mutual funds have been withdrawn.
If at all this had to be done under the IMF pressure, it should have been done in two phases. A quick conservative calculation of the impact of the two whammies for the middle income salaried groups earning Rs200,000, Rs300,000, Rs500,000 and Rs1 million, indicates additional taxes on the salaried individuals concerned, of Rs135,000, Rs232,000, Rs408,000 and Rs1,000,000, respectively, per annum.
If one takes into account the increase in petrol prices, electricity charges, food cost and a number of other inflationary increases, life for the middle level salaried class is really going to be a huge challenge for the foreseeable future.
The government needs to urgently revisit the plight of the middle level salaried class as well as the retired persons.