\u2013Say distinction between a filer and a non-filer must be abolished
\nISLAMABAD
\nThe Pakistan Institute of Development Economics (PIDE) Macro Policy Lab recently hosted the \u201cFixing Fiscal Policy\u201d Round Table Conference in Islamabad.
\nThe event addressed the persistent challenge of fiscal indiscipline in Pakistan and sought to chart a visionary path for the nation\u2019s fiscal policy.
\nIn his introductory remarks, Dr. Nasir Iqbal, Associate Prof. and Chief of Macro-Policy Lab, PIDE said that the Round Table Conference, \u201cFixing Fiscal Policy,\u201d aims to unite policymakers and thought leaders to foster collaboration and develop local solutions in the fiscal framework of Pakistan. By bringing together academia and policymakers, we seek to chart a visionary path of fiscal policy in Pakistan for the future, transcending from short-term approaches and firefighting.
\nIn his opening remarks speaking at the occasion Dr. Nadeem ul Haque, VC PIDE said that three things need to be focused on for the fixation of fiscal policy. Firstly, the role of the government is crucial in ensuring effective fiscal management.
\nSecondly, taxation and expenditure must be carried out in a transparent manner with accountability. This includes how to collect taxes, how to spend them, and where to allocate funds. Lastly, debt management is also an important aspect that requires attention.
\nDr. Ashfaque Hasan Khan, Principal of the School of Social Sciences & Humanities, NUST while speaking at the roundtable meeting said that to address economic challenges, it is important to immediately reset the role of the government from being an active player to a facilitator.
\nThis would involve eliminating the current regulation-based regime and transitioning towards a rule-based economy. The use of a regulatory guillotine would help in the elimination of unnecessary No Objection Certificates (NOCs). A rule-based approach, coupled with monitoring and evaluation, would ensure a more efficient and effective economic system.
\nDistinguished participants included senior economists, researchers, and fiscal experts from various institutions across the country, such as the Ministry of Planning, Development & Special Initiatives, P&D Baluchistan, QAU, SZABIST, the US Embassy, ADTMA, P&D Punjab, IIUI, NUST, and COMSATS.
\nIn the first session titled \u201cRole of Government and Economic Stagnation\u201d while presenting the detailed presentation Muhammad Shaaf Najib, Research Fellow, PIDE said that Interest Payments account for a significant portion of the targeted tax revenue, amounting to 77.5%.
\nThe total federal liabilities, including Interest Payments, Pensions, and Grants to provinces, stand at PKR 9512 billion.
\nThese liabilities exceed the targeted tax revenue, indicating a lack of a sufficient revenue base to support the functioning of the civil government, subsidies, and development spending. As a result, all development expenditure is entirely financed through debt.
\nThe remuneration of civil servants involves a basic salary and significant monetary and non-monetary benefits. The total reward is significantly higher than the base reward stated in the contract. However, the cost to the government for senior civil servants is much higher than the benefits they provide.
\nIn his detailed comments, Dr Ashfaque Hasan Khan made a comment on the presentation and stated that \u201cWithin the constitutional limits, without improving the NFC Award, we cannot adequately address our fiscal issues
\nThe speakers while commenting on the session, said that the significant government intervention in economic activity\/market, both as an active economic agent and through a regulatory regime, has been a prominent feature in the economy.
\nPIDE research suggests that the government has a footprint of over 60% of the GDP and there are more than 200 Federal State-Owned Enterprises (SOEs), many of which are loss-making entities. The Privatization Commission has been inefficient in dealing with these issues.
\nThe government\u2019s presence is hindering competition and market growth. On the regulatory front, the large size of the government is evident with over 120 regulatory authorities in Islamabad alone, according to PIDE research. This abundance of registrations, licenses, certifications, and other permissions (RLCOs) has resulted in a high cost of regulatory sludge, which accounts for 45% of the GDP in only 24 activities.
\nThe second session began with the presentation of Dr Khalid Mahmood, Senior Research Economist, PIDE on \u201cTaxation and Tax Administration\u201d. He stated that taxes often take the spotlight in media discussions; however, the tax policy in Pakistan is marred by arbitrary revisions, mini budgets, and IMF conditionalities.
\nAdditionally, tax administration inefficiencies require attention. The round table conference aims to explore long-term reforms for a modern tax policy. Consequently, it is evident that tax collection primarily burdens the unprivileged while benefiting the privileged class.
\nThe implications of the tax structure include exploitative tax composition, complex tax principles, excessive withholding regime, high compliance cost, fragmented tax system, and hindered growth, as well as low fiscal resource mobilization. Furthermore, Pakistan\u2019s tax-to-GDP ratio has been declining, indicating a lack of tax efforts, policy, political will, and tax morality.
\nThe speakers said that overall, the federal government relies heavily on indirect taxes, resulting in overwhelming collective revenues. The tax mix is not ideal, and there is a need to reconsider functional assignments and the experience of GST on services. The provincial tax efforts also contribute to this burden on the economy.
\nIndirect taxes, such as customs, federal excise tax, and sales tax, outweigh direct taxes, creating distortions and discriminatory resource allocation. The effective tax to GDP-ratio, which considers compliance cost, scrapping non-economic taxes, and tax expenditure cost, is calculated to be 14.23% for 2019.
\nTo address these issues, it is recommended to upgrade both tax policy and authority. The focus is on \u201cDoing Taxes Better\u201d to achieve higher taxes and higher growth. Efforts are being made to improve the overall tax policy, and a few recommendations have been put forth.
\nEssentially, we need to work on creating a clean system of documentation. Filing should not be solely based on the rate differential but should be made mandatory for all items. Additionally, income tax should not be segmented; it should be universal and cover agriculture income tax on the sales tax side. Instead of having too many revenues, the withholding tax (WHT) regime needs simplification.
\nThe economy would benefit from reducing withholdingisation to improve efficiency. The process of refund adjustment should be made easier, and the Federal Board of Revenue (FBR) should prioritize streamlining the online refund process to minimize economic costs.
\nThe participants unanimously agreed that the distinction between a filer and a non-filer must be abolished. They advocated for universal tax return filing, simplification, and the establishment of a reasonable threshold. Income tax should be universal and not segmented.
\nThe 3rd and last session was \u201cPakistan\u2019s Debt Management\u2019 which started with the presentation of Dr. Haider Ali, Lecturer of Economics at PIDE. He highlighted that Pakistan\u2019s debt profile has worsened in recent years with a significant increase in floating debt in recent years. With increasing expenditure, our debt has continued to increase.
\nHe identified numerous questions that we need to find answers to devise an efficient debt management policy for the long run such as how much debt is sustainable. What is the prudent composite of debt? And whether we have an effective debt utilization framework in place or not.
\nMr. Mohsin Mushtaq Chandna Director General (Debt), Finance Division mentioned that Pakistan\u2019s external debt saw an increase in the last decade when we turned to the global bond market to raise foreign reserve funds. The CDNS in recent times has dropped due to various policy decisions such as restricting institutional investment in saving schemes.<\/p>\n","protected":false},"excerpt":{"rendered":"
\u2013Say distinction between a filer and a non-filer must be abolished ISLAMABAD The Pakistan Institute of Development Economics (PIDE) Macro Policy Lab recently hosted the \u201cFixing Fiscal Policy\u201d Round Table Conference in Islamabad. The event addressed the persistent challenge of fiscal indiscipline in Pakistan and sought to chart a visionary path for the nation\u2019s fiscal […]<\/p>\n","protected":false},"author":2,"featured_media":355125,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":{"0":"post-355102","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-national"},"yoast_head":"\n