Ominous demands
THE cash-strapped government opened talks with the IMF this week in search of a larger and longer bailout. Nobody expects ongoing engagement with the IMF to be easy, even if the discussions are anticipated to go smoother than before.
However, the reports about the demands being made by the Fund and alternative proposals being put forward by the authorities sound quite ominous for the average Pakistani household and salaried classes. A report in this newspaper, for example, says the government is considering a “move to introduce ‘carbon tax’ on petroleum and similar products”. The new levy will be in addition to the petroleum levy of Rs60 per litre on fuel. The report quotes anonymous sources trumpeting the proposed carbon levy as a means to access global green finance, and cheaper loans and grants from multilateral institutions.
The reality is that the levy is being considered to raise revenues for the federal government just like the petroleum levy that was initially introduced in 2009 to modernise the petroleum supply chain and refineries. Likewise, there are other revenue proposals that aim at further squeezing salaried classes by lowering the highest taxable income limit.
These proposals are part of the government strategy to meet an IMF goal of raising tax revenues by about Rs2tr — above what is expected to be collected by end FY24 — in the next fiscal year. Moreover, pensions above Rs100,000 a month and income from pension funds are also likely to be taxed in the next budget as the IMF wants the authorities to increase the tax-to-GDP ratio by at least 3pc to around 12pc during the three-year life of the next programme. Although the government is reported to have plans to expand the tax net by ‘transforming’ GST into real value added tax, the political will to tax all incomes directly and regardless of their source appears to be weakening. The entire focus seems to be shifting to indirect taxes, which are easier to collect despite their inflationary impact.
The federal government’s current fiscal position is unsustainable and it desperately needs to boost its revenues to reduce future borrowing and pay back its existing debt. Yet it allowed tax concessions of Rs2.24tr during the last fiscal year or equal to 36.4pc of the total FBR collection in FY22. This figure did not cover loss estimates emanating from provincial tax concessions. And there’s no sign of revoking these exemptions to powerful lobbies, including businesses.
With low- to moderate-income households already at breaking point due to the heavy direct and indirect tax burden and their purchasing power eroded by high inflation, it is time the government rethinks its tax policy, and focuses on taxing those who aren’t paying anything or contributing far less than what they ought to.
Published in Dawn, May 18th, 2024
Heat warnings
STARTING next week, the country must brace for brutal heatwaves. The NDMA warns of severe conditions with temperatures soaring 6-8°C above normal, reaching 45°C or higher in Punjab and Sindh. The past few years have seen alarming climate trends. A new study reveals that last year’s northern hemisphere summer was the hottest in 2,000 years, with 2023 overall being the hottest year globally since records began in 1850. Last month, too, was the hottest April on record. These patterns underscore the reality of global warming, exacerbated by human activities. In Pakistan, the consequences are dire: Karachi has already witnessed deadly heatwaves, with over 1,200 deaths in 2015 and 65 deaths in just three days in 2018. Such extreme weather poses significant health risks and challenges, especially for vulnerable populations, such as children, the elderly and expectant mothers.
We must take urgent action to mitigate the impacts of these heatwaves. At the government level, establishing cooling centres in urban areas can provide relief for weary travellers. Ensuring a steady supply of water and preventing power outages is crucial. Public health advisories should be disseminated widely, educating citizens on how to stay cool and recognise signs of heat-related illnesses. Community-level initiatives are equally important. Local organisations can mobilise volunteers to check on elderly and vulnerable residents, ensuring they have access to necessary resources. Schools should consider adjusting schedules or temporarily closing during peak heat periods, as seen in Bangladesh and the Philippines, to protect students from the adverse effects of extreme heat. Punjab has announced early school closures. Sindh must consider a similar plan. Moreover, long-term strategies must be adopted. Enhancing urban planning to increase green spaces can reduce the urban heat island effect. Investing in renewable energy sources will mitigate climate change, reducing future heatwaves’ frequency and intensity. The writing is on the wall. Heatwaves will become more frequent and severe. We must build resilience against the increasingly unpredictable monster that is climate change.
Published in Dawn, May 18th, 2024
Property leaks
THE leaked Dubai property data reported on by media organisations around the world earlier this week seems to have caused quite a stir. Even though some individuals — including the current defence minister — insist that there is ‘nothing’ in the published information, others, like Interior Minister Mohsin Naqvi, have taken strong exception to being named publicly as owners of offshore properties. In a televised press conference on Thursday, Mr Naqvi regretted that an impression had been created by the media that the individuals mentioned in the Dubai leaks had bought their properties through illegal means or hidden them from the tax authorities. Acknowledging that his wife owns properties in Dubai and London, Mr Naqvi insisted that these assets had been duly declared and acquired with his own resources. His indignation, to some degree, is understandable: it is nobody’s business to tell anyone what they should do with their money. However, Mr Naqvi must understand that, as a public officeholder, his transactions will frequently come under public scrutiny, as will the doings and dealings of other politicians. As long as his hands remain clean, there should be nothing for him to worry about.
It is also encouraging that Mr Naqvi has put his support behind calls for an inquiry into the leaked data, which can determine whether any of the identified properties were acquired unlawfully. The government must announce and begin an investigation without further ado, considering how helpful it will be to establish a zero-tolerance policy for tax evasion and money laundering while it negotiates bailouts from international lenders. As mentioned earlier in these pages, the country’s authorities have long sought this data from the Dubai administration but remained unsuccessful due to various diplomatic reasons. Now that the data is available, they have an opportunity to analyse it and compare it with their own records. As Mr Naqvi has pointed out, such an investigation should not harass law-abiding citizens who simply made an investment decision to purchase property abroad: its sole purpose must be to determine whether tax compliance regulations were followed and to catch violators wherever they are identified. Unfortunately, the country will continue to be seen negatively by lenders until it is able to put its own house in order. Demonstrating significant seriousness in this matter is a good place to start.
Published in Dawn, May 18th, 2024