-Editorial

WEB DESK: Prime Minister Nawaz Sharif distributed the General Sales Tax (GST) refunds yesterday, according to newspaper reports.

Our political governments, be they civilian or military, regard any decision to reimburse the affected people from the public exchequer, be they displaced persons or be they those impacted by natural calamities, as the personal largesse of the chief executive. Unfortunately, however, this practice has not died with the advent of democracy in 2008 and carries on to this day.

Television footage of former prime ministers and presidents, as well as the incumbent, distributing cheques to internally displaced persons as well as those who qualified under the Benazir Income Support Programme (BISP) abound. The rationale employed for this exercise by politicians is the perceived linkage between the airing of the distribution ceremony and the positive political fallout in terms of enhanced electoral support. That such a linkage clearly unravelled after the completion of the tenure of the PPP-led government was reflected in the electoral results of the 2013 general elections when the PPP failed to secure votes due to BISP countrywide.

During the tenure of the present government, the trend to get the chief executive to publicly announce 'good' news to the public has unfortunately been further strengthened. Nawaz Sharif has repeatedly announced a reduction or keeping petrol and products rates constant - domestic decisions that, as per our policy are premised on passing on the fluctuations in the international price of oil and products to consumers on which the government has no say.

Granted that Pakistani governments rely heavily on taxes on petroleum and products and on occasion the decision to keep prices constant in the face of an international price rise accounts for reducing taxes or increasing subsidies as in 2007-8 yet such decisions have not been relevant during the tenure of the current government as international prices have been almost consistently declining.

Be that as it may, one would hope that Prime Minister Nawaz Sharif revisits his decision to distribute the cheques for tax refunds on three counts. First and foremost, the sales tax refunds do not reflect government largesse but are an integral component of a flawed policy supported by the Ministry of Finance, namely, to meet its own unrealistic budgeted revenue targets at any cost by the end of the fiscal year.

This cost ranges from advance income tax collections from large taxpayer units to delaying sales tax refunds to exporters that, in turn, has generated serious liquidity problems prompting them to borrow from the commercial banking sector for working capital which has raised their cost of production further thereby making their products uncompetitive internationally.

Secondly, there is a wide discrepancy between the total sales tax refunds as calculated by industry and by the Federal Board of Revenue - a discrepancy of more than Rs 100 billion. Thus the government's decision to give cheques for sales tax refund orders issued till April 30 this year in no way reflects the actual amount due under this head to exporters and industrialists.

Hence the ceremony of sales tax refund cheque distribution may highlight this fact which may generate negative as opposed to positive publicity by those who continue to await the issuance of such orders.

And finally, there is concern amongst economists as to the source of the refund money and the fact that it was almost certainly not budgeted in the current fiscal year or the previous year. Thus would the budget deficit for last fiscal year be revised upward as a consequence of these cheques or would the Finance Ministry engage in some more innovative accounting remains to be seen.

To conclude, one would urge the Prime Minister to devote his limited time to other more important issues including the data manipulation by the Federal Bureau of Statistics under the administrative control of the Ministry of Finance, the energy generation plants envisaging nearly double the per unit generation rate compared to other countries relying on the same inputs and of course implementation of the National Action Plan in all provinces.

Source: Business Recorder