Trying the same old formulas

As budget makers in Pakistan grapple with demands, possibilities and public aspirations, the business community, aware of the government’s limitations, holds low expectations. However, this hasn’t stopped them from inundating policymakers with their own proposals that project their priorities as national interest.

“With limited flexibility in national accounts [high expenditure demand and low resource mobilisation], and keen donor’s oversight, the budget has become more of an annual ritual, lacking innovation or intent to challenge the status quo.

“Addressing the key parasitic elements is not even on the agenda, as the current crop of politicians fear unmanageable chain reactions. They prefer playing it safe, using tried and tested donor-cleared formulas, making the budget a mere follow-up exercise,” commented an observer.

The conduct of the business community is not much different in this respect. Each year before the budget, they present their wish lists to the government, framing their interests as those of the entire country.

Analysing the budget proposals from various business forums reveals the diverse and regionally distributed shades of interests within Pakistan’s business class — trading house demands are more prominent in Sindh than in Punjab.

‘Annual budget proposals from chambers are an exercise of registering wishes with little hope for material change’

In Karachi, the thrust of demands of key constituents of the city chamber, the five industrial areas bodies — Sindh Industrial Trading State Association (Site Association), Korangi Association of Trade and Industry, Landhi Association of Trade and Industry, Federal B Area and North Nazimabad Association of Trade and Industry, prioritise security and infrastructure, along with concerns about high production cost and harassment by state and non-state elements.

Furthermore, budget proposals from the Karachi Chamber of Commerce and Industry and the Federation of Pakistan Chamber of Commerce and Industry focus heavily on sales tax and duties.

The corporate sector, meanwhile, emphasises fair and simple taxation, documentation, digitisation, privatisation and further liberalisation to create a more conducive environment for investment and industrial growth.

Sectoral bodies such as textiles, sugar, cement, auto, fertiliser, power companies, and pharmaceuticals lobby the government before the budget, seeking continued concessions and reduced costs for government levies, credit, raw material and utilities.

They emphasise the potential of job creation and tax contributions, warning of risks if their demands remain unmet. In addition to submitting formal memorandums to the relevant official forums, they run media campaigns to pressure the government and gain public support.

Commenting on the private sector budget proposals, Ehsan Malik, CEO of the Pakistan Business Council (PBC), stated, “Given the Federal Board of Revenue’s (FBR) inability to offer relief to the over-taxed or tax the under-taxed, annual budget proposals from chambers are an exercise of registering wishes with little hope for material change.

“This is especially true this year with the FBR restructuring and demanding International Monetary Fund (IMF) targets. There is also very little difference between this year’s proposals and those of previous years. Our fiscal regime is stagnant, and the FBR, driven by IMF-imposed short-term revenue targets, has little choice but to increase taxes on those already taxed.”

Mr Malik further explained, “The PBC is a business advocacy body, not a chamber or a trade association. It comprises major local and multinational investors with long-term economic growth commitments. Unlike sectoral trade associations, PBC’s proposals are broad, aiming to expand the tax base, promote investment and encourage wealth creation to generate higher tax revenues and create jobs.

“This year’s proposals also highlight the urgency of addressing brain drain and capital flight, warning of long-term repercussions. In contrast, most other chambers focus on their member’s immediate needs rather than broader longer-term issues.”

An anonymous analyst noted the complexity of Pakistan’s business landscape, highlighting that major manufacturing groups also own big trading houses. “In an import-dependent country like Pakistan, many industrial groups have diversified into trading, blurring the lines between commercial and manufacturing interests.

“Typically, these interests compete for favourable policies, but in Pakistan, the same few benefits are sought after, regardless of the policy framework. Making and forwarding pre-budget proposals more of a ritual.”

He also noted, “Recent import restrictions and limits on remitting foreign exchange, aimed at stabilising the external sector, along with high logistics costs from global conflicts and a shift in public preferences for local products, created opportunities for the domestic industry. These factors benefited top business groups the most, compensating them for trade losses.”

Abdul Aleem, Secretary General of the Overseas Investors Chamber of Commerce and Industry (OICCI), noted, “Our members are foreign investors operating across Pakistan, contributing one-third of the country’s tax revenues. As always, the OICCI 2024 budget proposals prioritise national considerations over regional ones.

“Our proposals aim to boost investment, attract foreign direct investment and create a level playing field. Key themes include broadening the tax base, adopting automation, reducing the cash economy, and simplifying regulations to enhance compliance and make Pakistan a more attractive investment destination than its regional peers.”