By Adnan Rafique
ISLAMABAD: PRIME, the Islamabad-based think tank Policy Research Institute of Market Economy, has stressed the importance of regulatory, structural, and public sector reform in its latest quarterly assessment report, PRIME Plus.
As par the report, “The current government has exerted considerable efforts to ensure stability in the country. Support from friendly nations and the IMF is anticipated to help sustain the country through the election season and the period leading to the appointment of the new government. The Pakistani Rupee is expected to stabilize in the short to medium term.”
“Although global and domestic inflationary pressures persist, they are gradually slowing down. These efforts may help prevent further decline in macroeconomic indicators,” it added.
The think tank highlighted a positive aspect, noting that the government incorporated expenditure cuts into the budget based on the IMF’s recommendations. As a result, the budget achieved a primary surplus, and the government initiated the process of decoupling pensions from the budget.
PRIME recommended that imposing higher taxes on the existing tax base could impede compliance and dissuade potential new tax filers from participating in the system. Additionally, the think tank observed that companies were increasingly incentivized to explore strategies for minimizing their tax liabilities. The report subtly implied that the budget might have fallen short of fully addressing these crucial aspects.
According to the think tank, taxes on salaried individuals, businesses, and companies were raised, resulting in an increased tax burden on existing taxpayers. However, the government’s efforts to broaden the tax base were deemed unsuccessful.
PRIME made an observation that this budget appears to be more complex than its predecessor, mainly due to the introduction of numerous new tax exemptions and the limited removal of previous ones. The think tank also expressed concerns about potential challenges in tax enforcement, which could lead to increased costs and inefficiencies in the collections process.
The report predicted a sidelining of the privatization agenda and expressed little optimism for State-Owned Enterprises (SOE) reform over the next 12 months. While the government appeared interested in privatization after the election year, efforts related to foreign direct investment indicate limited feasibility in the short run.
