Hiking fuel prices

Oil and Gas Regulatory Authority (OGRA) has sent a summary recommending massive increase in the prices of all petroleum products. The summary if approved without any decrease in the proposed prices, the price of high speed diesel will go up by Rs.8.99 per liter and the price petrol will rise by Rs. 8.53 per litre. Likewise the prices of light speed diesel and kerosene oil will be up Rs. 168 and Rs.1.69 per liter respectively. The regressive fiscal measure is aimed to fill the fiscal black-hole caused by massive revenue shortfall because of dismal failure in tax collection. It is also being taken to offset the impact of currency devaluation which is swelling the fuel import bill despite the 7 percent fall from $72 to $67 in the price of crude oil per barrel in the international market.

The petroleum products are not only used in public transport but because of the corruption ridden policy of thermal power generation of two mainstream political parties in their tenures of governments now more than 12000 megawatt very expensive electricity is generated by the diesel and furnace oil fired thermal power plants. The price increase at such a high scale will have a multiplier effect on wide range consumers’ goods the purchase of which has already become unaffordable for the people. It will further depress the productive capacity of the economy which is already going through a long phase of stagnation because of such adhoc and unwise measures taken in the previous two governments. The high fuel prices will necessitate further power tariff hike the combine effect of which will push up the production cost of exports oriented industries and Pakistan’s exports will remain stagnant at $21 billion and may even fall making the balance of payment position precarious in the long run.

Other adhoc measure of revenue generation, the government intends are the under consideration abolition of sales tax exemption for five export sectors and increase standard sale tax rate to 18 percent. These measures will serve as double edge sword for declining production and exports. In the previous government withholding the sales tax refund to exporters had impacted the production and exports of number products which created enough space to other countries to capture Pakistan’s share in the international market. The shrieked market of Afghanistan is one such example to which exports of vegetable ghee and other value added products declined because of abnormal delay in sales tax refund.

There are a number of untapped sources of revenue with no inflationary impact on the economy but the government is either reluctant or lack enough spine to impose tax on them. Exemption to agriculture income is not only blocking a major source of revenue generation but also providing conduit to tax evasion. With the collusion of tax bureaucracy and field officials,  big landlords succeeds to show significant amount of their income from industrial and business enterprises as agriculture income for the purpose of tax evasion. They have even managed to get exemption on income tax payment on the business including fisheries, diary farming and poultry. This big loophole must be plugged without further delay with the imposition and collection of agriculture income tax.

Greater component of the income of specialist doctors and high fee charging lawyers is out of tax net because it is not documented. In the private clinics of large number private hospitals the specialist doctors do not provide receipts to their clients for receiving consultancy fee. The same trick is done by majority members of legal fraternity. After the lawyers movement they enjoy enough clout and bringing their hefty income under the tax net is a difficult task but a way-out can be found with the consultation with bar councils. Squeezing the same lemon has been counterproductive and the focus must be shifted to sources of direct taxation.