The IMF has released a list of 28 structural benchmarks, which the government must meet the benchmarks for the continuation of the present $7 billion Extended Fund Facility. The release of the benchmarks is not merely in the interest of greater continuity, but are also meant to build pressure on the government. That pressure will be needed, for this time around, the IMF wants the government to thrust its hand into two distinct messes, where governments have tended to avoid. The problem is, both groups are identified with important support groups of the ruling party. The two benchmarks give until the end of this year for provinces to amend their agricultural income tax laws to make it correspond to the federal tax regime. And to tax markets by the end of this year.
On the one hand, the government must take on farmers, on the other it must take on traders. Both have been very firm about staying out of the tax net. The latter depends on the PML(N) to keep it out, the former depends on all parties, being well represented in all. The dynamics of electoral politics, where parties provide a name but no material support, means that no horny-handed son of the soil makes it to the National Assembly, and the rural constituencies, which are the overwhelming majority of the country, are represented, no matter the party, by large landowners. The PML(N) should realize that its attempt to protect one of its constituents may be laudable, but it means conniving at tx evasion, something which Prime Minister Shehbaz Sharif is a no=no. Also, while businessmen play hide-and-seek with the taxation authorities, large landowners ignore them with the lordly disdain bred by broad acres and a feudal mentality. The placing of agricultural income tax in the provincial list, thus ensuring its exclusion from federal purview, was something done by the agricultural lobby.
The government has to take on these tasks, not just to keep on the right side of the IMF, or because there is no other way to balance its budget, but because it seems inherently unfair that anyone should escape the tax net. The excuse given, taxmen’s rapacity, is also being tackled, and some of the benchmarks deal with corruption. The government must remember that governance is a two-way street, and it must not act solely as a lobby, but must persuade lobbyists to bow to the inevitable.
