Daily Times

That Pakistan is a donor/aid-dependent country is a fact that is in little doubt. However, what never ceases to amaze is the fact that we do not put any effort into being anything but that, into reforming our economic system in such a way that we can tuck away our begging bowl and hold our heads up high. In recognition of Pakistan managing to improve collection of taxes to some extent, the International Monetary Fund (IMF) has released a tranche of $ 501 million in accordance with a three-year loan support programme based on “solid progress” made by Pakistan in reforming its economic agenda. That is all very well and good but the IMF has noted — as has an entire litany of analysts and observers — that Pakistan still has to do a lot more to make sure that reforms continue and get to the bottom of our taxation problem.

Statistics are worrying. It has been reported that only one in every 200 Pakistani citizens files tax on their income. Statutory Regulatory Orders (SROs), which grant exemptions and concessions on taxes, are still very much part of our financial system despite their being a cutting down on some of them at the insistence of the IMF. These SROs are detrimental to the economic system as they grant tax exemptions in industry, commerce and agriculture, mostly benefiting those in the ruling elite. Who stands to gain? The ruling elite of course, which finds itself merrily distanced from the burden of having to pay vital taxation. The IMF recognises this sorry state of affairs and has been on our case to resolve it. It has insisted on the abolition of the SROs regime, a condition attached to previous support programmes as well. We have failed to fulfil this requirement each and every time. Instead, what we have done is increase indirect taxation to appalling lengths. General Sales Tax (GST) has gone up to a whopping 27 percent in some instances, e.g. for petroleum products to compensate for the drop in oil prices (since being reversed) that has cut into these levies. Indirect taxes burden everyone equally across the board, irrespective of income or ability to pay. This places a heavier burden on the poor as a proportion of their income. What is needed is not an increase in income tax, which is what we hear of in nearly every budget. What we need is for everyone to be brought into the tax net, for every citizen to pay their due if they fall within the net of taxation. The directly taxed 10 percent cannot keep on compensating for everyone else and the government must realise this, just like the IMF does. *