Finance Minister Shaukat Tarin on May 3, 2021 gave a policy statement on the economy and the IMF conditions, stating that, “IMF did injustice to Pakistan by asking the government of Pakistan to increase its electricity tariff, in order to reduce the circular debt, because this price hike is increasing inflation, had stopped the economy from moving forward and has increased corruption.” In his view “if the country does not have GDP growth of 5% than there would be a crisis for the next four years”. He warned that “bold decisions should be taken in this budget and instead of increasing taxes, the tax net should be widened.” The Finance Minister also stressed , “Improved short-term, medium-term, and long-term policies are needed for agriculture, industry, housing sector and price control.” He was of the view that, “very little amount was spent on education and health in the country”, adding that if the housing sector is revived, 20 other industries will revive.” ”He also emphasized that, “the government should privatise all public sector institutions that are unable to run”. Well done Finance Minister for saying the right things at the right time. In my opinion, this statement by Shaukat Tarin is surely economy- related, and definitely in the right direction. Now what has to be seen is whether Shaukat Tarin will ‘put his money where his mouth is’ in the next budget. Although policy is the realm of the federal government, it should be noted that implementation of the policy, especially industry, agriculture, health, education, housing and even price control are all provincial subjects after the 18th amendment. In this article, I would restrict myself only to the tax system and partially to the federal budget and discuss the rest of the issues of the economic policy for later writings. According to the budget document 2020-2021, the total tax revenue to be collected by Pakistan’s government tax machinery in 2020-2021 are Rs 5.5 trillion. The FBR taxes are envisaged at Rs 5.0 trillion, out of which more than Rs 2.0 trillion have to come from direct taxes, and approximately Rs 3.0 trillion from indirect taxes. Rs 0.5 trillion would come from other taxes. According to FBR, in the last nine months (July 2020 to April 2021) the FBR had collected approximately Rs 3.8 trillion. That would mean that the FBR has yet to collect Rs 1.2 trillion in the last three months to meet its budgetary target. According to the 2017 census, there are 32 million households in Pakistan. If we assume that 80% of these households (25.6 million) do not earn more than Rs 1,000 a day or Rs 365,000 a year, therefore are below the stipulated Rs 400,000 tax relief limitation, then we are left with 6.4 million households (20%) that earn an income above Rs 400,000 an annum and should be in the tax net. Although all of the CNIC holders in Pakistan should be filers, for argument’s sake let us only believe that the tax net should at least cover these 6.4 million households, if the tax net has to be broadened. According to FBR ,total filers in the country are 2.9 million. Therefore there are still at least 3.5 million households that can be brought into the tax filer’s regime. On direct tax collection, it is suggested that with coordination with NADRA, the Securities and Exchange Commission of Pakistan and other such state institutions that regulate and maintain the data bases of assets and businesses in the country (which the FBR has already claimed that they possesses this data) should calculate the income of all the property holders and businesses in the country through computerized means and send the calculated income and tax statements (returns) to these households (as is done with utility bills), rather than wait for households to file their respected tax returns. In this manner, any individual or household that needs to contest the FBR tax bill can go through their respected legal experts challenge the FBR claim, the rest would just pay their direct taxes, thus widening the tax net and at the same time, making tax collection as well as tax return filing an easy procedure for the public at large. The tax- to- GDP ratio would also go beyond the 12% of today. It is also suggested that the minimum tax exemption limit should be enhanced from Rs 400,000 per annum to Rs 500,000 per annum and the maximum tax on the highest income slab should be enhanced to 35% of the yearly income, so that the rich can pay more, while the poor are exempted from the direct income tax in order to maintain its progressiveness on the principle ‘higher the income, higher the tax’. Corporate tax should also be maintained at 35%. On subsidies and tax Incentives to industry, it is recommended that the tax incentives and subsidies to corporate sector and businesses should not only be linked to 10-15% yearly increase in their investments and businesses, but should also be linked to adopting quality schooling of children of their labour, especially adoption of few public sector schools. These tax incentives and subsidies should also be linked to at least 5% increase in employability of the labour force by each private sector firm investing in the country. With respect to custom duties and anti-smuggling measures, according to FBR the custom duty collected in these nine months is more than Rs 606 billion which is more than the envisaged target of Rs 507 billion. Another Rs 48.5 billion worth of smuggled goods have been seized by the custom authorities during July-April 2020-2021. A survey should be done by the Finance Ministry to see how much is spent by the government of Pakistan on the working, salaries and equipment of the Customs Department in the country. And is that money and equipment costs more or less than the Rs 48.5 billion worth of smuggling caught by this department or what percentage of the Rs 606 billion is spent on the working and capacity-building of the Customs Department. It should be a simple exercise in costs and benefits of this department’s efficiency to give us a measure of the viability of the custom duties so that the government can reduce its own expenditures and use out- of- the- box solutions to control smuggling as well as to enhance revenue for the government in a cost-effective manner. This cost-benefiting analysis can also be done on the working of all the ministries and departments of the government of Pakistan. One such measure can be to bring down the taxes and duties on imported items (with the exception of anti-dumping, anti-environmental measures) to zero and tax all domestic as well as imported goods on the retail market as sales tax after calculating the adverse impact on domestic products (provide, domestic products have to be protected at all). For the economy to grow faster on Pakistani product except raw materials that are exported out of the country should have export tax in order to give incentives to earn much needed foreign exchange for the country. On indirect taxes and GST, it should be underlined that these indirect taxes are regressive taxes and therefore their burden falls more heavily on the poorer section of the society rather than on the richer section of the society. Therefore, it is recommended that the GST should be reduced to 10% and should only be levied at retail for all goods and services sold in the country. It is important for this exercise that the writ of the state should be enforced, irrespective of the pressure tactics of the businesses and traders and all those that hide their income from services like medical and legal practices in the private sector. As long as businesses and retailers are not registered through computerized mechanisms, such tax collection is not possible. It is recommended to reduce GST to 10% and enforce this tax only on retail, with all other indirect taxes being abolished. The burden on the average consumer and producer would be minimised, while the tax net would expand, and the incentives to the investors and producers would also be in place for enhanced economic activity when all three elements of welfare – consumer surplus increase with decrease in prices of final products in the country, producer surplus would increase, with decrease in cost of doing business, therefore profitability and enhanced revenue to the government that can be spent on much needed development projects. As far as wealth tax (which is a progressive tax) is concerned, it is my opinion that a 25% wealth tax should be imposed on the super-rich, giving wealth tax exemption to the middle and upper middle classes of the country. This is another way of documenting the economy as well as to enlarge the tax base and tax income. This would also discourage tax evasion and corruption in the country. New investors can also be exempted from such tax burden for a limited 10- year period. All other indirect taxes except local taxes, should be abolished.