Budget 2012: What about tax collection?

Everyone wants the budget to provide some form of relief but nobody is willing to pay tax.

Farhan Zaheer June 02, 2012
Dr Hafeez Shaikh is a helpless man. He says powerful lobbies in the country do not want to pay taxes. This is true, but it's nothing new for us. What duty is the current elected government performing, if not tax collection, to run the country?

Everyone wants the budget to provide some form of relief but nobody is willing to pay tax. Unfortunately, those who do end up paying their taxes in Pakistan, the salaried class, are being further burdened, while the powerful people in agriculture and services sector are free of any societal responsibility.

It is well known that government expenditure in our country currently exceeds our earning capacity. Major expenditures like our defence budget, the interest payment on our debt, and huge subsidies on our power sector and state-run organisations leave us with lower funds for infrastructural development.

However, the reality that we need to come to terms with is that no government has a magic wand that can be spun to provide relief to its people; tax collection is not an option, it is a necessity, and without enough tax collection relief should not be expected. Pakistan has one of the lowest tax-to-GDP ratios in the world; we stand at nine percent while arch rival India stands at a whopping 17 percent.

Last year’s tax collection target was set at Rs1, 588billion, which our ever efficient Federal Bureau of Revenue (FBR) claimed to have achieved only for us to discover later that the amount collected fell short by at least Rs40 billion. This year’s target has been set at Rs1, 952billion but experts believe that the government may fall short this time too by at least Rs30-40 billion.

Despite this fact, Humayun Bashir, the President of the Overseas Chamber of Commerce and Industry (OICCI), a leading association of 180 multinationals operating in Pakistan, complimented Hafeez Shaikh for working hard to achieve the tax collection target.

Regrettably, one of the few positive things that the present government wanted to do in tax collection was the implementation of the Reformed General Sales Tax (RGST) bill, which was thwarted by leading parties like the PML-N and the MQM. Unfortunately, a large section of our mainstream media went against the government and towed in populist sentiments that the RGST would increase inflation etc. Hence, RGST is now a lost dream.

It is unfortunate that our leading political parties are not giving any thought to the collective and long term benefits of such a modification, that could help the people of the country, but have instead succumbed to popular politics. More tax collection means more funds for the aam aadmi (ordinary man) otherwise, we will all continue to suffer.

The government, however, has now fixed the tax collection target at Rs2, 381 billion for the fiscal year of 2013; at this point, all we can do is hope for the best.

Read more by Farhan here.
Farhan Zaheer
The views expressed by the writer and the reader comments do not necassarily reflect the views and policies of the Express Tribune.


Sajida | 12 years ago | Reply Greece and Italy are European stars of tax evasion. Now look what is happening to them. They took on debt to make up for what was not collected in taxes. http://www.nytimes.com/2010/05/02/world/europe/02evasion.html?ref=general&src=me&pagewanted=print May 1, 2010 Greek Wealth Is Everywhere but Tax Forms http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010?printable=true¤tPage=all Tragic Flaw: Graft Feeds Greek Crisis "According to Italian newspapers, people reporting incomes of less than 20,000 euros (about $26,000) per year cumulatively own 188,000 supercars, (such as Ferraris, Lamborghinis, Porsches, or BMW couples), 518 private airplanes or helicopters, and some 42,000 yachts. All together, 15 million Italians — about 1 out of 4 citizens — declared no income last year. Reports indicate that nearly a fifth of that group own at least three homes."
Imran Kamyana | 12 years ago | Reply "Major expenditures like our defence budget, the interest payment on our debt, and huge subsidies on our power sector" Which huge subsidies are you talking about my dear friend? Defense and Debt Servicing would eat up to 1500 Billion rupees (officially) while subsidies for the energy sector are not more than 140 Billion. Is it huge by comparison? And lets not forget health and education. Each Pakistani is allocated RS 200 for health & education. After all its "Islamic Republic of Pakistan" which is supposed to be "sovereign" so let the holy cows eat as much as they want.
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