The Verdict
Why oppose the RGST?

Why oppose the RGST?

While it is justified that an agricultural tax be implemented in the country, it is unjustified to oppose RGST.

Farhan Zaheer December 02, 2010

Why is the Reformed General Sales Tax (RGST) such a headache for so many and why does the government keep insisting that it is ‘necessary for the country’?

More than anybody else, people should listen to what economic experts say about RGST first. Talk to any analyst and expert on the economy of Pakistan and they will support the RGST being implemented. They do this because it will help increase tax collection and make a dent in the untaxed sectors of the country’s economy.

Pakistan with just a nine per cent of tax-to-GDP ratio tops the list of countries with the lowest such ratios in world.

Look at our regional countries, our neighbors have tax to GDP ratio which are over 13 per cent, while most industrialized countries have such ratios which are over 40 per cent.

Some lobbies in Pakistan have taken so many general sales tax concessions in the last 15 years that that the originally implemented tax is not even recognizable. It is basically this GST regime which is now being replaced.

The minister for finance has rightly said that ‘powerful lobbies are opposing the RGST’ due to vested interests.

The RGST will not only tax the currently untaxed but it will also bring to the table a uniform GST at the rate of 15 per cent. This will end the present unjustified system in which some industries pay sales taxes as high as 25 per cent while some enjoy rates of only 17 per cent. Something is wrong with this picture.

While it is justified that an agricultural tax be implemented in the country, it is unjustified to oppose RGST because it will affect the common man as it will actually do him a favour.

This is because the RGST will document the undocumented economy of Pakistan which in return will help improve government resources which could then be spent on health, education and infrastructure development.

Would you still oppose the RGST even though you knew that it would reduce tax evasion, help increase the tax-to-GDP ratio and collect taxes from the untaxed?

WRITTEN BY:
Farhan Zaheer

The views expressed by the writer and the reader comments do not necassarily reflect the views and policies of the Express Tribune.

COMMENTS (12)

Samar | 13 years ago | Reply RGST may prove to be helpful to our economy if fairly collected from elites as well, Because taxation help strengthen any economy if collected and used honestly...

eatisam ul haq | 13 years ago | Reply i think rgst with it self is not so much debatable..the main point is the timing which the gov has selected..when our national instituations have so many leackedgs and gov ant stop that.when inflation is going high and high and when this democratic gov is not ready to decrease his expenditure...so facing these conditions its better to work on weak ares and save mony from there rather wsting energy on rgst

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sajid khan khattak | 13 years ago | Reply It may increase the chance of corrupton in tax collection system if unchecked. It may help to decrease the inequilty in tax system and government can utilized this money for education,health and for elimination of poority. It creat sense of responsiblity in common man because of it broad scope and he can ask for its utilization.

aamir hussain | 13 years ago | Reply just wana say, u were right about countries where they pay 40 perc , if i am not wron sweden is in my mind...yes they are justified b/c they are providing free education/free health facility/stipend to un employed persons...and they have proved themselves as welfare states... but sorry dear, we are willling to pay this RGST too, if u gave us guaranty that this amount will be repaid to us in form of our welfare, and will not deposit in to some SWISS A/C.

khurram kaleem | 13 years ago | Reply @Arachnid..if you put 17percent GST on cotton fabric a Rs 300 garment will increase in cost to Rs 354 which at a retail multiple of 2.2 will increase by Rs 118. almost 17 percent increase for Consumer. The tax has to be finally paid by consumer although it will be collected by manufacturer. End point is you have to improve system effieciency and not go on blunt taxing further.the growth rate is already rock bottom the economy is stalled You should improve tax net by bringing the 60percent tax free economy into net .Indirect tax is a menace already the economy is choked as 80 percent tax collected is via Indirect taxes like GST ,central excise etc

Ehtisham Rizvi | 13 years ago | Reply It is only the middle class of this country which pay the taxes, not the upper class and not the poor people (directly that is). So I oppose this RGST because it means that I have to pay more and more out of my hard earned income while people who dont pay their tax stay unaffected. It is now over-due that Nawaz Sharif and Asif Zardari declare their assets and start paying their dues instead of asking me and many like myself for more money.

Arachnid | 13 years ago | Reply @Khurram Kaleem: RGST will increase inflation by only 0.63 percent. State-owned loss-making behemoths like PIA need to be dumped, but that's no reason to make stuff up.

Talat | 13 years ago | Reply You are not well-informed brother. It will not "make a dent in untaxed sectors", rather it will break the back of the poor and the middle class people. I have read an analysis of an expert, I am sure he is better than your experts.

khurram kaleem | 13 years ago | Reply RGST will only increase inflation in the economy.if enforced it will be collected by the powerful from the poor awam. Already the state is losing 350 billion out of 9 state owned company from wapda to Pia to Pak steel.this leakage is unacceptable.The awam has to pay this loss/corruption via inflation one way or the other. Now if you impose a NEw GST regime it will be a havoc to enforce a new tax when the previous tax money is being squandared . why not stop the leak of 350 biliion i.e 4 billion USD per annum. Belive me and mark my word imposing RGST will encourage more curroption and state owned losses will mount from present 350billion to 500billion in the next two year.

parvez | 13 years ago | Reply A lot has been written on this subject your article has over simplified this complex issue. Two years from now you will be pleading a case for the NRGST - N stands for new.

Ali Hassan | 13 years ago | Reply It will tax the untaxed It will end the unjustified system It will favor the common man It will document the undocumented economy It will improve government resources which could be spent on development It will reduce tax evasion Take it easy man, you are talking about Pakistan.

S. Ali Raza | 13 years ago | Reply In order to document the economy while letting corruption take a boom is no justification of RGST. Tax is necessary, and a must on all nationals, but we are talking about taking income tax from the one's who have never paid it in their lives. Why does 500 items have to be brought into the RGST net to cover for them.

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