‘Watch the rich closely and tax them more’

Tax adviser says pending habits of the rich need to be studied.

LAHORE: The spending habits of the rich need to be studied so that they can be charged general sales tax (GST) on them, said UK-based tax adviser, Khalid Mehmood.

He was delivering a lecture on ‘RGST in its current form’ at the Institute of Statistics, Punjab University.

He told the students that Pakistan’s direct taxes to GDP ratio is only 10.2 per cent. “That is a little higher than Afghanistan’s six per cent, which is almost 50 per cent less than that of India,” Mehmood said. He added that in many welfare states, the ratio is higher than 30 per cent, “In the UK it is 39 per cent while in Denmark the direct tax ratio to GDP is 49 per cent.” Criticising the government for helping the IMF and World Bank achieve their objectives, Mehmood stressed the introduction and implementation of a new viable tax strategy. “It should be simple and made in line with the life style of the Pakistani nation,” he suggested.

Khalid Mehmood recommended the government broaden the tax net through more direct taxes, introduction of reforms in the financial sector and taking measures to increase revenue. “To meet this target, urgent reforms are needed at the State Bank of Pakistan, Security and Exchange Commission and in banking and insurance sectors,” he said. He also stressed that the tax system, from assessment to collection, must be free of political pressures and corruption.According to the tax adviser a low literacy rate, an inefficient banking system and the absence of a clear strategy are the main factors responsible for the tax-evasion culture of the nation.

Earlier, the institute director, Prof Dr Shahid Kamal, welcomed the alumnus and told him that the department was proud of him.

Published in The Express Tribune, February 27^th, 2011.