Dodging the taxation bullet

Governments, all governments, in the modern era levy taxes to fund a range of core services from healthcare to massive infrastructure. No individual or corporate entity anywhere in the world likes paying taxes, but there is a general acceptance that as the saying goes there are just two certainties in life — death and taxation. For Pakistan taxation has never been equitably levied since Independence and no government has ever done anything beyond the purely cosmetic to extend the tax envelope to the richest in the land. The current government is no different in this respect and recent times have actually seen a decline in the total of taxes collected when measured on a per-capita basis.

The government had revised the taxation target downwards and now it is going to miss even that, largely as a result of failing to make or even conceptualise the administrative reforms that would net a larger slice of taxation. The chief prestidigitator of the fiscal numbers is Finance Minister Ishaq Dar, who in many ways has the most thankless job in governance. He it is that is blaming the shortfall on a change in fiscal policy with the keeping of tax rates on petroleum products low in comparison to the previous year. Analysts argue that this is a red herring and that the shortfall is entirely down to income tax collection rather than government subsidies.

The Federal Board of Revenue (FBR) had an income tax target of Rs1.558 trillion, and is expecting to harvest Rs1.378 trillion in the outgoing fiscal year, which represents a reduction of the share of income taxes in the total revenue collection from 43 per cent to 39 per cent, hardly a picture of fiscal health especially when viewed through the prism of government borrowing from the Chinese to buy its way out of the rolling debt-servicing charges that currently form a necklace of albatrosses around its neck. There are also conflicts within. The FBR has said that it does not accept the government proposal of Rs4.013 trillion as the target for the next fiscal because the government has ‘not taken adequate revenue measures’ and the target was ‘unrealistic.’ Kamikaze economics — another first for Pakistan.

Published in The Express Tribune, June 2^nd, 2017.

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