A bold move? Maybe

If there is a single failure that runs across consecutive governments in Pakistan ever since Independence it is the failure to devise and implement a universal system of taxation. The rich largely escape meaningful taxation and always have. Something less than 2 per cent of the population that are eligible to pay income tax actually do so. There has never been a concerted and meaningful effort to change the status quo and there is no indication that such a move is in the offing. By contrast a revolution is taking place across the border in India, a revolution that is being closely watched by the State Bank of Pakistan and the money mavens this side of the border.

A new goods and services tax (GST) in India came into force on Saturday 1^st July replacing with a single tax more than a dozen that were imposed across the 29 states. The aim is to transform the $2 trillion economy into a single market — a move easier said than done. The Indian PM, Narendra Modi, has said perhaps slightly naively that GST is ‘a good and simple tax’. Good it may be simple it is not, and the business community is viewing the shift with considerable trepidation. Parts of India and the disputed Jammu and Kashmir region have refused to sign on for the new taxation and its infrastructure legislation. The main opposition Congress party boycotted the launch ceremony. Commentators inside India and internationally are cautious in their reception, acknowledging that the principles underlying the new tax are sound — but with an implementation handbook running to 200 pages perhaps not the easiest to implement. The new system is completely reliant on computers and the internet and many millions of Indian businesses have neither, being paper-dependent for all transactions. How well or ill this all works out for India may contribute to the future of tax reform in Pakistan? It would take considerable political courage, and on current form radical paradigm shifts are on no political agenda.

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

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