In the wake of growing consumerism and availability of trade options, innovative technology, governments tend to draft policies that equally shift weightage on its people for averting clamour. Nevertheless, tax contribution is a prime necessity for a government to run its affairs, greater tax contribution means better economy.
Rich countries are able to collect 30% of GDP in their taxes while low-income economies are able to net only 12%. Pakistan’s tax collection is 11% of its GDP. The lower tax collection creates hindrances for a government to finance its infrastructure, public projects, etc. This results in the state’s unfair, burdensome, non-transparent policies. The decision of the government to collect direct tax remains poor at about 40% of the total and the remaining rests upon indirect taxes. In addition, corruption is a major cause of revenue leakages. As a result, the common man is forced to bear the burden.
With the general elections arrival in the following year political parties geared up and started selling their solutions for turning this Third World country into a developed one. Same was the PTI’s case. During its struggling phase for acquiring power their stalwarts made several acquisitions along with much criticism, claiming that the common man was burdened by levying heavy taxes on petroleum products, extreme indirect taxation, mismanagement of state funds, executing projects for political gains instead of public need.
Prime Minister Imran Khan’s maiden speech was sought as a ray of hope that an honest statesman like him shall turn the tables around. As he promised, by not taking aid from international bodies or a foreign country, construction of five million housing units, eradication of unemployment, deep focus on human development. The most talked about, abolition of protocol, all in lieu of austerity measures to curb the financial drainage consuming the national exchequer.
The PTI did keep their word by launching an immediate cost-cutting campaign through auctioning, as termed, ultra-luxury vehicles of the PM House. The government, however, faced a setback and grabbed a mere Rs200 million by selling off only 62 out of 102 vehicles. The next phase in generating funds to support the depleting economy included auction of six buffaloes kept at the Prime Minister House. The government has also considered significant cuts in expenditure, increase in custom duty on over 5,000 items, increase in regulatory duty on 900 items. A country facing a $38 billion trade deficit is trying to clip expenses by applying cosmetic measures just to gain temporary popularity.
In reality, the applied cuts and tax hikes are totally opposite to the party’s manifesto. The only appreciable move in the PTI’s Mini Budget was reverting tax immunity on allowances of the prime minister, governors and all ministers. The promised human development has turned cold in abyss because the federal cabinet has no clue about revising the Higher Education Commission’s development budget, as the previous government slashed it to Rs15 billion from Rs35 billion, whereas the Orange Line project of Lahore cost around Rs250 billion.
Current news stories also highlighted that the premier only headed to Saudi Arabia for funding of approximately $10 billion to bolster the depleting reserves that the State Bank announced was almost $10 billion.
The confusion and lack of respect towards taxpayers, without having widened the tax net, affects the oppressed class more as compared to the rich because the proposed indirect taxes are said to have an impact of Rs90 billion. The following actions do depict the government’s line of action to be flawed but if this isn’t revised the problem may become unmanageable.
Published in The Express Tribune, October 10th, 2018.