VAT not feasible for the country

The imposition of value added tax is not feasible for the country because of the bad state of economy, said Director Applied the Economics Research Centre (AERC), Karachi University, Prof Dr Nuzhat Ahmed.

“Indirect tax is not in favour of the middle and lower classes,” she said while delivering a lecture on Federal Budget 2011 at the Karachi University on Wednesday.

The government must promote direct tax in the budget which is constructive for the economy, she said.

The ongoing debate should have focused more on importance of direct taxes and indirect taxes, she said, adding that it is proven that the imposition of indirect taxes usually has a negative impact on the economy.

The important issue is what commodities are going to be taxed, she said. “There is a lack of awareness of VAT, while we have generated misconception about the tax.”

It is being said that the idea of VAT imposition came from abroad, which is one of the foremost misconceptions. VAT is imposed in majority of the developed countries that encourages documentation which is considered positive for any economy.

The question on the eve of the federal budget should be whether the budget is going to be pro-poor or not, she said.

Published in the Express Tribune, June 3^rd, 2010.