VAT versus “modified GST”
Bureaucrats have won in their cause to block an overhaul of the taxation system that would include an imposition of the VAT.
In the words of James Carville, the American political strategist, “You can call the dogs in, wet the fire, and leave the house. The hunt’s over.” In this particular case, the bureaucrats have won in their cause to block an overhaul of the taxation system that would include an imposition of the Value Added Tax (VAT). Sindh and the federal government have agreed to a “modified General Sales Tax (GST)” to take the place of the proposed VAT.
Why would provincial governments be opposed to a tax that would result in more revenue and distribute the burden of taxation more evenly throughout the economy? We are at a loss to find the answer.
The bureaucracy has tried to disguise their attempt to railroad the VAT as a “pro-people” move, saying that it will cause a spike in inflation. They even had the audacity to suggest that it would result in a greater incidence of tax evasion. Yet the reality is that the tax will actually make it easier for the government to detect tax evasion, regardless of whether or not it builds up the capacity to do anything about it. And that is precisely the point: the bureaucracy is letting its lethargy and – dare we say it – their corruption to dictate whether or not they support a policy initiative that will help the country in the long term.
It has been stated before on these pages that tax evasion cannot take place without the connivance of revenue collection officials. Might the opposition to the VAT simply be a case of fear of losing the gravy train? If that is indeed the case, then it is a very sad day for the cause of good governance. We would recommend that the government reconsider its position on the VAT and impose the tax rather than fiddling with the GST. It may be harder, but the rewards are almost unquestionably greater.
Published in the Express Tribune, June 17th, 2010.
Why would provincial governments be opposed to a tax that would result in more revenue and distribute the burden of taxation more evenly throughout the economy? We are at a loss to find the answer.
The bureaucracy has tried to disguise their attempt to railroad the VAT as a “pro-people” move, saying that it will cause a spike in inflation. They even had the audacity to suggest that it would result in a greater incidence of tax evasion. Yet the reality is that the tax will actually make it easier for the government to detect tax evasion, regardless of whether or not it builds up the capacity to do anything about it. And that is precisely the point: the bureaucracy is letting its lethargy and – dare we say it – their corruption to dictate whether or not they support a policy initiative that will help the country in the long term.
It has been stated before on these pages that tax evasion cannot take place without the connivance of revenue collection officials. Might the opposition to the VAT simply be a case of fear of losing the gravy train? If that is indeed the case, then it is a very sad day for the cause of good governance. We would recommend that the government reconsider its position on the VAT and impose the tax rather than fiddling with the GST. It may be harder, but the rewards are almost unquestionably greater.
Published in the Express Tribune, June 17th, 2010.