Taxing the rich

Taxing the rich has remained one of the central policy debates in times of rising inequality. This is partly due to strong resistance from elites and partly because high-income taxation can help provide some balance in the economy by downscaling inequality. This issue recently became the topic of much discussion in Pakistan when, last year, Prime Minister Shehbaz Sharif announced a 10% super tax on major industries to control the “storm of inflation” that has disrupted the socio-economic fabric of the country.

This was indeed a promising decision in terms of generating revenue, holding the elite accountable, and curbing inflation as the tax would be directly levied on the profits earned, restricting any price increase. But, as usual, false promises prevailed and the tax implementation was deemed invalid by Sindh High Court following staunch opposition from the elite class. Now, with the economic situation deteriorating and foreign exchange reserves falling to a new low, the Supreme Court has ordered the collection of 4% super tax. This, too, will be taken with a pinch of salt, showing exactly where the allegiance of the rich lie. Pakistan is a country controlled and ruled mostly by the rich class, which is why tax cuts and austerity measures for the rich and their corporations have fueled inequality, with lower-income individuals paying higher tax rates than billionaires. With much talk of leadership, philanthropy and giving back to the community, the elite continue to fail the country — first in terms of governance and now in terms of reparations.

In times of economic crunch, it is expected that the rich take it on the chin like the rest and uphold their responsibility to their fellow citizens. The economy no longer has room to provide them with concessions at the cost of the common man. A major way to mitigate inequality is to keep money rolling.

Published in The Express Tribune, February 20^th, 2023.

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