Widening tax net

The International Monetary Fund (IMF) has urged Pakistan to tax the rich and widen the tax net to reduce the burden on the poor and middle class, but the political elite is unwilling to curtail the black economy.

The ink on the much-awaited IMF agreement has not even dried yet our financial minister announced that no new taxes will be imposed on the real estate, agriculture, and retail sectors.

Such an irresponsible statement may please a few, who have been beneficiaries of amnesty schemes and reliefs, but it will erode our credibility with IMF and other international financial institutions. Inflation has already driven the masses to desperation.

Any further burden will result in country-wide protests and chaos, which will damage the already fragile economy. What this country needs is a finance minister like Dr Manmohan Singh, willing to take the bull by the horn.

Pakistan’s national security and state sovereignty itself is threatened by this economic crisis and hard decisions must be taken.

PMLN, PPP and PTI must understand that either the documented economy and revenues earned from direct taxation must increase, or the black economy strengthened, and resultantly state sovereignty and security compromised. The status quo cannot persist any longer.

Imposing direct taxation can curtail the tax to GDP ratio, which is already the lowest in the region, at approximately 9.5% as compared to 17% in India and 18% in Nepal.

An uncontrolled population explosion is another impediment.

The ruling elite would go to any extent to protect their constituency, even if it takes burdening those already in the tax net, instead of widening it.

This temporary relief offered by the IMF agreement will soon fade away and Pakistan would go back to its perpetual financial bankruptcy status.

Malik Tariq Ali
Lahore