Tax base!

Listen to article

The government's endeavour to bring the elite formally into the tax net is appreciated. But whether the reforms strategy to broaden the tax base - by enabling an increase in tax-to-GDP ratio - will really go on to target the top 5% of the wealthy into the tax net or result in slapping more burden on the middle income and salaried class remains an enigma. The fact that the who's who of the aristocrats are under a negligible tax is a crime in itself, and goes on to mandate a surgical option. All those in the businesses of real estate, sugar, cement and beverages are off the hook. It confirms that the present taxation paradigm is highly flawed, squeezing only those who are hand to mouth. Moreover, Pakistan is the only country where there is enough of indirect, but compulsory, taxation in the form of GST, which goes on to make life further miserable for the commoners.

The finance wizard's intention to review the value chains of progressive sectors of the economy should account for proper estimation to address tax gaps. Moreover, indispensable steps such as end-to-end digitisation, reduction in bureaucratic discretion and inherent corruption are a must. It goes without saying that a similar mantra was harped by all the previous dispensations too, but when it comes to implementation, it all ends up in thin air. If the status quo continues then the target of achieving over 13% tax-to-GDP ratio in the next 36 months will end up in doldrums, severely impacting the commitments made with the donors, especially the IMF, for stringent reforms.

The current taxation slabs, nonetheless, in power tariffs and petroleum products are counter-productive to the economy. They have hampered growth and led to a sharp decline in exports. With produce being uncompetitive in the international market, the task of increase in GDP and tax base is nothing but a mirage. It's time to expand the tax net at the expense of elite capture, and ensure that all the loopholes are plugged. Until and unless taxes are fairly distributed across all sectors of the economy, it will continue to breed resentment.