Wage earners' tax burden

The government's inability to expand the tax base and start collecting direct taxes from everyone who should be paying them has created a situation where a graphical representation of tax collection now looks like a calculation error.

Figures from the first three quarters of the ongoing fiscal year show that salaried individuals now pay some 10% of total taxes collected, which is 16 times as much as what the traders paid. What makes things worse is that, generally speaking, salaried folks are the most susceptible to inflation, while business owners are the most adaptable.

The end result is that while traders mostly rode out the disastrous inflation in recent years, with some even making a pretty penny off the rapidly rising prices, salaried individuals across the board have seen their relative wealth decline to the point where many have been forced to downgrade their lifestyles.

While every government talks a tough game on punishing non-filers and tax evaders, the fact is that most tax laws are not aggressive enough, and are easily negotiated, or avoided altogether, by business owners and others whose primary sources of income are not salaries.

One of the more galling examples of this is how, after the government started imposing and enforcing withholding taxes on retailers, the owners of these businesses simply passed the entire tax burden on to consumers, meaning that the billionaire owners' homes were still unaffected and untaxed, while the working poor are effectively paying additional taxes.

Unfortunately, even the IMF and other lenders seem to have little interest in getting the government to legislate in favour of the masses, focusing only on increasing overall tax revenue, regardless of who is paying those funds and how. If the IMF really cared about weaning Pakistan off loans, it needs to push Pakistan to introduce the kind of reforms that significantly increase collection from traders, businessmen and self-employed people, rather than squeezing every last drop of blood from wage earners.