Not the easy way out

The government, in yet another display of spineless cowardice, has proposed to increase income taxes.

Ordinarily, we would support the government’s efforts to increase the revenues it collects through taxation. But the flood tax currently being proposed is little more than a case of loading a greater burden on the proverbial camel that is the miniscule tax-paying class of Pakistan. That the flood has increased the urgency with which those revenues are required is undeniable. Yet what irks the tiny minority called taxpayers is that it is always they who are asked to do more. The government, in yet another display of spineless cowardice, has proposed to increase temporarily income taxes on the salaried class in addition to additional taxes on imports. Why not extend the tax net to income from agriculture (in principle this should be done, though post-floods it may not be feasible)?

The administration has chosen to deepen the tax net rather than widen it. Given the high poverty rates, we understand that a large proportion of society simply cannot afford to pay taxes and nor should they be asked to. But entire swaths of the country’s elite are either legally exempted through glaring loopholes in the tax code pushed through by powerful lobbies or simply flout the law and refuse to pay their fair share. Why not push for improved efficiency of the tax-collecting mechanism, in particular the Federal Board of Revenue? Also, why not seek fiscal space in the existing budget by freezing the salary increases of government employees and the defence budget at the 2009-10 level, and launching an austerity drive at the federal and provincial levels? A well-respected economist who served in senior positions in the government has already pointed out on these pages that enough space exists if the government were serious about re-prioritising its expenditures. Why hasn’t that been explored instead? The current proposal is just an easy way out – and patently unfair to existing taxpayers – as it is their tax rupees are paying for the government’s flood relief efforts.

Published in The Express Tribune, September 3^rd, 2010.