Inequitable taxation
The problem with Pakistan’s tax structure is that it offers far too many exemptions to far too many industries.
It makes no sense to give an even bigger voice to groups whose pernicious influence is responsible for our highly distortionary tax code in the first place. DESIGN: ESSA MALIK
The Nawaz Administration is getting increasingly bad at hiding just how beholden it is to lobbying groups. The decision to launch the Tax Advisory Committee to help the government formulate a set of proposals on tax policy for the upcoming budget is just the latest example of just how much this administration is willing to bend over backwards to please their friends in big business.
We are not opposed to the idea of offering business groups a seat at the table when decisions about tax policy are being made. The Constitution guarantees that all citizens have the right to freedom of association and that people have the right to lobby the government to make their voices heard, even those we disagree with. But the problem with Pakistan’s tax structure is that it offers far too many exemptions to far too many industries. In such a scenario, it makes no sense to give an even bigger voice to groups whose pernicious influence is responsible for our highly distortionary tax code in the first place.
Finance Minister Ishaq Dar appears to be quite proud of having given in to all 26 tax proposals made by the business community to the government. He is about to find out very quickly that such demands, while making those lobbyists and the businesses they represent quite happy, will most likely hinder the ability of the government to collect the revenue it needs to provide basic services to ordinary citizens of the country.
Those ordinary citizens, meanwhile, pay the overwhelming bulk of taxes in the form of sales taxes and other indirect taxes on much of what they purchase and consume. We do not deny the need for a sales tax, but would like to ask the government why a poor schoolteacher must pay taxes on everything she buys, while a billionaire exporter owes hardly any taxes at all on his profits. Such inequity makes no sense and the government needs to take firm action to get rid of these kinds of distortions in the system. That goal of equity, however, is unlikely to be given voice by the very people who benefit the most from the current unjust system.
Published in The Express Tribune, March 11th, 2014.
We are not opposed to the idea of offering business groups a seat at the table when decisions about tax policy are being made. The Constitution guarantees that all citizens have the right to freedom of association and that people have the right to lobby the government to make their voices heard, even those we disagree with. But the problem with Pakistan’s tax structure is that it offers far too many exemptions to far too many industries. In such a scenario, it makes no sense to give an even bigger voice to groups whose pernicious influence is responsible for our highly distortionary tax code in the first place.
Finance Minister Ishaq Dar appears to be quite proud of having given in to all 26 tax proposals made by the business community to the government. He is about to find out very quickly that such demands, while making those lobbyists and the businesses they represent quite happy, will most likely hinder the ability of the government to collect the revenue it needs to provide basic services to ordinary citizens of the country.
Those ordinary citizens, meanwhile, pay the overwhelming bulk of taxes in the form of sales taxes and other indirect taxes on much of what they purchase and consume. We do not deny the need for a sales tax, but would like to ask the government why a poor schoolteacher must pay taxes on everything she buys, while a billionaire exporter owes hardly any taxes at all on his profits. Such inequity makes no sense and the government needs to take firm action to get rid of these kinds of distortions in the system. That goal of equity, however, is unlikely to be given voice by the very people who benefit the most from the current unjust system.
Published in The Express Tribune, March 11th, 2014.