A question for the FBR chief

Letter April 15, 2010

HYDERABAD: The chairman of the Federal Board of Revenue (FBR) recently said at a press conference that value added tax (VAT) will be imposed in the forthcoming budget and that it was estimated to add almost 800 billion rupees to annual government receipts.

At the same time, he also said – or should I say claim – that it would not cause any inflation? I have a simple and straightforward question for the FBR chief: Sir, surely you would know that levying a tax such as VAT will be inflationary because it is an indirect tax levied on consumption of goods and services? How will it not cause any inflation? It seems that levying VAT has become a kind of an obsession for the FBR – simply because it has failed in its duty to collect taxes due on the incomes of those from the industrial and commercial classes of the country.

It’s as if the middle class is being penalised for the sins of the upper classes and is hence patently unfair and unjust. The government should not impose VAT – rather it should expand the tax net to include all those rich and powerful who presently pay little or no tax.