Increased GST burden

Govt's move to increase GST should serve as a reminder of the FBR’s inefficiency to meet its tax collection target

In a move that would, as usual, annoy ordinary citizens, the government has decided to increase the applicable general sales tax (GST) rate on all petroleum products from 17 per cent to 22 per cent, hoping to increase tax collection by an estimated Rs48 billion on an annual basis. The move, primarily motivated by the Federal Board of Revenue’s (FBR) inefficiency and failure to meet its collection target, meant that another Statutory Regulatory Order had to be issued, a clear violation of the government’s promise to the IMF. While decision-makers passed on some relief to the people after the slump in global oil prices, the government, this time, decided to take a decision aimed at increasing tax revenues that have taken a hit since the drop in the price of crude oil.

The move, to take effect from January 1, 2015, should serve as a reminder of the FBR’s inefficiency and incapability to meet its tax collection target, forcing the government’s hand on withholding benefits meant for the general public. While the prices of petroleum products would still go down, the extent of the decline would be cut and diverted towards the national kitty. One could possibly argue that this move was driven after the sit-ins across the country had ended, which initially had forced the government to either delay or cancel decisions that would irk the general public. Why else would the decision of increasing GST and power tariffs be taken after the protests have ended? While one could argue that the sit-ins had a negative impact on the economy, they did keep the government from making decisions that would invite further backlash from ordinary citizens. The IMF, under its Extended Fund Facility, had asked the government to meet its tax collection target but, also told the government to “protect the most vulnerable from the direct and indirect impact of these measures”. However, it seems that the government’s job is not to look after ordinary citizens. It seemingly involves ensuring that its promises, which fetch it billions of dollars from international institutions, are kept — by hook or by crook.

Published in The Express Tribune, January 1^st, 2015.

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