Who’s afraid of the RGST?

Allies of the PPP have all gone their own ways so who is suppor­ting the RGST, other than the silly econom­ic team?

Opposition to the reformed general sales tax (RGST) is so opportunistic that I can feel it right here in Colombo, the venue for the launch of an Open Budget Index for South Asia. Had the silly economic team and its pompous predecessors been more open about their intentions, they would not have to contend with the unintended consequences being witnessed now. First, it forgot the adage that an old tax is no tax. The name change from ‘GST’ to ‘RGST’ signalled to the inflation-stricken folks that a new indirect tax was being imposed. The fact that it is the same old tax with a reduced rate and exemptions for items of common consumption has been of no consequence. Instead, trade leaders, fearing documentation of the major sectors now included, have been selling the fantasy that the rate will in effect be higher than before. Secondly, the team did not do a good job of convincing the main ruling party, the PPP, which seems ill-prepared, if not divided, on the issue. The allies were completely ignored. It was taken for granted that by allowing the agreement with the IMF, the ruling alliance was behind the proposal.

Interestingly, all parties agree that the tax-to-GDP ratio needs to go up from its abysmally low level. Each of them, however, wants to tax the vote bank of the other party. The main opposition party, the PML-N, had introduced the sales tax in 1990. Ask Sartaj Aziz and Hafiz Pasha, the then economic team, if there was ever any doubt that it would eventually become a full VAT. As a matter of fact, the army had been mobilised to make the aborted attempt to bring retailers into the tax net. (The army was called out in Wapda as well, such was the love of khaki then!) With an eye on the next election, the party is now representing its army of traders. As an alternative to the RGST, the party proposes an end to corruption: meaning, get Zardari. Revenue is needed now and getting the Zardaris of the world can be an unending process, made no easier by Nawaz’s Ehtesab Bureau, Musharraf’s NAB and now judicial activism and media particularism. If anything, the documentation caused by the implementation of the GST will reduce corruption in tax collection in general.

The next major party in opposition, the PML-Q, says that taxing the already overburdened population in such bad times is not a good idea. It conveniently forgets that it failed to introduce a full VAT when, according to its own claims, the economy was booming. It was not then so much an IMF idea. Insaaf, Jamaat and other parties outside parliament are one in suggesting that more revenue means more money for corrupt use by present rulers. Does this mean they support the RGST but only when they come into power? No, the whole idea is dismissed as IMF dictation.

Allies of the PPP have all gone their own ways. The MQM, which holds the balance for a simple majority, has been opposing flood tax on urban properties to protect its own vote bank and proposing land reform affecting the PPP and some Muslim League factions. It is now one with businesses in Karachi in opposing the RGST and proposing the alternative of taxing agricultural incomes. The Maulana of Dera Ismail Khan is upping the ante and is succeeding, as always, RGST or no RGST. After securing a good deal in and out of the NFC transfers and foreign assistance, the ANP hedged its bet and formed a committee. The vibes from the statement of its leader Senator Bilour are not very encouraging, though. And let’s not forget that the whole delay so far was caused by differences with the provinces. These remain unresolved. Even if the National Assembly passes the bill, the provincial assemblies may not follow suit.

So who is supporting the RGST, other than the silly economic team?

Published in The Express Tribune, November 26^th, 2010.