Forget the RGST, implement the GST

The proposition that RGST will widen our tax base is possibly the most pernicious of justifications.

Of all the wisdoms being peddled by the government, the Federal Board of Revenue (FBR) and “financial experts” to justify the imposition of the Reformed General Sales Tax (RGST), the proposition that it will widen our tax base is possibly the most pernicious. Experience has shown that every fresh tax merely imposes an additional burden on the handful of persons who are already registered taxpayers while tax evaders are presented with one more tax to evade. As a first step to developing a taxpaying culture, the FBR should ensure that every adult with an income above the tax threshold is assigned a National Tax Number and brought into the tax system. It is only after accomplishing this basic task that taxes can be imposed fairly and equitably.

The politicians are not interested in this for fear of losing vote-banks among the traders and shopkeepers who operate as urban mafias. Tax officials are not interested because they are themselves beneficiaries of the stolen billions found in the coffers of tax evaders. The RGST is merely an extension of the GST which has existed for many years. Yet there are vast swathes of our economy where the GST is levied but is hardly collected. There are whole industry sectors which are legally bound to pay the GST but in reality, at the most, only a couple of companies actually do. The milk and dairy sector is a good example. A handful of multinational and local industries have become high-profile household names as a result of heavy advertising and marketing expenditures. Yet all of them in aggregate represent no more than four per cent of that industry — the remaining 96 per cent operating happily under the ‘unorganised sector’ category. The notion that these huge sectors are suddenly going to start paying tax just because the GST is now to be called the RGST is ridiculous in the extreme.

All these facts are well-known and documented. Yet no politician or tax official is interested in correcting such glaring anomalies. If the FBR were to make an honest and concerted effort at ensuring that all amounts due under the existing GST were fully and fairly collected there would be no need for the RGST. The IMF, to devise effective policies, should interact with the registered taxpayers of this country and learn what actually happens at the sharp end. There is little point in theorising in ivory towers with officials who are complicit in the sloth, corruption and incompetence that has brought this country to its knees.

If we are in such dire economic straits, what steps has the government taken towards reducing its own wasteful expenditures? Regrettably, all major political parties have failed miserably in this aspect. Are they then surprised that there should be such a loud and vociferous protest at the imposition of this new tax proposal?

Published in The Express Tribune, November 27^th, 2010.