Genuine taxpayers on thin ice

It didn’t surprise many when the petroleum minister announced a less-than-proposed reduction in fuel prices, as dwindling tax revenues have made authorities resort to unpopular methods that only give voice to rage against the government. The reasons for not reducing fuel prices in proportion to international oil rates — they have come down by almost 60 per cent — are simple; the country has been unable to increase tax collection, is running a budget deficit, is in debt and taxing fuel is a huge source of revenue. Given the brief rally in the price of crude oil internationally, the decrease was never going to be as much as the oil regulator had proposed.

But given the public has to accept and make peace with higher tax rates on fuel — which amount to approximately 45 per cent in the case of high speed diesel — the least the government can do is show good faith and go after sectors that do not pay taxes. In time of declining oil prices, countries tend to increase tax rates on fuel consumption and while this may not be a populist decision, Pakistan has very little choice. More than half the public is not aware of what taxes it is required to pay, most don’t want to pay any and the rest are taxed through measures beyond their control. The ones who don’t pay taxes thrive on the government’s inability to enforce law and feed on its inclination to take the easy way out by raising tax rates for the rest. And this is exactly why the ones who are taxed, don’t want the additional burden. Power consumers are already paying higher in some cases, to make up for theft and distribution losses. The fight against terrorism and the cost of it has already meant higher taxes across various sectors, resulting in a one-off super tax this fiscal year. The government is stretching its hand and is almost maxing out its limit. The withholding tax has already made enough headlines. While one cannot predict an outburst, the government seems to be on thin ice with the tax-paying public. However, since the tax-paying public is a ‘minority’, the government isn’t too worried.

Published in The Express Tribune, September 5^th, 2015.

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