Decision-making, or the lack thereof, has been one of the characteristics of the present dispensation in Islamabad. Countless announcements have been made and retracted since the Gilani-Zardari duo took charge of Pakistan.
Taxation has dominated political and economic policy making with the reformed GST, and now the flood tax being proposed as a one-time surcharge. Everyone from politicians, economists, salaried professionals and small businessmen have a point of view on the tax incidence.
On Monday, President Zardari proposed a one-time surcharge to raise funds for flood relief in Sindh. His team was quick to point out that due process - cabinet and parliamentary approval - would be sought before the surcharge is implemented.
Opposition parties, however, were quick to dismiss any tax on the already stretched middle class. They fear the tax will disproportionately affect their constituencies.
The distinction between urban and rural population is perhaps most pronouned in Sindh, compared to the rest of the country.
"This surcharge on the elite (as suggested by the government), will instead affect the middle class the most," said Ayub Mehar, an economist.
As a one-time surcharge on provincial taxes, the proposed flood-tax is expected to raise just Rs3.5~4 billion, according to a leading tax expert. He called the exercise futile and instead stressed the need to tax income on high-net-worth individuals.
A lesson in taxation from history suggests that if the levy is purpose specific, it will have a greater impact on revenue, experts suggest. "When individuals witness the services being offered, they are more likely to pay their dues in the future," remarked Zafar Iqbal, a partner at Azimuddin Law Associates, a tax law firm in Karachi.
Public sentiment has aligned with foreign donors that stress on the need for the countrys elite - including politicians, landlords, businessmen and wealthy professionals - to lead the income redistribution efforts.
Broadening and deepening the tax base needs to be a key priority for the government for many years to come. At present, only 2.5 million of the 180 million residents of the country are registered taxpayers.
Taxing large agricultural and residential property and luxury items, such as big cars, could easily draw revenue to the tune of Rs1 trillion based on a tax rate of just 1 percent, according to research by Mian Asif Said, CEO of Cornell Consultants.
While the estimate above may be overstated, large amounts of revenue can be drawn if conscious efforts are made to tax Pakistans high-net-worth individuals to subsidize the lowest classes.
In some ways, the refusal of international financial institutions to extend further lending will force decision-makers to think of internal revenue generation schemes. If sincere efforts are made in this direction, there should be no shortage of money that can pour out of the pockets of the many mistrusting citizens of Pakistan.
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