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Perspectives

The budget is around the corner, but there is no expectation of ‘out-of-box’ solutions

  • Analysts and followers expect govt to tax the groups that are already contributing with little to no hope on a widening tax net
Published Updated
Image generated by AI
Image generated by AI

Pakistan’s taxation system has long been a topic of debate with many arguing that it disproportionately targets the common person more than it does the rich.

The constant increase in taxes on petrol, commodities, and consumer goods has become a heavy burden on the already struggling salaried group and corporations. Meanwhile, the undocumented economy – comprising sectors like real estate, agriculture, and certain professions – remains largely untaxed.

With the budget around the corner, experts are advising out-of-the-box solutions. However, there is little hope. As usual, policymakers will likely tax the same groups that have already been contributing Pakistan’s national kitty. Policymakers also have the International Monetary Fund (IMF) to think about.

Already, taxes on Pakistan’s salaried group have increased and there is talk to increase the burden on them further. The recent attempt to revisit the net metering policy, which allowed households to generate electricity and sell excess back to the grid, is another example.

This move will only add to the financial woes of the middle income groups, which remains the government’s primary target.

On the other hand, big influential sectors continue to enjoy lenient tax treatment. The lack of taxation on agriculture, a significant sector, raises questions about the government’s priorities. Moreover, professionals like doctors and real estate agents seem to be exempt from tax obligations and get away with cash transactions, hiding their wealth.

The government’s eagerness to tax the already taxed is a classic case of “kicking the ladder.”

The salaried group and formal corporations are already contributing to the national exchequer, yet they are being asked to bear more. This approach will only lead to tax fatigue, discouraging investment and economic growth.

The thin neck of a Pakistani, burdened by taxation, is a stark reminder of the government’s failure to address the root causes of economic inequality. The widening gap between the rich and the poor is a result of the government’s policies, which favour the influential and neglect the common man.

To broaden the tax base and ensure a more equitable distribution of the tax burden, the government must focus on bringing the undocumented economy into the tax net. This can be achieved through reforms and incentives for compliance, rather than punishing the already tax-compliant segments of society.

The government must recognise the plight of the common Pakistani and not burden them with taxation just because it is easy to do. The government needs to take steps to alleviate the pressure. A fair and inclusive tax system, where everyone contributes their fair share, is the only way to ensure sustainable economic growth and prosperity for all.

These solutions have been suggested many times, but they bear repeating as a reminder:

  • Reform the taxation system to include the undocumented economy
  • Introduce incentives for tax compliance
  • Reduce tax slabs and increase the tax net
  • Implement a progressive tax system
  • Increase taxation on influential sectors and professions
  • Reduce taxation on essential commodities and consumer goods

The government must take steps to address the root causes of economic inequality and ensure a fair and inclusive tax system. Only then can Pakistan achieve sustainable economic growth and prosperity for all.

Pakistan has not even seen the kind of increase in its literacy rate it should have over the years. Inflation is playing a big part in acting as a hindrance.

The government must not try to grab only the ‘thin necks’.

With electricity, gas, and other utility bills amid historic high prices of edibles and medicines, there is very little room left to breathe.

The article does not necessarily reflect the opinion of Business Recorder or its owners

Bilal Hussain

The writer is the Head of Digital Content at Business Recorder

Comments

Comments are closed for this article.

Aamir Jun 11, 2024 10:22am
Unbalanced article .taxation is one side? No mention of expenditure side at all. What about excessive defense budget? SOEs and high current expenditures ? Budget means analysis of both sides
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KU Jun 11, 2024 11:32am
Cognition n morality are not for our leaders. A nation that accepts lies n injustice by threats of laws n corrupt, has to fight or choose flight. Anyway, poetic justice n tragedy is around the corner.
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zh Jun 17, 2024 09:43pm
For an out-of box solution is necessary for the governing class to be able to think out-of box.
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