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EDITORIAL: One reason our ruling class always paints IMF’s conditions as “harsh” is their own inability, rather unwillingness, to do as the lender really says when it pushes the government to increase revenue and cut the fiscal deficit.

Caretaker PM Kakar was, in fact, only the latest head of government to be told, pretty bluntly, to tax the rich and protect the vulnerable as he met the IMF chief, Kristalina Georgieva, on the sidelines of the UN general assembly.

Just months ago, she delivered the same advice to the PDM government and its finance minister, Ishaq Dar, when time was running out to save the now discarded EFF (Extended Fund Facility).

But, typically, not only did the government not go after big tax evaders in the agriculture, real estate and retail sectors, the finance minister went on live television and categorically rejected any measure that would help revenue collection at the cost of alienating the powerful and connected lobbies that lubricate expensive election campaigns for politicians.

That is why, quite naturally, the burden of increased indirect taxes to meet the stiff revenue target fell once again on honest taxpayers who are unable to cheat their way out of paying their fair share.

The caretaker setup does not need to extend such favours to be cashed in later, because it does not comprise professional politicians, but it also does not have the mandate to present a budget or toggle with the revenue stream. So, the best it can do with the Fund’s advice is hope that it will finally find some resonance in power corridors.

That is very unlikely if the past is any guide because no political administration or military dictatorship has yet had the nerve to go after the big fish with high nuisance value that flout the tax regime with impunity.

Yet now that the economy is at the end of its rope, quite literally, whichever party forms government next might not have any other option but to finally do the right thing, regardless of the personal cost to its hierarchy.

Surely, they can all see that the idea of trying to meet tax targets by increasing indirect taxes, which affect lower segments of society far more than upper classes, was not a very smart one. And ordinary people, already overly burdened with historic inflation, unemployment and inflated bills, are not very far from considering outright revolt if the government keeps tightening the screws on them.

It’s not exactly rocket science to figure out what to do and the government doesn’t really need the IMF chief to tell it that failure to tax the rich will put the country’s survival itself into question. And the way to do it is to impose direct taxes on high income, with cascading effect so the highest earning slabs are incrementally taxed the most.

Everybody knows that the government, regardless of the party in power, has made a habit of leaving trillions or rupees in unfairly, and often illegally, untaxed income. And only bringing these sums into the tax net will give the government the chance to negotiate better terms with the IMF.

It’s a shame that our democratic leaders, voted into power by ordinary people, have never cared to implement a fair tax policy. Even now, with the noose of sovereign default casting its shadow and the lender of last resort calling for an efficient tax regime, there’s a slim chance of policymakers actually going down that road.

If the old trend still doesn’t change, and if the untaxed are not taxed through widening of the tax net and the vulnerable are not protected by the state, then at least the people will know very clearly who to blame as things reach a tipping point.

Copyright Business Recorder, 2023

Comments

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KU Sep 29, 2023 11:09am
The IMF and WB should push the government to form a national economic revival ordinance/committee, with members including economists, industrialists, and agriculture, and declare politicians and bureaucrats as ‘’persona non grata’’. Alternately Pakistan is not going to get out of the politician-made economic chaos any time soon. The decision dragging and reluctance in netting the untaxed due to favor is a familiar story, similar reluctance to catch the thieves stealing electricity, gas, and hoarding is being witnessed. If there was a ''mother of all wars'' to be fought, the armed forces should fight this war against corrupt characters that are currently busy destroying our country.
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Builder Sep 29, 2023 11:20am
Tax the rich? You mean salaried class, right? 'Cause that's the easy target paying both direct and indirect taxes.
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Johnny Walker Sep 29, 2023 02:41pm
Mr Kakar has just spent millions on his and his family and friends 15 day junket abroad at tax payers cost. You simply cannot expect this greedy lot to tax their benefactor's. The rich will not be taxed unless a grassroot uprising takes place.
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Khalid Khan Sep 30, 2023 07:38am
Your editorial avoids recognizing the actual biggest threat to the country which is the external account deficit.
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Usman Sep 30, 2023 02:07pm
@Johnny Walker, exactly.Thats what pti was opposing when omln wanted to tax the rich qureshi and asad umar use to protest against it.
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Az_Iz Sep 30, 2023 08:11pm
Taxing the rich is easier said than done. The wealthy will find many ways to escape the taxes and move the money out of the country. And cascading tax rates will do the same. Providing tax breaks for investments , may encourage the wealthy to bring or keep the money in the country. Which will create jobs, expand the economy and also help to increase the revenue for the government.
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Az_Iz Sep 30, 2023 08:21pm
End all the subsidies, which everyone including the wealthy benefit from. Then figure out ways to compensate the low income families. Maybe by setting up and enforcing minimum wages for the poor and laborers.Provide cheap public transport which will benefit the middle class. Increase sales tax on luxury items like big cars ,SUVs , high end smartphones etc which the wealthy will buy regardless, although the revenue generated from this will be very tiny. Just increasing the tax rate on high income will not work, simply because, the wealthy know how to hide their income, more so in an economy that is not very well documented.
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Tulukan Mairandi Oct 01, 2023 07:27pm
Heavy taxes must also be slammed on overseas Pakistanis. They can't have their cake and eat it too!!!
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