EDITORIAL: With the Stand-By Arrangement (SBA) greenlighted by the IMF (International Monetary Fund), after such a close shave with sovereign default, one would think that the government would’ve finally realised that it must do whatever is needed to increase tax revenue.
Also, more importantly, that it can no longer keep its preferred holy cows out of the tax net purely for political convenience. Yet even though it has already become painfully clear how quickly the Fund can turn away, even mid-way through a programme, if the government fails to walk the walk after talking the talk and signing on the dotted line, it seems authorities are making the same mistake of favouring certain groups by exempting them from taxes all over again.
A report in a local daily, not challenged by the government so far, claims that more than 50 percent of 9,082 big retailers “will exit the FBR (Federal Board of Revenue) system due to the omission of one registration condition under the law by the government”, and that “this omission will further erode the tax base of Pakistan”.
If true, it would mean that the PML-N-led PDM government has simply removed an important condition for integrating large retailers with the FBR system through the Finance Act 2023 just to support retailers – one of its core constituencies. The paper claims, quoting FBR officials, that about 4,800 big retailers would benefit from the recent legal change in the General Sales Tax Act. That means additional tax revenue, agreed with the IMF, will have to be squeezed out of the already heavily taxed salaried class while the big fish get to enjoy yet more time in the sun.
This is a very serious situation. Deprived of the luxury of an expansionary budget in an election year, is the government wriggling around to still sprinkle favours around to guarantee votes? If so, the Fund would surely take it as an insult because it would mean that all the time the government was promising to fulfil all conditions of the SBA with a straight face, it was still maneuvering as if it were business as usual. And, if recent experience is anything to go by, a snub will come swiftly and forcefully, depriving the economy of IMF’s life support system once again.
It’s not just retailers, of course, because a number of sectors remain untaxed or under-taxed even as the economy, indeed the whole country, faces an existential threat that can be mitigated only by increasing tax and export revenue. Yet even now, any party that comes to power keeps retailers, wholesalers, feudal lords and real estate tycoons and their billions comfortably sheltered from their fair share of taxes.
That naturally necessitates further burdening the people that do pay, or have no option but to pay taxes. And doing that in a country with one of the world’s highest population, poverty and illiteracy rates is like lighting dynamite with a very small fuse. It will have not just economic, but political and social consequences as well.
It also shows ordinary people, whose votes supposedly put the political elite in power in a system of representative government, where they really stand in the bigger scheme of things. That they are the first to be thrown under the bus — in this case forced to pay others’ taxes — brutally exposes the painful reality that politics in Pakistan is only about the privileges and powers of politicians; nothing more. There’s no extent they would not go to, nor any line they wouldn’t gladly cross, to entrench themselves more firmly in power; even if it is at the cost of the common man.
Securing the SBA made for great optics for the government. But if it uses it as a shelter and plays the same old (tax) game of protecting its favourite clients, then it will have to answer to the IMF as well as the people of Pakistan.
Copyright Business Recorder, 2023