Indirect taxation makes Pakistan most taxpaying society


Rasheed Khalid


Thursday, July 25, 2013 Islamabad: SDPI Executive Director Dr Abid Qaiyum Suleri has said that the new IMF programme for Pakistan came with ‘front loading package’ as Islamabad failed to implement previous commitments with IMF which would entail fiscal and structural reforms measure before the start of loan negotiations and the fact is reflected in the current budget.


Dr Suleri was addressing a seminar on ‘Pakistan Federal Budget 2013-14 and role of IMF’, organised here by SDPI. The SDPI chief said that newly introduced adjustment taxes to document economy, increase in GST to 17 per cent, gradual withdrawal of un-targeted subsidies, reforms in PSE’s and continuation of BISP are major component of reform agenda. However, he opined that there must be a cap on indirect taxation and innovative governance as keeping on regressive taxation would not serve any more.


He said that Pakistanis are most taxpaying society in a way that even poorest of poor who live on social protection are paying taxes levelled through indirect taxation. He said that although government paid substantial amount to end circular debt but it would further accumulate again unless we give fuel to energy efficient plants, control distribution losses and change energy mix for electricity production.


He asked all the stake-holders to show political wisdom and unite on agenda for common economic reforms. Economist and financial expert Safiya Aftab said that government cannot achieve revenue targets until radical reforms and restructuring is done in current tax administration. Current budget disregards the dismal performance of tax authorities which collected Rs2 trillion against the target of Rs2.7 trillion last year.


She said this year budget estimated Rs3 trillion revenue collection but no policy framework was provided on how to achieve target of additional 1 trillion rupees from last year. This is precisely why IMF in recent negotiations was not convinced that tax administration was amenable to reform, she said adding that only 1.2 million Pakistanis file income tax returns whereas the actual tax payers are even less than that figure.


Analyst and media person Farrukh Pittafi said that over the years in Pakistan, IMF programme was unnecessarily criticised due to which governments, especially the political ones were unable to own them. He asked government, media and civil society to explain true narrative to ordinary people to facilitate economic reforms in the country. He said that IMF track record not only reflected the political decision-making linking it to foreign policy, it also conveniently overlooked its own reform agenda in areas such as defence spending or taxing the sectors with powerful lobbies such as agriculture.


Tahir Dhindsa, Editor SDPI Economic Bulletin, said that Pakistan has exceeding becoming dependent on external budgetary support including foreign aid and loans from international financial institutes such as IMF. He said that this year’s budgetary exercise was shadowed by IMF whose mandatory demands for entering into fresh loan, were embedded into the budget. He said that Pakistan needs monitory support and a steady growth of 3 to 5.5 per cent over next few years to avoid a structural default.


This demands carrying forward the structural adjustment process to improve fiscal situation. He also presented three major reforms to follow in short and medium term basis that included un-interrupted supply of electricity to industrial sector, improve revenue through direct taxation and support to manufacturing and agriculture sector simultaneously. Courtesty News


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