There is neither any insignificant buzz nor a normal bugaboo about the budget for the fiscal year 2004-05, to be announced this week. Nonetheless, traditional suggestions by trade bodies and industrial associations, besides pre-budget seminars by professional institutions in preparing proposals are in quite good number.
The proposals sent to the federal finance ministry for acceptance by all 'concerned' with tax affairs contain one common point which is a 'request for reduction' in the rates of taxation, both direct and indirect.
Fiscal reasons in support of such common suggestion have been eloquent on this point.
It would be better to initiate a bold move to trim the existing four tiers and four forms of taxation in vogue in the tax structure.
The four tiers and forms are creating complexities in laws, rules and procedures to implement to collect taxes and enhance the revenue. It is indeed imperative to cut the long taxation tail creating torments.
Trimming the tiers, so as to sharpen the key spheres, is indispensable to make taxation 'a friendly feature'. Trimming can help in better administration of taxes, enabling higher collection without coercion.
A word about the four tiers existing in the taxation domain. These tiers refer to: (1) federal, (2) provincial, (3) local government and (4) informal.
All of these are government structured and as many as 35 agencies are on parade in the field. Within the four tiers, all created by the government, each segment contains a number of taxes, some of them imposed arbitrarily and, as such, being collected in a coercive manner.
One can easily visualise the frustration in accumulating the taxes from the helpless taxpayers. Keeping proper track of such an array of taxes and tax levying agencies, with big bands of collectors, is well nigh impossible.
It makes, at the end of the day a 'grand' tally representing very high cost of carrying business, professions and its direct bearing on cost of production and distribution, being dished out in high prices for the consumers, rendering the life of the masses miserable.
The informal tax refers to 'voluntary' service collections by all the four tiers' departments.
Liberal characteristic of corruption, absence of good governance and often business efficiency dictates create extra stress. Not a single small business unit and even hawker are an exception to the informal taxation, besides 'Bhatta' culture which is flourishing.
The four tiers of taxes, 35 agencies, as many taxes and tax collectors make the life of the taxpayers miserable.
It is time to ameliorate the situation and cure the taxation structure from being a hardship by multiple tiers, forms and rates.
Taxes hold in four-dimensional collections are classified as (1) direct, (2) indirect, (3) price and tariff, and (4) invisible.
Like four tiers, the four forms make taxation tricky to deal and tough to bear. Like the four tiers, the four forms make the taxation system in vogue really complex, rather complicated. It is not a compulsion but obsession to make taxation so twisty.
Taxation needs to be simple to understand, easy to comply with and efficient to serve the public interests. Eight canons of taxation have been described by the economists.
The taxation prevalent in our midst will rarely pass test of two among the eight principles so defined. This means the need to reform, reshape and restructure the taxation system.
The present government has often pledged to tailor taxation outfit to tolerable dimensions and bearable limitations. Time has come to translate this into bold deeds. Time is on the right side, as macroeconomic indicators denote.
Tax receipts tend to be in a high tide and may go over to Rs 510 billion from the target of Rs 505 billion.
Exports are in fine tune to meet the target revised to $12.10 billion. Growth rate of gross domestic product stands revised to six percent and is poised to surpass its target of 5.3 percent.
Investments have geared up to match the target of 16.8% of the GDP. Budgetary deficit will be contained fairly at four percent.
Real GDP growth of six percent shall create greater fiscal space. Growth of monetary assets at 13 percent emanating from fine forex inflows, besides keeping the balance of payments in surplus, it has remarkably reduced debt servicing on domestic borrowings by the government.
Similarly, repayment of costly external debts before schedule and remission etc have brought external debts down to $31 billion. All these features are fascinating after economic horizons being covered by thick dark clouds for a very long time, almost two decades.
Light at the end of the tunnel has come true as it has ended travel filled of danger and fear. So, it is time to reduce tax strains, in tiers, forms and rates for equity and, of course, prevent additions in it which may prove a proverbial last straw.
Reduction in numbers and rates of taxes will not dent the projected revenue receipts any more. GDP growth to exceed its target by 13.20 percent shall as much increase tax and aggregate revenues without effort and inconvenience. This shall help to eliminate some numbers from the tax book.
Some taxes tend to be incurring administrative cost more than their collection. Some others tend to be quite inconvenient to the payers, creating hardships, hassle and cause harassment.
These should not have been there ab-initio. There is no justification to keep them alive and make them a means to little ends. Their instant removal is overdue.
Easy access to credit facilities and substantial reduction in debt servicing, besides more money with dominant segments of the society, have made business more rewarding. Bottom-lines in black have brightened up.
Income tax slab needs revision, towards reduction, for sharing of the bonanza by the business and not all of it to be picked up by the government. Let business and government be partners in growth and progress.
Leverage shall make business proactive to vigorous pursuits. It shall spring growth of revenues by growth momentum of the economy, a perfect equation for progress and prosperity to usher. It is imperative, as such, to reduce the rates of taxation.
Over the years, the GoP has markedly revised the upward prices of food items, clothing etc and raised tariffs of utilities, services, gasolines, etc. As a result, the costs and prices of goods and services have shot up.
This is the result of tariff administrative form of taxation. It has taken too high a toll to bear any more and deserves to be reduced carefully.
The most vicious victim of invisible taxation, besides the two distinct forms, direct and indirect, has been the fixed and lower income groups.
Inflation, the notorious invisible form of taxation bites the said segment the most, as it is fully exposed to all the three forms and without flexibility to escape the brunt. Taxation axe falls in totality on this group and leaves no room to relax.
This segment deserves generous treatment, since it bore the burnt in totality in the past. It is time to compensate this section having made immense sacrifices in the past. If it is ignored this time, it will lose hope for a fine morning to dawn.
The group which contributed the most despite its economic difficulties turning more acute, in good time it must be given a better deal, instead of administering more and harder blows.
This is time to repay it in a liberal manner. Income tax rates ought to be reduced for the salaried class and the small business.
Sales tax at a single rate of 15 percent, irrespective of the nature of goods is notorious and a major blow to the poor, lower and middle income segments of the society. Food items shall be set at zero rate of sales tax.
Likewise the necessities be subject to five percent, comforts at 10 percent and luxury items at 15 percent rates of sales tax. Discreet treatment shall not be deemed as detrimental and discriminating.
It is time, a fine time indeed to keep the economic tides rising by trimming taxation tiers, numbers and rates. Let it be a time to make taxation friendly to the payers, which it has never been in memory of the present generation.
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