Federal Minister for Finance and Revenue Muhammad Ishaq Dar has been repeatedly announcing that the government has not imposed further taxes on agricultural and real estate sectors in the wake of $3 billion loan as part of the nine-month Stand-by Arrangement (SBA) with the International Monetary Fund (IMF).
How surprising it is that the country is under an IMF programme and therefore required to meet certain conditionalities of the lender, including a marked increase in tax collection.
Instead of widening the tax net, the government has preferred to add to the tax burden of those who have been paying due taxes religiously and obligingly, although fairness demands that government’s taxation system should be equitable to all citizens.
However, what is important to note in relation to the debate on how to raise taxes is IMF’s own reluctance to show strictness in relation to fiscal reforms or the matters relating to tax generation and the revenue distribution in a programme country.
According to the IMF itself, for example, “although raising high tax revenues in this situation ideally calls for the rich to be taxed more heavily than the poor, the economic and political power of rich taxpayers often allows them to prevent fiscal reforms that would increase their tax burdens.
This explains in part why many developing countries have not fully exploited personal income and property taxes and why their tax systems rarely achieve satisfactory positivity.” What one can safely deduce from the foregoing is that bounding programme countries (developing countries) to carry out taxation reforms has never been IMF’s priority per se.
Secondly, insulating agriculture and real estate/construction sectors against imposition of increased taxes clearly shows that the government has succumbed to the pressure of the economic and political power of the rich taxpayers owing to a variety of factors, including the upcoming general election.
Tariq Mahmood Kharal
Lahore
Copyright Business Recorder, 2023
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