Shifting focus from indirect to direct taxes suggested

The government ought to consider shifting its focus on raising revenue from indirect taxation with easy "tax handles", such as import duties, which would decrease revenue collection.
According to the report of the Panel of Economists, issued on Tuesday, "the government ought to consider shifting its focus on raising revenue from indirect taxation with easy "tax handles", such as import duties, since tax compliance, and hence revenue collection, tends to decrease with higher and higher rates of taxation, aside from the fact that indirect taxes tend to have adverse implications for social justice".
The report said that the government ought to review the burden sharing of taxation. The well-off (the rural and urban elite) ought to be bearing a greater burden of taxation than they historically have, since they tend to receive disproportionately higher benefits from government expenditures. Consequently, taxation of agricultural and urban land and property ought to receive serious consideration as an additional base for revenue enhancement - a source which has favourable implications for equity, and help to reduce the undesirable effect of land speculation which has driven property skyrocketing. A broadening of the tax base should have favourable consequences for the revenue enhancement.
Raising revenues from non-tax sources ought to receive due consideration. The operations of government commercial entities ought to become an integral part of the government's revenue enhancement effort. The operations of some public entities, such as the railways and PIA, which defy commercial norms and persistently vie for classification as government expenditure, ought to receive due attention - ensuring such activities contribute to the budget and not drain it.
The sources of fiscal measures (revenue collection and effective government spending) depend on the co-operation of the public and the discipline and integrity of civil servants, the report said. It said that the new economic stabilisation program aims at reduction in both the fiscal deficit and the balance of payments deficit.
As regards the fiscal deficit: Reduction in expenditure is contemplated with phasing out of subsidies, while enhanced government revenue is anticipated through higher taxes on imports. The tax-to-GDP ratio (of less than 9 percent) for Pakistan is perceived to be low when international comparisons are made. Hence, 'over-emphasis' on finding avenues to boost revenue collection through taxation.
The government also has non-tax revenue base through its engagement in a wide range of commercial activities: such as the production & distribution of electricity and gas, postal services, railways, commercial air travel and banking, the report added.