Vat can spark widespread tax evasion

After GST, now a new Frankenstein is about to suck whatever life is left in the veins of emaciated Pakistanis. The Prime Minister and his aides are saying that the value-added tax (VAT) is just a sweet GST, and wouldn't have much effect. Yes, it wouldn't have much effect on the Pir of Multan, his boss and their acolytes, who only know how to count in billions.
The IMF is so insistent on the imposition of a value-added tax (VAT) that it has relaxed the targets it had set for Pakistan to achieve in the 2010-11 financial year, including the target for the budget deficit as a percentage of the GDP. It must not be assumed that the IMF has abandoned anything, just that it hopes to achieve the results it had intended from the original targets, from the imposition of the VAT.
Those results include the economic subordination of Pakistan, so that it continues to be dependent on IMF handouts, and continues to toe the US line generally, but particularly in the war on terror. This is particularly important after the US has planned to withdraw from Afghanistan towards the end of the financial year.
The VAT, Pakistan must impose to gain help from the IMF, could spark widespread tax evasion as a protest from businesses and a public. But it is interesting to note that the government has silently abandoned its commitment to tax agriculture as well as speculative businesses like real estate and the stock exchanges.
The VAT, or GST in VAT mode is usually implemented in robust/sustained economies, but fortunately (or rather unfortunately ) these days Pakistan has become an economic laboratory of the IMF, which is in the process of experimenting with the effects of implementing the VAT in a country passing through recessionary period. It is about to be experienced in a country, which is, at the moment, riddled with a stalled economy, internal political problems and chaos among its provinces over the distribution even after NFC award.
As per the requirement of the IMF, GST is required to be replaced by VAT. It will increase prices of products by 15%.The replacement of general sales tax (GST) with value added tax (VAT) on October 1, 2010, may increase prices of over 122 major categories of items, including food, by at least 15 percent and yield an additional revenue of about Rs 80.5 billion to the exchequer, according to official estimates.
Issuance of SROs, without much deliberation and haste, leads to many complications. It symbolises a syndrome and is a major cause of policy and enforcement problems. Underlying causes include lack of political vision, lack of tax professionalism and intellectualism and prevalence of colonial mindset of the bureaucracy.