The budget is around the corner, but there is no expectation of ‘out-of-box’ solutions

Pakistan’s taxation system has long been a topic of debate with many arguing that it disproportionately targets the common person more than it does the rich.

The constant increase in taxes on petrol, commodities, and consumer goods has become a heavy burden on the already struggling salaried group and corporations. Meanwhile, the undocumented economy – comprising sectors like real estate, agriculture, and certain professions – remains largely untaxed.

With the budget around the corner, experts are advising out-of-the-box solutions. However, there is little hope. As usual, policymakers will likely tax the same groups that have already been contributing Pakistan’s national kitty. Policymakers also have the International Monetary Fund (IMF) to think about.

Already, taxes on Pakistan’s salaried group have increased and there is talk to increase the burden on them further. The recent attempt to revisit the net metering policy, which allowed households to generate electricity and sell excess back to the grid, is another example.

This move will only add to the financial woes of the middle income groups, which remains the government’s primary target.

On the other hand, big influential sectors continue to enjoy lenient tax treatment. The lack of taxation on agriculture, a significant sector, raises questions about the government’s priorities. Moreover, professionals like doctors and real estate agents seem to be exempt from tax obligations and get away with cash transactions, hiding their wealth.

The government’s eagerness to tax the already taxed is a classic case of “kicking the ladder.”

The salaried group and formal corporations are already contributing to the national exchequer, yet they are being asked to bear more. This approach will only lead to tax fatigue, discouraging investment and economic growth.

The thin neck of a Pakistani, burdened by taxation, is a stark reminder of the government’s failure to address the root causes of economic inequality. The widening gap between the rich and the poor is a result of the government’s policies, which favour the influential and neglect the common man.

To broaden the tax base and ensure a more equitable distribution of the tax burden, the government must focus on bringing the undocumented economy into the tax net. This can be achieved through reforms and incentives for compliance, rather than punishing the already tax-compliant segments of society.

The government must recognise the plight of the common Pakistani and not burden them with taxation just because it is easy to do. The government needs to take steps to alleviate the pressure. A fair and inclusive tax system, where everyone contributes their fair share, is the only way to ensure sustainable economic growth and prosperity for all.

These solutions have been suggested many times, but they bear repeating as a reminder:

• Reform the taxation system to include the undocumented economy
• Introduce incentives for tax compliance
• Reduce tax slabs and increase the tax net
• Implement a progressive tax system
• Increase taxation on influential sectors and professions
• Reduce taxation on essential commodities and consumer goods

The government must take steps to address the root causes of economic inequality and ensure a fair and inclusive tax system. Only then can Pakistan achieve sustainable economic growth and prosperity for all.

Pakistan has not even seen the kind of increase in its literacy rate it should have over the years. Inflation is playing a big part in acting as a hindrance.

The government must not try to grab only the ‘thin necks’.

With electricity, gas, and other utility bills amid historic high prices of edibles and medicines, there is very little room left to breathe.

The article does not necessarily reflect the opinion of Business Recorder or its owners