EDITORIAL: Once again the tax-to-GDP ratio for the last fiscal clocked in at nine percent and, typically, once again there hasn’t been a squeak out of the government about the real reason it’s stuck in such a low band even though this is the fifth-highest populated country in the whole world.
It’s because this government, just like every other administration before it, bowed to political pressure and left the biggest fish – agriculture, wholesale, retail, real estate – un- or under-taxed and now there’s no hope at all of this fiscal year’s outcome to be any better than the last one’s.
The new banker-finance minister promised to finally tax these holy cows, just like every other finance minister before him, but didn’t – or couldn’t? – do it when the budget was rolled out. His promise made a lot of sense. We were on the cusp of another critical EFF (Extended Fund Facility) with the IMF (International Monetary Fund), and taxing untaxed Big Money would have created the fiscal space needed to meet the harsh “upfront conditions”.
But when push came to shove, the cruel tax burden fell not on these bloated mafias but on the common, hard-working people who’re already footing the debt bill because they’re forced to pay taxes even when their real incomes have not kept up with historic inflation and unemployment.
It’s rightly said that the most dangerous lies are the ones we tell ourselves. And over the years our leaders seem to have come to really believe that protecting the rich, connected and powerful from the tax net while squeezing more and more out of ordinary, law-abiding citizens is the right way to run the country.
Even now, with the economy on the brink of ruin, the specially protected sectors are allowed to use pressure tactics, outright blackmail, or more often their contacts in government to avoid paying their fair share.
Agriculture, for example, still makes for less than one percent of provincial revenue figures. In such circumstances, you’d expect a committed government in the centre to calculate the agri tax at the same tax rates as ordinary people pay and then deduct said amount from annual NFC transfers.
But since the central government is also littered with the same kind of feudal lords and industrial barons, it’s no surprise that no such smart idea ever sees the light of day. And we go round and round in the same circle.
The big problem is that now the well is running dry. Most common Pakistanis have seen their real incomes drop badly because of the economic downturn of the last few years, especially unprecedented inflation and unemployment.
And since they’re earning much less in real terms yet must pay far more taxes – just so the government can meet the Fund’s conditions and avoid default – it’s only a matter of time before we reach some sort of critical threshold.
For a while, though, it really did seem that this time would be different. This government took office after a very controversial election, but promised that it understood the gravity of the situation and was willing to do whatever it took to sort out the economy.
And it really seemed that the new finance minister really meant business when he talked taxes; that he’d bring the no-nonsense, clinical calculus of the banking world to the finance ministry and set the budget right.
Alas, it was not to be. It’s not just that we’re unable to expand our tax net and raise tax revenue. It’s that the state is not interested in it.
Copyright Business Recorder, 2024
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