The increasing poverty in Pakistan is the direct result of indirect taxation. Our tax collecting agencies at the federal and provincial levels only know how to squeeze the common man, - who has no voice in the corridors of power - by enhancing the rates of utilities.
The increase in the rates of electricity, gas charges, telephone and petrol/petroleum products, results in price-hikes of every item of daily use.
The impact of an enhancement in indirect taxes wide ranging with multiple effects on the common man's daily life, making his income shrink even further.
The common man has very few opportunities to enhance his income, he is left with no option but to cut his expenses even further.
First of all, the education of the children is sacrificed. These children are forced to look for non-existent jobs, aggravating the employment situation.
Above all, the continued lowering in the value of Pakistani currency, during the last decade, has made imports costlier and also increased the debt burden.
The value of one dollar equal to Rs 17 in 1988 increased to rupees 57 in 1998! The burden of imports was most damaging for the industrial sector, hundreds of industrial units closed down.
And we witnessed a phenomenal increase in unemployment and resultant poverty.
The incidence of poverty was further precipitated by the imposing of the Sales Tax regime hardly contributed 60 to 67 billions rupees to the government.
kitty, but caused immense problems to the business community, particularly small traders and home based small manufacturing units. Besides the ever increasing rates of utilities, government taxes on petrol/petroleum products are more than double than the actual market prices.
The price of one-liter petrol is about rupees thirty and includes rupees 17 or more as government taxes. Hence indirect taxes have great role in increasing poverty by affecting the prices of daily-use items, making the inputs costlier for the industrial and agriculture sector.
Many industrial units closed down due to the high costs of inputs rendering the small-scale manufacturing non-profitable.
This, in turn, further aggravated the unemployment situation and increased the number of poor in the country.
These days, a greater emphasis is being laid on the alleviation of poverty. Yet, it cannot be controlled and brought to some acceptable percentage without addressing the above-mentioned causes.
Poverty has been created and aggravated by imposing indirect taxes and enhancing rates and duties without considering the impact of these increases on national economy or on the life of the lower income groups.
What is more, tax collection did not improve, and we continue to beg and borrow. The total outlay of the annual federal budget of 750 billion rupees contains over 400 hundred billions rupees of borrowed money called "external sources" in every annual budget.
If financial managers are serious, about addressing the dual problems of unemployment and increasing poverty, then they must evolve a system of taxation, based on fairness, equality and justice.
We need to think according to our own dynamics, socio-economics priorities and the golden principles of religion Islam.
These were the basis, the ideology behind the creation of a separate state for the Muslims of the Indian subcontinent.
Our founding fathers did not envisage on merely changing the colour of the skin of the Banyas holding us hostage to their purse string.
Our "foreign educated" financial experts and the highly paid CBR officials must do some soul searching and simple calculations.
They should make it easy for the citizens of this country to be honest, willing, and proud tax-payers instead of turning them into tax avoiders, forcing them to hide their earnings and assets like ordinary thieves, by considerably lowering the rates of taxes and applying the universal percentage of income tax, of not more the 10%. To regain our financial sovereignty, and to generate enough revenues to meet our budgetary requirements without resorting to "external resources" we must reconstruct our tax system on the basis of "incomes and not consumptions."
The revenue generation must be through direct taxation, and not by constantly levying and increasing the rates of CED and surcharges on utilities, petrol/petroleum products.
Pakistan is a country of 150 million people, one-third (50 million) lives below the poverty line, and another 50 million people belong to the lower middle class or low income groups, who are struggling hard to meet their daily needs.
They cannot be expected to contribute to the state revenue by paying income tax. But a third of the 150 million people certainly earn enough to shoulder the responsibilities of generating enough revenue for the state exchequer to meet its budgetary annual requirements.
Recently the C.B.R increased the limit of taxable income from rupees 60,000 per annum to rupees 80,000, which is still highly unrealistic.
A family of a minimum of five members can not possibly live with in an income of six thousand six hundred rupees monthly, and eat three meals a day, not to speak of meeting the expenses of education and its health needs.
This must be raised to an annual income of rupees 120 thousand, the income tax rate should be fixed at 10% for all earnings over and above this figure without any "slabing" or rebates, because this opens the flood gates of corruption.
The 50 million people who belong to the upper middle and rich classes, do earn enough to live a comfortable life, (this fact can be gauged by many indicators, such as the number of expensive schools, restaurants, number of private vehicles owners, posh housing areas of the cities etc) Assuming that each family of the higher-middle and upper class comprises of five members and there is one earning member whose income provides all the necessities and comforts to his family, he is certainly earning enough to be able to pay a minimum, rupees ten thousand annually, to the government as income tax. This gives a number of 10 million income tax payers instead of only 1.5 million taxpayers. The heads of ten million families of the higher income groups, by paying a minimum income tax of ten thousand rupees annually, can contribute an amount of rupees one thousand billion to the annual federal budget. Our present budget requirements are 750 billion rupees only. It includes 40% borrowed money. To acquire this "external source of income" we have been pledging our sovereignty for decades and keeping two-thirds of our population living in despicable conditions, with the lowest standard of health and education.
Our finance minister stressed upon the importance of direct income tax, it being the ultimate source of revenue generation.
He also advocated a self-assessment scheme for paying income tax. Why is he then reluctant to apply it, to all who want to pay their taxes without hassle. Every Pakistani who earns enough to pay taxes will pay willingly if the rates of income tax is reduced to 10% and made applicable universally on all incomes without breaking the income into different 'slabs'.
At the same time, paying taxes must be made easier. Provide a simple two-page form at all the scheduled bank branches, all over the country, a round the year. Taxpayers should be able to pay taxes at the nearest bank branch, thirty days before the new fiscal year starts, and they should receive a receipt with a computerised number, to send to the regional tax office for the issuance of a proper NTN.
The government would collect enough revenues by adopting these simple and direct procedures, and would be able to take back all the indirect taxes, which are hampering local investment, growth of industry, agriculture and increasing the incidence of poverty. Above all, free the nation from the need to beg for loans at every budget and hence, protect our economic sovereignty. We will then be able to eliminate poverty from all over Pakistan.