In all vibrant economies, taxation always requires moral and constitutional authority; hence, its mechanism and ratio become secondary issues. Ironically, taxation in countries in economic disarray and distress facing equilibrium deficit, is ever considered a vice, menace and curse.
The situation gets worse at a time when taxation lacks moral authority and its mechanism benefit the rich and strong, punishing the poor and the vulnerable. Numerically, Pakistan falls among the few states where taxation is on the lower side; its ratio is marginal. Still, any bid for wide-range taxation from the government invites a vitriolic response from people because of a variety of reasons. Mainly it is the merciless wastage of the hard-earned money, the brutal drainage of taxpayers' earnings by the ravenous monster of corruption
Apart from the main thrust that tax must be spent as sacred money only for the maximum welfare of the people at large, our focus in this article is on the traditional views and concepts of taxation in the contemporary theories. There exist two main views: First, populous and second, elitist. In the first, the mechanism of progressive taxation covers income and wealth through various slabs in order to maintain economic and social equilibrium in society. In the second, the mechanism of taxation is regressive which exonerates the super rich from the core network of tax, shifting the burden on the medium and lower medium segments of society. More elaborately, the tax-base is broadening in the former also covering the super rich, which explicitly means that the more the wealth and income the more the ratio of taxation. In the latter, however, the tax-mechanism is inversed which means corporations and mega-businesses enjoy immunity on one or the other pretext.
The following pattern of taxations explains both the views. According to statistics released by the World Bank 2009-10, an individual pays 20% tax on his/her marginal income, a business entity 31% on profit and a corporate 35% in Pakistan. Similarly, an individual pays 40% tax on his/her marginal income, a business entity 65% on profit and corporate 29% in France. This mechanism operates in India, which differs from Pakistan and France.
For instance, an individual pays 30% tax on his/her marginal income, a business entity 65% on profit and a corporate 34%. In China, doubtlessly an emerging economic giant on the globe, an individual pays 45% tax on his/her marginal income, a business entity 78% on profit and a corporate 35%. More precisely, a business entity pays lesser taxes in Pakistan, a maximum in China while equal in France and India ie 69% and 65%, respectively.
In 2010, the GDP growth rate in Pakistan was 4.8%, in China 10.3%, France 1.5%, and India 10.4%. Apart from France, the populous tax mechanism is marvellously supporting national economies in China and India. Pakistan's is under stress due to elitist taxation. Comparatively, China is the fastest growing economy, India is stable but improving; however, France's economy is instable and showed even negative growth rate in previous years because of being a member of the European Union facing collective recession since 2007. So, with each passing day, populous taxation is becoming inevitable for every nation state.
In his concluding budget speech, Pakistan's Finance Minister pledged to collect taxes from one million tax dodgers who include capitalists, industrialists, media-merchants, politicians and mafia tycoons. Even then, anticipated tax collection, as indicated by the FM, does not register any major contribution in the government's revenue. Therefore, a dire need arises to consolidate efforts to further broaden the tax base in order to invoke a populous view of taxation; instead of elitist. Hence, the government is required to check wastage and evasion of tax money, which will help it to exercise its authority in harmony with moral authority for collection of new taxes. Contrary to it, shall add another abortive attempt to the long list of many failed attempts of the government in the past.