Budget 2012: What about tax collection?

Dr Hafeez Shaikh is a helpless man. He says powerful lobbies in the country do not want to pay taxes. This is true, but it's nothing new for us. What duty is the current elected government performing, if not tax collection, to run the country?

Everyone wants the budget to provide some form of relief but nobody is willing to pay tax. Unfortunately, those who do end up paying their taxes in Pakistan, the salaried class, are being further burdened, while the powerful people in agriculture and services sector are free of any societal responsibility.

It is well known that government expenditure in our country currently exceeds our earning capacity. Major expenditures like our defence budget, the interest payment on our debt, and huge subsidies on our power sector and state-run organisations leave us with lower funds for infrastructural development.

However, the reality that we need to come to terms with is that no government has a magic wand that can be spun to provide relief to its people; tax collection is not an option, it is a necessity, and without enough tax collection relief should not be expected. Pakistan has one of the lowest tax-to-GDP ratios in the world; we stand at nine percent while arch rival India stands at a whopping 17 percent.

Last year’s tax collection target was set at Rs1, 588billion, which our ever efficient Federal Bureau of Revenue (FBR) claimed to have achieved only for us to discover later that the amount collected fell short by at least Rs40 billion. This year’s target has been set at Rs1, 952billion but experts believe that the government may fall short this time too by at least Rs30-40 billion.

Despite this fact, Humayun Bashir, the President of the Overseas Chamber of Commerce and Industry (OICCI), a leading association of 180 multinationals operating in Pakistan, complimented Hafeez Shaikh for working hard to achieve the tax collection target.

Regrettably, one of the few positive things that the present government wanted to do in tax collection was the implementation of the Reformed General Sales Tax (RGST) bill, which was thwarted by leading parties like the PML-N and the MQM. Unfortunately, a large section of our mainstream media went against the government and towed in populist sentiments that the RGST would increase inflation etc. Hence, RGST is now a lost dream.

It is unfortunate that our leading political parties are not giving any thought to the collective and long term benefits of such a modification, that could help the people of the country, but have instead succumbed to popular politics. More tax collection means more funds for the aam aadmi (ordinary man) otherwise, we will all continue to suffer.

The government, however, has now fixed the tax collection target at Rs2, 381 billion for the fiscal year of 2013; at this point, all we can do is hope for the best.

Read more by Farhan here.