Creating a ‘Robin Hood effect’ through equitable tax reforms

LAHORE: By the time this regime assumed power, the country was in dire need of aggressive changes in revenue collection system or may be of some 'Robin Hood effect creating reforms' that truly tax the rich and justifiably relax the poor, but, as expected, the ‘old whine’ in the ‘new battle’ did what it does the best –preserve the status quo.

The result is that prices of essential items have shot up sharply, while the rich and corrupt are sitting comfortably. Taking few political leaders to accountability courts or starting probes against those who parked money abroad is an administrative action and has got nothing to do with reforms.

Removing encroachments again is an administrative action that hurt many innocent but avoiding actions against those who actually abetted the encroachers have not been taken to task.

The government could have pursued accountability but should have given priority to the third generation reforms.

When the inequality in the country increases it indicates the richer segment of society is benefiting more and the poor are sidelined. The planners have to go through the entire business regime to see how the poor could be included in the system.

On paper, the taxation regime looks pretty fair as higher income tax is levied on the rich and most of the poor do not fall into income tax net. But in practice the poor seem to be paying much higher government levies that their capacity in the shape of indirect taxes and higher utility tariffs.

Food is the basic need of every human being and people work to earn bread for their family.

The poor spend almost 70 percent of their incomes on food and the balance on renting houses in slums and transportation. The richer you become the percentage of income you spend on food declines.

The filthy rich hardly consume 0.01 percent of their income on food.

The richer you get the more you enjoy the luxuries of life.

The poorer is a family the higher is its deprivation from the basic necessities of life.

There are poor segments in developed societies as well but they enjoy at least the basic amenities of life. The majority in those societies live in comfort.

It is the other way around in Pakistan.

The electorate pins high hopes on each government that they vote into power. But the lot of people in general has not actually changed. Unfortunately every government that comes to power is afraid of instituting real reforms. Every government is very sensitive to shabby roads in posh localities and is always indifferent to the broken infrastructure in areas where poor live.

Every regime is keen to increase revenues and rightly so because our expenses are higher than our incomes. But they are shy of taxing the rich directly. They even recover the most of the income tax (that is the only direct tax) indirectly as withholding tax at the time of imports and supplies. The impact of this tax is passed on to the poor.

Governments the world over hope to provide a positive roadmap of their complete tenure in the first 100 days of power, ensuring that they spark hope and not despair among the electorate.

The first ninety days of present regime have been depressing for the electorate. Every step they took during this period hurt the poor the way things are moving it looks that the trials and tribulations of the poor would only worsen in next six months.

The government should have reduced the sales tax and increased the income tax by corresponding percentage on incomes above Rs2 million.

It should have imposed a monthly tax of Rs1000 on all shuttered shops in the country.

The fee of the private schools should have been frozen at the current level and all schools should have been asked to deposit 25 percent of the fee amount as tax.

The treatment charges at all private clinics should also be frozen and 25 percent of the charges should go to national exchequer.

The hotels charging over Rs5000/day for a room should have been asked to deposit 25 percent of the rent as service tax.

Similar taxes should be imposed on all their services. Any increase in services should be subjected to severe penalties. These harsh measures would not hurt the poor.

In the meantime the government planners should chalk out a comprehensive reform strategy that ensures all incomes are equally taxed and everyone should be taxed according to their capacity.