LAHORE: After every change in government, the new rulers plead with the electorate to bear hardships for a while before the economy recovers; each time the measures taken are the same as the predecessor’s that had ended in failure.
One wonders why the governments are afraid of taking steps that hurt the elite. Why they want the common man to bear the hardship? The basic problem of every government in Pakistan is revenue. The expenses of the state are higher than its income.
The standard operating procedure of each government is to increase government levies on production and services. Petroleum products have also become a source of lucrative revenue for the state.
It is worth noting that successive governments in Pakistan have tried to reduce the income tax rate that comes out of the pocket of elite class. However, the taxes that are borne by the masses are regularly increased.
To increase revenues, the governments increase the sales tax rates and excise duty. The levies on petroleum products are automatically increased with every increase in petroleum product rates.
All the above measures impact the common man only. The importer, producer and the service provider charge the sales tax from the consumer and deposit it in the national exchequer.
The impact of excise is similarly passed on to the consumers. The businesses in some cases benefit from these indirect taxes by under-reporting production or imports.
Thus, avoiding sales tax or excise, but they charge the full amount from the consumer. The state lacks capability to stop these unethical practices because of weak institutions and high corruption.
The government levies on petroleum products are very high. On the top of that there is an impact of sales tax on each jump in the rate of petrol and diesel.
It is fair to pass on the increase in the rate of crude oil in the global market, but is it fair to obtain additional sales tax on that increase? The petroleum rates impact every economic activity.
The transport of goods becomes expensive. Travelling by road, train or air becomes more costly. The transporters are not impacted; they recover the increase with some additional profit from the consumers.
In all these processes, the elite class is not disturbed. They operate their business on predetermined profit margins and increase in government levies does not disturb their profit margins.
The state can collect more revenues from the elite through targeted taxation. This will need strong political will and patience to bear the backlash of the elite that would not move out of their comfort zone so easily. Every step that hurts them would be termed as polluting the investment climate. Luxurious lifestyles in Pakistan are possible without paying due taxes. The government may not be able to apprehend the informal businesses but it could penalise them on their lifestyle.
Forty years back, there was hardly a car above 1300cc running on Pakistani roads. Today, we are flooded with luxurious cars in the price range of 10-20 million rupees.
There are people that proudly claim that they have a fleet of 50 or above luxury cars for family use. The government as a first step should take a onetime tax of Rs500,000 on each luxury car of over 1300cc.
There should be federal luxury car tax of Rs100,000/month on each luxury vehicle. This step would bring sobriety in the culture and the luxury show off would wane.
Luxury house of over two canals should be heavily taxed on monthly basis so that people living is villas spread over acres either bear the tax or live simply. Every facility like swimming pool or gym should be separately taxed on monthly basis.
There should be complete ban on import of fruits, vegetables and dairy products in any form. All schools should be forced to teach the government notified syllabus for each class.
There should be a complete ban on appearing foreign exams from Pakistani soil. The doctors should be forbidden to charge more than the government notified fee and operation charges irrespective of the hospital they serve. Such harsh measures would create upheaval among the elitists, but everything would settle down in two years as it would provide level playing field to all.