Taxing reforms

LAHORE: The IMF staff has hoped the next medium-term IMF program Pakistan is seeking will be for strengthening public finances, and broadening the tax base (especially in undertaxed sectors). But which sectors the IMF thinks are undertaxed needs justification.

There are numerous avenues where tax is avoided, but salaried persons fall into a category where their income tax is deducted on a monthly basis by the employers and deposited in the exchequer. We have seen in recent years the IMF asking the government to increase taxes on income from salaries.

Are they undertaxed? Or are they in a position to conceal their incomes? Is it not true that the salaried class pays much higher taxes than most of the traders, the majority of whom file no income tax returns? Barring at maximum 5 percent of the top bracket salaried persons, most salaried workers live modestly, and 50 percent of those that earn taxable income live in poverty.

Are they undertaxed? How can the IMF and our rulers be insensitive to the genuine needs of the salaried class? Today, a person earning Rs100,000 cannot rent a decent house, keep a car, or get his/her children admitted to a decent school. Even these expenses are taxable.

The tax rates of the salaried class are already very high. Look at the economic statistics of the country. According to research by a credible economist, unemployment in the country was previously 7 percent and has now reached 10.5 percent. Poverty has also increased by the same proportion, and the poverty rate has increased from 33 percent to 45 percent. Currently, 20 million educated youth are unemployed in the country.

Do the IMF or Pakistani authorities know that the burden of all these distressed people is shared mostly by the salaried class? Their educated children are unemployed.

There are dozens of non-taxed or undertaxed avenues, each capable of generating many times more taxes than the salaried class. There are numerous avenues of corruption that eat up resources equivalent to or higher than our current tax collection.

We can generate at least one trillion rupees by taxing the incomes of doctors according to their income. Is it justified that a specialist doctor who pockets rupees one million daily only from three heart surgeries a day ends up paying many times less income tax than a person drawing Rs350,000 monthly?

Another rupees two trillion could be easily generated if real estate were fairly taxed. An interesting thing in this regard is that real estate is visible to everyone. There should be no reason that these assets could be concealed. You tax the property straight away instead of looking for the owner. Non-payment states could seal the property.

Then, by fully documenting traders who are used by smugglers and under-filers, and those that under-invoice, the government could generate a massive revenue of over rupees 4 trillion. The smugglers and others who are unethical would have no recourse but to follow legal ways as they would not be able to dispose of their goods through 2.2 million traders.

Another trillion rupees could be saved by privatizing loss-making public sector companies that are constantly bleeding us. The government and the IMF should concentrate on these avenues of tax generation instead of targeting the salaried class.

Last but not least, we should bring our birth rate to the level of India, Bangladesh, and Sri Lanka, which ranges from 0.9 percent to 1.1 percent.

Ours is 2.5 percent. Our average GDP growth in the last 4 years has been 2.5 percent. The population has also increased at the rate of 2.5 percent, which means that our average income has not improved at all.

Please note that the word "states" in "Non-payment states could seal the property" may need clarification or replacement depending on the intended meaning. It could be a typographical error or a specific term within a context. If it refers to government actions, it might be replaced with "authorities" or "agencies".