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May 24, 2019

Tax the rich


May 24, 2019

The current economic situation of Pakistan has happened before and if we look closely, there is a pattern there. Pakistan is facing high inflation. To curb inflation, the government raises interest rates, which forces people to move their savings into currency, gold and property. This causes stock prices to fall, while demand for currency raises the dollar price which increases prices of imported essential items and fuel, which increases inflation more. This endless cycle can bring the country’s economy to its knees. Although the government has controlled the prices of food, medicine and other essential items to help control inflation in Pakistan, these measures have not been useful. This is because in Pakistan the price of fuel and electricity also increase the cost of business and prices of all essential items.

Unfortunately, the government of Pakistan has been using fuel and electricity to collect taxes and over time these taxes have been increasing. The government has for many decades failed to increase direct taxes and relied on fuel and electricity taxes for major income every year. But these measures are hurting the economy and putting us in the deadly circle of inflation. Therefore, to immediately reduce inflation and end the inflation-dollar cycle the government should reduce taxes on fuel and electricity. To overcome the tax shortfall from such a move, the government should impose taxes on luxury non essential items like women stylish shoes, luxury vehicles, cigarettes, plazas and large houses, luxurious hotel stays, branded women clothes, special vehicle number plates, expensive wedding dresses, international air tickets, items used by the rich more than the middle class. Even taxing restaurants and eating outlets that charge more than the government set limits for food and drink will not only be beneficial for society but will also tax the rich. The government can also bring e-commerce into the tax net by allowing citizens to claim tax paid on goods purchased online and providing e-commerce companies with mechanism to issue digital invoices for taxes charged from customers. By taxing luxuries and reducing taxes on fuel and electricity the government will be able to control inflation, increase tax base, reduce dollar rate, while also keep the economy from shrinking.

Engr Shahryar Khan Baseer


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