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June 25, 2019

People and taxes


June 25, 2019

This refers to the article, ‘Why people don’t pay taxes’ ( by Dr Pervez Tahir, in The News Encore of June 23, 2019. The author has been swayed by the rhetoric of the government and blames innocent people without any cognizable data. If people do not pay taxes wherefrom the billions of government revenue come? The basic premise of the writer that “the purpose of taxing is to finance public services and, in all fairness, those benefiting more should bear proportionate liability” is faulty. The second part of the sentence contradicts the teachings of economics which suggest that taxes should be collected from the rich according to the ability to pay – and spent for the benefit of the poor. There is no point in sharing the burden proportionately. The right question would be: why should people pay taxes? There is a social contract between the people and the government. People pay taxes for the supply of public goods/services which cannot be priced appropriately privately, including schools, hospitals, roads, water courses, clean drinking water, etc. Public authorities can provide these services at a much lower cost and on a larger scale than individuals can arrange themselves.

The efficient supply of public goods results in saving in cost and improves the ability and capacity of individuals to pay more taxes. If the government defaults in providing public services, and squanders the money away on prestigious and unproductive projects like metro buses and orange trains, people get nothing in return for the taxes paid by them. They become poorer by the amount of tax paid to the government as well as additional cost incurred for arranging such services privately as security, education, health, water supply etc. Their ability and incentive to pay taxes are killed. For example, if the water supply in my house is regular and adequate, I would not have to buy a tanker costing Rs1200 twice or three times a month. Similarly, if the government school is working properly, I would not send my two children to private school costing Rs25-30 thousand per month. Therefore, if the government wants to have more taxes, it should spend more money on education, health, clean drinking water and other civic services, rather than searching bank accounts. Bank accounts are personal property of an individual and so strictly confidential. Pakistani workers abroad remit more than $ 18 billion annually, If the secrecy and security of their accounts is not maintained, they will shift their accounts to foreign banks. The government should beware negative effects if its tirade for increasing tax collection.

Abdul Majeed


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