16 May 2004	Sunday	25 Rabi-ul-Awwal 1425

KARACHI: When it becomes difficult for masses to afford living even at a bare minimum standard, least a state can do is to provide them with some relief through reduction in taxes. Incidentally, in our case there hardly is any realization on the part of economic planners who feel all is well!

World agencies and local NGOs have been warning the government that people living below the poverty line has increased substantially. But it seems that all their warnings landed on deaf ear.

According to private estimates, presently around 40 per cent of the population is living below the poverty line which means that out of 140 million around 40 million people do not have sustainable resources and means to get on with their living.

The question arises what could be done under given circumstances, if not giving direct benefit then what the government should do to provide relief to the hard pressed masses? Least the government could do is to try to lessen the burden of taxes by cutting down the rates or going for more direct than indirect taxes.

With ever rising cost of living the fixed income group or for that matter the salaried class which constitutes the largest part of the middle class is being crushed under an unprecedented burden. There is constant rise in POL prices which has risen by almost 150 per cent during last four years. A rise in energy cost means a widespread increase in prices of all categories of goods.

But strangely the finance minister feels more than happy in saying that per capita income would rise to $600 next year from $492 during 2002-03. Nevertheless one would like to ask the minister that against this rise in per capita income how much the rise had been in the cost of living.

Even a layman could say that there had been constant decline in the purchasing power of general masses and after cutting all the possible edges one could not meet his monthly budget. Almost the entire earning of a middle class family is swallowed by three major expenditures - children education, utility bills and transportation. Whatever is left a family has to compromise with it for rest of the month for its food - what to talk about health and other social obligations.

Instead of giving relief the government had been withdrawing sales tax exemption on goods by bringing in more items under the ST regime. There is a strong demand that as a first step the rate of sales tax should be cut to 10 per cent from the present high rate of 15pc, which will give an indirect relief to consumers. However, it should be ensured that such a relief is not hijacked by manufacturers or middlemen but should reach end consumer.

On the income tax the government, besides, cutting down tax rates should enhance the exemption limit of Rs80,000 to Rs200,000 which will assist fixed income groups in getting direct relief. Unlike other taxpayers the salaried class which is the biggest representative of middle class could not evade tax because tax is deducted at source.

Secondly, exemption on food, medicines, computers and books should continue. Presently, there is sales tax on manufactured or processed foods which should also be exempted as nowhere in the world food items are taxed under ST regime. Sales Tax being a consumption tax carry equal impact on rich or poor class, therefore, such essential goods like food, medicines, computers and books should stay out of its ambit.

Strangely enough presently edible oil and sugar, which are essential goods and are equally used by rich and poor are not exempted from sales tax. Similarly, the two major housing industry items - steel and cement - are also not exempted from Sales Tax. If the economic wizards of Islamabad look into the matter seriously they could easily feel that these items should enjoy exemption from sales tax.

Every state collects revenue to fulfil its social obligations towards its people. These responsibilities include education, health, availability of potable water, infrastructure, including communications. Above all security, law and order are among the few fundamental responsibilities of a state.

But unfortunately, when we look at these facilities in our country they are either in very poor condition or are totally non-existent. Therefore, taxpayers are being exploited on two accounts -heavily taxed but in return getting nothing.