Direct vs indirect tax

Published Jan 08, 2014 07:49am

MORE reforms are needed to overcome the low income-tax-to-GDP ratio, lower tax base, tax evasion and lack of new source of taxable income. There are too many concessions and exemptions, either permanently notified or extended through SROs.

Moreover, when it comes to taxing the rich, leaders have resisted obeying democratic norms. Income tax forms the major share of direct taxes and is the ultimate source of a balanced and developed society, whereas indirect taxes contribute the chunk of source of revenues.

During the last financial year, the share in the GDP of direct taxes in the national tax revenue was 3.50pc and of indirect taxes 6.40pc.

Big companies pay billions in taxes which are collected from customers through the supply chain, as companies merely act as collectors and consolidators of those tax sums.

About 25 pc tax revenue is collected through direct taxes and the remaining 75 pc through indirect taxes.

Noble Laureate Joseph Stiglitz in his recent book The Price of Inequality has argued that big corporations abuse market mechanism to shift their corporate tax burden to others. A major reason for the market abuse is the asymmetric relationship between well-informed and well-organised business giants and ill-informed and unorganised consumers.

Consumers mostly do not know as to whose burden they are made to carry. Even if some of them realise it, the individual burden is so small that they do not consider it worthwhile to mount a challenge socially or legally.

Thus, there is a need to examine inadequacies of tax administration which require strategic deviation from the comfort zone to a realistic and equitable approach in taxing taxpayers.

Muhammad Azam Shaikh

Advocate, High Court &

General Secretary

Tax Bar Association


Do you have information you wish to share with You can email our News Desk to share news tips, reports and general feedback. You can also email the Blog Desk if you have an opinion or narrative to share, or reach out to the Special Projects Desk to send us your Photos, or Videos.

More From This Section

National Savings affairs

THIS refers to poor customer service faced at the directorate of National Savings, where mostly retired people ...

Pakistan Steel

REFERENCE your editorial ‘Shambolic state of Steel Mill’ (Oct 29). Undoubtedly the pathetic state of Pakistan...

K-Electric billing

K-ELECTRIC changed meters in our area last month and this month they sent me a bill of nearly Rs100,000 for...

Comments (0) Closed