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ISLAMABAD: Council of Islamic Ideology Chairman Maulana Mohammad Khan Sherani said that indirect taxes are contradictory to the teachings of Islam and prohibited in Sharia.
“Taxes can be imposed only on income,” Sherani said while addressing a press conference at the end of a two-day seminar on Islamic system of economy.
The CII chairman maintained that tax cannot be collected from the end consumers on the purchase of a product instead it should be collected from the industrialist and traders.
“The end consumer is the ultimate sufferer of indirect taxes,” Sherani said adding that tax must be collected from industrialist and traders on sale of a product as they are the beneficiary who are earning from it.
Maulana Sherani held that all the indirect taxes are prohibited in Islam.
Know more: Is indirect taxation the best means of raising revenue?
The economic system based on paper currency is not strong enough and gold is the more acceptable medium, he added.
“The paper currency is only based on the power of the state has and no standing in the shape of a solid material,” he said.
“The gold dinar coin was used in the Islamic world from the 8th century onwards and survived in certain parts till 19th century,” Sherani said.
The CII chairman said capitalism is about to fall after the collapse of communism and the world must opt for Islamic economic system to meet the challenges confronting the economy.
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On DawnNews
Comments (100) Closed
Apr 27, 2016 07:57pm
What about evading and not paying your taxes
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Apr 27, 2016 07:57pm
Finally said something right and useful..
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Apr 27, 2016 08:02pm
We need to decide the system (Sharia or secular) we want in Pakistan.
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Apr 27, 2016 08:03pm
simply sickening & retrogressive.
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Apr 27, 2016 08:07pm
"The economic system based on paper currency is not strong enough and gold is the more acceptable medium, he added."
Great! But if I want to purchase a kilo of meat and 200 grams of garlic how do I chop off a chunk of gold from an ingot of gold to pay to the butcher and the green grocer?
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Apr 27, 2016 08:07pm
@Sagittarius very true just decide for once democracy and secular or Sharia .
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Apr 27, 2016 08:10pm
"tax must be collected from industrialist and traders on sale of a product as they are the beneficiary who are earning from it"....... very valid point
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Apr 27, 2016 08:12pm
It is good to see that Islamic Ideology council is working practical and critical aspects of the countries problems.
Indirect taxes create a black hole of money that the politicians can use at will. This type of taxation is creating a number of problems in many developed countries. Politicians use them to buy votes, move money where they have messed up or out right legalized corruption.
Direct taxes give a better indication of the economic health of the country and bring transparency to the whole tax system. Taxation policy should not be just about collecting tax but also spending those taxes accordingly. Good Job Mr. Shirani
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Apr 27, 2016 08:15pm
Please tell this to all the Gulf states, particularly the government of Dubai.
They tax you in so many ways, indirectly, so your tax-free income is reverted back to the government in the form of visa fees, exit fees; Emirates ID card fee; parking fines; speeding tickets (which cannot be challenged); medical fees, NOC fees, filing fees; stamping fees; and soon to be introduced VAT!
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Apr 27, 2016 08:16pm
So the opposite of charging indirect taxes would be avoiding all taxes...?
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Apr 27, 2016 08:25pm
Just wish he had studied a course or two of classical economics.
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Apr 27, 2016 08:27pm
What about the interest the country pays on the loans it takes
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Apr 27, 2016 08:32pm
@Kamal Yes, because the only valid way of thinking is what you are taught in class. Any new ideas are invalid if they contradict what you have been told is right.
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Apr 27, 2016 08:34pm
Living in the past, do you have any solution to modern problems maulana sahib?
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Apr 27, 2016 08:33pm
How much tax do you pay?
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Apr 27, 2016 08:34pm
@Mak
In economies such as Pakistan where income transparency is absent, indirect taxes are perhaps the only practical way. It is called improvising.
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Apr 27, 2016 08:43pm
Therefore VAT or Sales Tax is contrary to Shariat?
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Apr 27, 2016 08:44pm
@Shakeel Ahmed Gold was used for larger transactions and silver, bronze for smaller. A digital card system based on gold holdings is already in place. The advantage of gold or bitcoin etc is that governments can't manipulate them that easily. It's this government manipulation of paper currency that causes the middle class to become poorer.
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Apr 27, 2016 08:44pm
Paper Currency carries a solemn pledge of honor from the Governor State Bank that, on demand of the bearer of that note, its denominated equivalent (in gold) will be paid to the bearer. But, who is honest in that deal?
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Apr 27, 2016 08:46pm
Five trillion dollars change hands daily.....put this in context. Then decide paper currency or gold.
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Apr 27, 2016 08:52pm
What difference it makes to tax recovered from trader or industrialist?
At the end consumer has to pay higher cost as trader or industrialist will pay tax from his profit.
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Apr 27, 2016 08:52pm
@bkt, that they don't care, coz otherwise they themselves will have to pay...it's just a speech..
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Apr 27, 2016 08:57pm
The problem is that one is stuck in the 8th century.
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Apr 27, 2016 09:04pm
Sheerani saheb. You are great. This is the first time you have said something useful.
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Apr 27, 2016 09:03pm
Rich are not paying taxes in Pakistan, it has the lowest ratio of Direct taxes to GDP in the world!
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Apr 27, 2016 09:10pm
While in principle his thesis is correct, the minds of so many people have been conditioned to so far, far away from spirit of truth, now truth feels foreign and out of place. The ease with which not even paper, mere plastic, can do the trick, who would like to listen to the genuine truth. Dollars and pounds are sent from abroad for loved ones, and the same are exported immediately back abroad (ala Panama leaks) and people are handed paper rupees cheaply and generously printed for this very purpose. Again, the spirit of the thesis is sound, unfortunately conditioning of mind sees it unworkable. Is it really?
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Apr 27, 2016 09:11pm
In theory he is right as indirect tax are regressive in nature. So a beggar and rich pay the same tax when purchasing a packet of cigarettes . So anyway you look at it, the system of sales tax is unjust.
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Apr 27, 2016 09:16pm
if traders are made to pay tax, they will just add it to the value of the product
eg a products of rs 100 they will price it rs 110 and sell showing that it values rs 110
and then pay govt rs10 as tax they lose nothing infact they may nt pay the govt and pocket that money too and we pay rs 10 extra
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Apr 27, 2016 09:25pm
Leave the economy to economists,
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Apr 27, 2016 09:23pm
As an Indian, I find this mindset regressive. First of all, there is no need to mix religion and trade. They should be kept separate. Income tax laws are not based on religion. Further, the person who is recommending to tax the traders, salespersons and businessmen on sales of their products, forgets one simple logic. If you start taxing people on sales of their products, they will simply raise the prices of the products and then whatever extra money they get by raising the prices, they may or may not pay as taxes. Ultimately, the consumer who is buying the product will be at loss because he will be shelling out more money to buy the product. And even after that, there is no guarantee that person selling the product would not evade taxes somehow.
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Apr 27, 2016 09:34pm
Islam promote justice and fairness, a state has every right to collect reasonable revenue to administer its affairs including defence, it is also a vehicle to redistribute the wealth so the rich do not become richer and less fortunate could be helped. It should be based on fairness and justice.
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Apr 27, 2016 09:33pm
@Khilari List the problem sir...
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Apr 27, 2016 09:38pm
So now the Molana is becoming economics expert.
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Apr 27, 2016 09:45pm
So now this man is an economist!
"Sherani said adding that tax must be collected from industrialist and traders on sale of a product as they are the beneficiary who are earning from it .... "
Presumably they will just pass the cost on to the end consumer so the overall effect is exactly the same
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Apr 27, 2016 09:47pm
There are two type of taxes in levied in modern world, tax on income (income tax) and tax on consumption (sales tax or value added tax). Sales tax or VAT is the primary source of tax revenue for most government followed by tax on income.
The tax system should be fair and apply equally to all citizens, I don't see anything wrong in applying consumption tax since everyone involved with VAT pay their share as a product pass through many stages of commercial activity.
The problem with Pakistan is that the tax legislation is largely drawn in favor of elites (who claim exemptions through SROs) and hardly pay any income tax. The rich agriculturist class is altogether exempt and only the class that pay fair share of income taxes is the salaried class.
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Apr 27, 2016 09:56pm
Simple fact is, whether it is legal or illegal to put money in off shore accounts, to hide(basically what it is) your money else where and not in Pakistan only draws one conclusion, you don't want to pay taxes on it, specially when you do it in a way where no one knows about it, yet you claim to be worth a few meager million in the bank while the reality suggests BILLIONS. Also, tactfully putting businesses in families names and declaring expensive vehicles worth millions to be gifts is insulting peoples intelligence.
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Apr 27, 2016 09:57pm
Welcomed progressivism Maulana saheb
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Apr 27, 2016 10:04pm
Finally heard some good news for poor from our religious scholars.
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Apr 27, 2016 10:05pm
Thanks for the verdict. But how would you collect direct taxes when there is no honest documentation of individual incomes?
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Apr 27, 2016 10:05pm
But world would not accept this, and finally you could not trade them with Islamic system of economy.
Till to date, no one has presented an alternative to Banking system which in Islam is not lawful. First of all we need pure islamic banking then we can move to the next stage.
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Apr 27, 2016 10:15pm
Dude, however you collect them it will always be the consumer who will be paying taxes. We need to tax the parked wealth.
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Apr 27, 2016 10:20pm
@Shakeel Ahmed Gold currency can be made by fewer grams of gold. Dinars don't necessarily have to be in kilos or tons. Thanks
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Apr 27, 2016 10:26pm
I wonder if the Maulana can do my taxes?Such experts they seem.
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Apr 27, 2016 10:26pm
He has issued this statement under directives from Prime Minister office.
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Apr 27, 2016 10:39pm
I am not sure if Maulana Sherani is aware of the fact that the 8th Century Islamic world was an agrarian mercantile society. Since then the world, including the Islamic world, if there was one, has moved forward It cannot be cited as a model for 21st century.
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Apr 27, 2016 10:44pm
Yes, we should go back to a barter system of trade!
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Apr 27, 2016 10:48pm
@Siddique Katiya Where does it say in Islam or State management that the rich should be taxed so that they don't become richer? Does that mean someone who's skillful is to be punished for the incompetence of the unskillful?
In Islam there's voluntary alms giving. State has nothing to do with what a person has to give. It's not the job of the state of provide for people. It's the job of the people to voluntarily help those in need.
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Apr 27, 2016 10:50pm
@Nadeem The Maulana did not think it through. The traders will just add all taxes to the price they are offering and the customer will always end up paying more. Where is the Islamic justice in that?
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Apr 27, 2016 11:03pm
We should implement it immediately and show the Islamic world the way forward.
On another note, as only 0.5% of the population pays income tax, would we have much to lose in abolishing income tax ? Imagine the billions that would flow back to our country as well trillions from Panama and places. Sounds ridiculous but with 1 in 200 paying direct taxes, why not ?
We would still have corporate taxation, customs duties , taxes on oil imports etc.
We need something radical, so why not ?
Discuss....
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Apr 27, 2016 11:09pm
The value of gold is absolute (historical data from 2 centuries) and building gold reserves instead of mounds of currency notes will lend the existing notes a lot more power. We have to stop creating paper notes over and above the gold stock piles (oil reserves, other minerals can also be use).
Currently, if the State Bank holds, 1 kilo gold, they have issued paper currency worth at more 10 kilo gold. If a concerted effort is made, we CAN peg our currency to gold, or at least a large portion of it.
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Apr 27, 2016 11:24pm
perfect.......
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Apr 27, 2016 11:28pm
Good point raised by the Sheikh on taxes
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Apr 27, 2016 11:42pm
Why religion should be mixed with economy. By doing so rich remains rich and poor remains poor. And top some comments are supporting this man. Young minds really needs to change their mind set which needs proper education. Suggest this idea to Pakistani living abroad he or she will completely rubish his ideas . Until this kind of extremist ideas remains there is no scope Pakistan will progress to greater extent
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Apr 27, 2016 11:42pm
How does religion come into it?
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Apr 27, 2016 11:43pm
i don,t like taxes on consuming goods because it creates a black market where the ultimate consumers make under the table agreement in order to avoid the tax.
However,Maulana Sherani does not qualify as a tax expert.
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Apr 27, 2016 11:46pm
Maulana forgot to comment on tax on bank's withdrawals. This tax is the most hateful tax only seen in Pakistan. The elites and corrupt politicians prefer to keep their wealth abroad, because if they keep their wealth at home,each withdrawal will be taxed. But people are also aware their tax money is not honestly used, a part of it goes to corrupt Mafia .And if caught the corrupt are so shameless they argue and boldly say for investigations from rulers since 1948.
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Apr 27, 2016 11:48pm
Really capitalism is about to fall.he has been looking in to his crystal ball
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Apr 27, 2016 11:57pm
Respected scholar did not provide any legal proof based on Islamic principle nor explains what indirect tax is?
It is my view that tax on use is an example of direct tax
It is easy to make religious ruling on theoretical question, what about the compliance and collection? What would be Islamic punishments for the non-compliers?
Economic system based on Gold is wishful thinking but who is going to control the Gold price, hardly any of Islamic states produces Gold.
Pakistan should consider the combination of consumption including property, income and wealth tax.
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Apr 28, 2016 12:10am
@Kamal Just wish the same about you. His point is right... I am economics graduate.
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Apr 28, 2016 12:15am
you look at any way, customer has to pay the tax. direct or indirect.
Yes, decide about what you want to use, fiat money or dollar backed money or gold back money.
For sure we cannot carry gold for everyday exchanges.
Fact is that Taxes are the blood line of any government system. Better question is where is this money being spent?
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Apr 28, 2016 12:18am
Should we start using smoke signals instead of cell phons
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Apr 28, 2016 12:51am
What about lying, cheating, hypocrisy, hurting other peoples feelings, being disrespectful of other religions, killing in the name of religion, disrespecting women, being corrupt in every sense of the word, the misuse of blasphemy in order to satisfy ones own greed, etc, etc, etc......and all you can think of is indirect taxes.
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Apr 28, 2016 01:18am
And if the corporations will have to pay those taxes, the prices of the products will be inflated. This is the curse of capitalism - you cant get rid of the taxes because the taxation difference will get added on to retail price. Nowhere in the world the companies have to justify price of their retail products. Pricing is based on what they feel is right, so long as it does not affect the sales targets.
I am afraid, this is yet another clumsy and un-thought statement.
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Apr 28, 2016 01:20am
What about storing millions of dollars of other peoples money hidden in Panama under false companies? What is his opinion on that?
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Apr 28, 2016 01:40am
@TA Fix the system, rather than making it more complicated to the benefits of crooked businesses and politicians!
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Apr 28, 2016 01:58am
Thanks god.. Some sanity at last. Please also tell the rulers to pay their taxes because that is also contrary to the islamic laws
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Apr 28, 2016 02:07am
Sure, a valid point is raised by this guy for one about indirect taxation.
At the same time other aspects of his argument don't make sense to me like many of his other "pronouncements" before.
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Apr 28, 2016 02:28am
Mr, Truth...... Maulana Sheerani is a Mufti.
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Apr 28, 2016 02:42am
@M.Saeed - there is no such declaration which says government will pay equivalent in gold..
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Apr 28, 2016 03:03am
How then do Muslims live in non-Islamic countries. Are these not 'true Muslims" as they pay the taxes they have to in other countries. Thank God for secular countries where religion is between man and God.
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Apr 28, 2016 03:18am
@bkt That's the whole point. Those with income and the ones making money are evading it, while the consumer has no way of avoiding indirect taxes, no matter what strata of the society he/she belongs to.
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Apr 28, 2016 03:30am
Capitalism is about to fall? It's stronger than ever.
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Apr 28, 2016 03:40am
He just wants us to go back a few centuries
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Apr 28, 2016 03:41am
Molana Sahib you are right. Country should abolish all kind of taxes excep income tax and property tax. But it is extremely difficult to assess people income. People are dishonest when they declare their income especially non government people, people in business, doctors, and traders. See how much Nawaz family paid income tax. Not much.
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Apr 28, 2016 03:45am
I cannot believe this guy.. He is living in the past…. Live in the present and smell the beans Man!!
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Apr 28, 2016 04:27am
@Unshackle Pakistan the problem with Bitcoin is that there's no money trail. A national security nightmare
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Apr 28, 2016 04:56am
Gold coin as currency. How it will work?
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Apr 28, 2016 05:09am
Please go and leave us alone.....no one wants the advice of these Mullahs.
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Apr 28, 2016 05:33am
@Shakeel Ahmed Hes talking about a economy where you only have gold coins. You give a 0.3gram coin for it.
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Apr 28, 2016 05:35am
Sir, gold dinar as currency is as efficient as camel ride compared to jet. Please, understand economics 101 before commenting on capitalism.
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Apr 28, 2016 05:47am
@Khan of khans, Although rich and poor pay same amount of tax on a pack of cigarette, remember how many more and expensive things rich buy. They have to pay tax on all those things. Poor besides a pack of cigarette buy very little as compared to the rich so they end up paying very small amount of consumption tax. That is why GST is the fairest form of tax. This Mullah should be removed from the CII. Actually CII should be done away with. Same with Sharia Court.
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Apr 28, 2016 06:07am
Truth about Pakistan,only army, semi Government servants pay tax . Rest of the population does not pay taxes. To run the country you need money so Goverment impose indirect tax. Now any thing you buy you pay tax electric,gas petroleum products. There is no system in Pakistan. rich do not care and poor cannot speak.
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Apr 28, 2016 06:06am
This logic does not apply to the 21st century Mulana Sahib.
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Apr 28, 2016 06:11am
This so called Maulana is devoid of any sense of how market economy works these days.
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Apr 28, 2016 06:19am
This man needs to go home.
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Apr 28, 2016 06:37am
These kind of statement are useless unless and until it comes from some power ful side or government side which will never come, discussion are useless unless some efforts can't be to accelerate it
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Apr 28, 2016 07:12am
Why we see all things in context to religion....??
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Apr 28, 2016 07:14am
First setting of a Sharia court and now probably a Sharia parliament. First tell
hard-line Islamic countries about paper currencies as every Islamic country has
paper money and no one uses gold as currency.
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Apr 28, 2016 07:52am
We are lucky to have intellectuals like Maulana..!!!
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Apr 28, 2016 08:12am
@Shakeel Ahmed
There are other mediums for paying in lesser amount.Silver and bronze is used to meet the objective
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Apr 28, 2016 08:13am
@Shakeel Ahmed exactly!
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Apr 28, 2016 08:14am
@Mak politicians do not get to spend our money. Our elected representatives do. If you don't like them then remove them. But they represent us.
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Apr 28, 2016 08:17am
@Unshackle Pakistan governments do not set the buying power of their own currencies. The market does. It has been that way since Nixon Era.
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Apr 28, 2016 08:20am
@Siddique Katiya there is no injunction anywhere that the rich should become poorer. Or the rich should avoid becoming richer.
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Apr 28, 2016 08:34am
Media should ignore all the statements of religious parties. They like to be in the news.
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Apr 28, 2016 08:49am
Most of the tax structure in today's world is new and it start existing from last couple of century only. Hence it is not correct to link tax from religion angle.
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Apr 28, 2016 09:13am
@Jonty Rhodes why do you find this regressive? Islam is code of living. That means it's teaching encompasses all spheres of life eg. faith and belief, prayer and rituals, daily affairs, financial and economic matters, social relations, etc. Islam has a viewpoint on any topic. That is why muslims consider islam as a complete religion. Life is actually part of islam and not the other way round.
Secondly it is responsibility of the government at the time to protect its citizen should industrialists and traders manipulate the price. Government has to provide oversight and protect the consumers by enacting anti-trust laws and implementing them.
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Apr 28, 2016 09:17am
@Shakeel Ahmed
gold AND silver have co-existed as currency since time immemorial.
A small coin of silver only has a modest intrinsic value. Thus it is VERY suitable for everyday use.
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Apr 28, 2016 09:21am
Isn't Pakistan a consumer based society?what is the harm in collecting tax on consumption of goods and services?
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Apr 28, 2016 09:22am
This country ruler don't care when it came to their own benefit and well being.
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