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Replacing GST with VAT

Published Jul 01, 2013 08:10am


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Living in Switzerland, thousands of miles away from Pakistan, I had hoped for a real change in the fiscal ways of the new government. In all civilised democracies we notice that the most unpopular but good for the country decisions are taken and implemented immediately after the elections.

In Pakistan the recent budget did not come at par with the decisions of a government that had reversed a failed political party and an ailing economy.

On the contrary it looked like the work of a bureaucrat who did a hasty 'copy paste' job in a week and handed it to the finance minister.

Economists and analysts had expected a much different and radical approach. To be brief, two aspects of fiscal policy that need immediate attention are (a) taxation of agriculture income and (b) replacement of General Sales Tax (GST) by the Value Added Tax that is already practised by innumerable countries and democracies.

Rumour also has it that the FBI has a list of persons, entities that can be brought into the tax net if authority is given to it.

To say that agriculture is the provincial subject is like throwing dust in the eyes of the public. It is the agriculture income like any other income which has to be made a part of the income tax.

VAT was paddled by a previous finance minister in vain.

If it is implemented it will provide the much needed tool of accounting the economy. This should be seriously considered in spite of the opposition by the tax evaders of the country. Furthermore, urgent legislation is required to chase the tax evaders. I also heard the National Assembly speech of Imran Khan quoting Switzerland many times. Justice is essential but it cannot be brought to people in its true sense without bringing about a balance between resources and the demand for them.

Resources do not mean those that are unexploited or are hidden underground. Resources mean those which are available for usage. These resources have become limited and scarce. Unless we control the demand for them, balance cannot be achieved. For that a net reduction in the growth of population is essential.

Switzerland has a very low growth rate of population. Family planning should be promoted as part of the government policy without caring about the noise made by the religious parties and ignorant religious elements. We expect more from enlightened persons like Imran Khan in this regard.

We must focus on the pressing issue of reducing a growing population.


Comments (2) Closed

NAEEM SYED Jul 01, 2013 04:35pm

Every one of these leaders will side step the real issues. Agriculture Income from a base line of a 100 Acres or above must be taxed and Vat has been a success story all along. Any one who has not filed a Tax return should have his Passport cancelled. Pakistanis Living abroad who are remitting money home should be given incentives in ratio to their remittances. Let There be a voucher system where they are given preference in purchasing Govt Lands etc. This Govt has not shown any backbone to date they seem to be sleepwalking or maybe are incapable of taking bold actions that are the requirement of the day. I predict that we will see demonstrations very soon at their inability to get our chronic problems solved. What a pity.

Aziz Jul 01, 2013 02:54pm
My first reaction to the story is that it would have lot better if the blogger had first done some basic research. Pakistan's GST is VAT which has, due to FBR's over indulgence with statutes, substantial distortions but the basic structure of the system is VAT based. If he had advanced the argument that the distortions be removed and VAT/GST's application extended to the wider scale in economy including covering retail sector then it would have made sense as he argues that it would lead to accounting of the economy. His comment regarding agriculture tax is based on sheer lack of constitutional arrangements in the country.