PAKISTAN has recently imposed new taxes and implemented new systems in an ambitious bid to document the economy. This, it is hoped, will broaden the tax base and ensure a steady flow of revenue to the treasury.

Many of us were well in favour of Gen Musharraf when he refused to back down in the face of extended strikes by traders who were protesting the imposition of the general sales tax, or GST. It is ironic that most people of some means would jump at the chance to move away to the US or other developed nations and abide by their laws, while grabbing every opportunity to cheat our own government as well as fellow citizens. Developed countries almost without exception, make it their priority to enhance revenues through taxation so as to be able to pay for social work programmes, development projects, health care and most importantly education. Why is it that our own developing nation is scorned when the government tries to collect taxes?

While the intent of the present government is well understood and appreciated, one must question the way in which these schemes were implemented. By all accounts, it appears that Pakistanis are irrationally averse to taxation; that is, they expect not to pay taxes and yet they complain when the country cannot provide any basic services for them. Our wealthy businessmen and land-owners try to find any possible means to avoid declaring income so as not to have to pay taxes. In such a hostile environments, the government has imposed GST at 15 per cent (and now increased to 20 per cent on some products). I wonder what the considerations were behind picking such a large number? In the US and many other developed nations, the sale tax ranges from 0-8.5 per cent. The assumption of course is that this is not negotiable or avoidable in most countries.

Recognising that in Pakistan we find ways of avoiding most taxes through bribery and rampant corruption, could we not have picked a lower rate in order to provide some incentive for people to pay the tax, and then legitimately expect something in return in the form of government programmes and assistance? Due to the exorbitant GST rate, there is a strong motive to cheat one’s way into not paying the tax, and there are thousands of transactions taking place each day that do not provide tax revenue. The loss to the government runs into the billions of rupees.

In the face of poverty, inflation, a declining standard of living,, increasing unemployment, what is the incentive to the common man, or even the common businessman, to pay the GST? One can hardly argue that without a corresponding increase in earnings, the average person’s buying power has declined significantly.

I hate paying taxes as much as the next person, but if one thinks rationally about all the services we have come to expect from a modern government, it seems fair that the entire country shares the costs. I can’t imagine anyone in the world enjoys paying taxes, but people do it so that they can receive the things that a financially well-equipped government should give them: development for the country, fairness for all people, strict enforcement of the law, and equal rules for all.

The perception from the Pakistani man on the street has always been that the tax money is taken into some great big bank account, shared amongst the politicians for their own personal benefit, and whisked away to foreign countries to buy palatial properties at our expense. So while 15 per cent is a huge bite to the wallet, it does not even feel as if there will be any benefit in sight. There is no incentive to honestly and dutifully give the government its share of commercial activity in the form of taxes. I realize that we are under instructions from world financial agencies to adhere to specific economic regulations in order to be eligible for aid and loans, but at some level our government needs to look out for the benefits of the average citizens instead of finding quick fix solutions to our bread financial problems.

To that end, would it not have been better to have a more conservative GST levy of 3-5per cent— something to warm us up, break us in? This amount would be reasonably bearable for everyday purchases and commercial sales alike - it may not have been perceived as excessive. Additionally, with this more modest tax rate, people may have been less inclined to find loopholes to cheat the government and risk embarrassment if they are caught etc. At the same time it could even have meant greater absolute tax revenue, as borne out by the economic theory which hypothesises that a state’s tax revenue increases as the tax rate declines due to a lower payoff for breaking the law, and in this case due to a greater volume of reported transactions. If we had started with a lower figure, it may even have been possible to provide for regular increases in the rate of the GST perhaps on a bi-annual basis.

In general, one has to provide solution based on the situation at hand, and not based on the experiences of a foreign power. I would like to propose to the government: Let us not play into the hands of whoever holds the cheque book that week; rather let us solemnly fight for the people of Pakistan, so we can get out of the rut of having to beg others to feed ourselves. And let us all remember that it is our own responsibility to improve our collective lot, rich and poor alike.