Tax....... The Lifeline of economy

Tax....... The Lifeline of economy

(Muhammad Shahid Imran)

Tax to GDP ratio indicates what percentage of Gross domestic product ratio is collected through taxes. Tax to GDP ratio is the simple measure of dividing Tax collected by the GDP (total income). It has no concern how you collect or spent your tax revenues. The worldwide table computed by Washington based heritage foundation shows that countries with high Tax to GDP ratio have the best living standards and are the developed ones. On the other hand countries with low tax to GDP ratio are the third world countries.

Pakistan with 10 % or less tax to GDP ratio is in the league of notoriously failing and down troen countries along with  Afghanistan, Nigeria, Burma, Sudan and other African countries. Even the India has much better value with 17.7 %. Only exception is oil rich Arab countries with ratio around 2 % as they do not depend on taxes for state income.

Some people argue that collecting taxes in Pakistan is counterproductive as it further enriches the elite class who use this state money for their own spending through corruption. Furthermore political powers do not care to account tax revenues as most of them do not pay their tax dues so how they can care for any corruption while gaining without paying.

In Pakistan poor and middle class is the main source of collecting the taxes. On the other hand in developed countries taxes are levied on personal income and poor people were not burdened. In Pakistan most tax revenues were collected from common people. So it is the worse aspect of taxation in Pakistan that the money collected from common people is not spent on them as it is in high tax to GDP countries.

People in developed countries pay their taxes because they know if they want better health facilities, education and roads they have to pay their tax. They are confident that their tax will be spent on them. In developing countries like Pakistan feudal and elite class of society took the major share of revenue collected through taxes and in return they contribute nothing in national income. They do not recognise the basic human rights of the taxpaying middle class. They improvise feudalistic methods of extracting most from people while giving back very little or nothing at all.

These facts show that Pakistan is very far away from joining the civilized world. The reasons behind no tax culture in country are political unwillingness, low standard tax collecting methods, strong political and economic lobbies and non equal distribution of tax collecting.

Since last ten years the tax to GDP ratio lowered to 9% which was 11 % in 1990 and it was lowest and static in the world. In 2011 about 0.31 million people registered themselves to Tax system and get their NTN but only 0.5 million to 0.15 million people pay their tax.  It is worth mentioning the domestic tax survey of people that about 0.45 million people are under the tax circle but only 17% of them were paying taxes, it is one among 6 people.

The minister of treasure in his budget speech warned that country’s economy is in ICU and it is because of wrecked tax system. He said that to run the country upgrading of tax system is inevitable. So this is the high time for present government and treasure ministry to pass the test of economy by applying improvements in tax system. They should cut off the system of taxation in which elite class got exceptions and major tax paying sectors do not contribute their due share in GDP. Also they have to introduce the improved and innovative tax system on the lines of developed countries so that common poor people would not burdened.

The foreign debt and interest value is more than developmental budget of the country. It become the major part of budget spending.  Now again it is indebted to IMF with strict conditions of increasing rates of daily usages of common folks. It further weighted the poor instead giving any relief to him. If only the ministry of treasury make some solid steps towards proper tax collection there was no need of any debt.