More good news on the tax collection front. This shows that the Musharraf government reforms which have shown a more than 50% increase in total tax collection in the last 3-4 years, are being continued successfully.
Pakistan tax collection continues to show rise
Showing significant growth on sales tax and customs side, Pakistan’s Central Board of Revenue (CBR) has collected nearly Rs170 billion during the first five months of the current fiscal (July-November 2003-2004), against the target of Rs168.5 billion, recording an increase of Rs1.5 billion. According to a senior CBR official, the final collection of Rs170 billion during first five months of the current financial year was Rs13 billion more than the collection of Rs157 billion during the corresponding period last fiscal year. The major contributor in tax collection during first five months of current fiscal year remained sales tax with collection of over Rs77 billion despite huge refunds of sales tax to exporters. Similar healthy trend was witnessed on customs side, showing growth of 35.8 per cent after gradual rationalisation of duty drawback rates.
According to the break-up of July-November tax collection figures, direct taxes collection was Rs46.378 billion against Rs43.036 billion during the same period last year (increase of 7.8 per cent); sales tax Rs77.146 billion against Rs74.962 billion; central excise duty (CED) Rs15.875 billion against Rs16.384 billion and collection of custom duty was Rs30.406 billion against Rs22.392 billion (increase of 35.8 per cent).
Two major factors responsible for extraordinary increase in the collection of custom duty were rationalisation of duty drawback rates and more growth in imports, the official said, adding that this was despite the fact that CBR had paid a huge amount of Rs20 billion during July-November 2003-2004 as duty drawbacks against Rs18 billion last year. Tax collection in November was Rs33.755 billion against Rs31.780 billion during corresponding period last financial year, registering an increase of 6.2 per cent. **Sources in the government are of the firm opinion that continued upsurge in revenue collection is mainly due to enhanced business activity, particularly strong export growth. **
the elepahant in the room is broadening the collection of Income Taxes… there is no improvement shown in that department no matter what kind of self determination tactics you employ.. rank corruption cripples the collection of taxes from those pressure groups which oughtta be paying it.. the salaried class bears the burdon of all..
An exaggerated estimate would put less than 3% of Pakistan’s 140million paying Income Taxes!!
Tax collection indeed has improved. It has gone from 308 billion rupees in 1999 to over 460 billion rupess today. http://www.sbp.org.pk/Ecodata/tax.htm
Nevertheless, I’d like to see direct taxes making a larger share of the total tax collection than the indirect ones since indirect taxes hurt poor more than they hurt the rich.
With increased prices of real estate, increased wealth and higher inflation (higher purchasing power), its natural that tax collections will increase. The critical question is whether there is any increase in the number of people paying taxes and more importantly, is the percentage of people who are trying to hide their income and not pay proper taxes increasing or decreasing?
With vast agricultural income out of limits, it creates an automatic disparity in tax collection and puts an unfair burden on the industries, cz the industries and personal income taxes are, therefore, carrying the burden for the whole country.
A long time ago, Dr Mehboob-ul-Haq, the former Finance Minister said that if the people of Pakistan pay their due taxes for just one year, all the debts of Pakistan can be repaid and the budget will be balanced.
I think taking on board the current poverty levels and the outstanding international debts.. it will take good 10 - 20 years for that to happen.
The taxation system needs to be updated as well..
get rid of the wealth tax.. why should you be double taxed.. you may have scrimped and saved that monies.. to be taxed on it again.
implementation of tax breaks for savings schemes.. this way the people would save for longer periods. and with tax breaks on profit/interest/investment of these funds.. people would be more willing to put money within the banking system.
(the more money invested in banks.. means the banks can loan out more money on basis of these long term savings.. thereby increasing the economic activity.)
increasing the tax on higher value properties and land .. and to be reduced if the land is actively part of the economic activity. e.g. if its being utilised to the maximum for agricultural or industrial use.
This is because there would be income tax generated from the sales of products from these properties.
(This would ensure that we do not have hectares upon hectares of irrigable land not being utilised to its full benefits
It would also make sure that the fuedal land owners pay their due share to the exchequer.. though considering the large number of them in the parliament .. i doubt such a law would be passed.. bah humbug)
introducing PAYE (Pay as you earn) scheme where companies or individuals pay taxes as they earn.. This prevents need to file separate income tax at the end of the year.. I have not filed a tax form in the last 6 years .. you only file if you have extra earning for which you have to pay taxes.. or you want to reclaim tax overpaid. (I think even US can learn from this)..
introduction of easy self filing tax system.. which would make it easy for people to pay taxes.. (works wonders in UK... small businesses and own business owner utilise this service)
There are a lot more ways that you can generate more tax.. but you need to make it more equitable.. and not skin the people who actually are trying to pay taxes.
There also needs to be simplification of the taxation system and of filing taxes.
I do have to agree with Black Zero that the withholding tax (10%) is much too high, especially since the interest rates have declined meaning that there is less of an incentive to put money in the saving schemes. The role of the banking sector is the channel money from savers (who aren't the best investors) to investors (entepnuers). Altough at this moment the Pakistani banks are awash with liquidity, nevertheless it would be wise to remove this tax in anticipation of when they are not. But I am a bit confused by the (PAYE) system, wouldn't it make it a less of an incentive to increase production. ( I don't know much about this system). I think they have gotten rid of the wealth tax, I was hearing it in the news.
its us, the ghareeb awam, salary holders who r being heavily taxed :o tax is automatically deducted from our salaries...
its not like this tax is coming out of the pockets of rich landlords or industrialists...
petrol kee qeemat kal dubara aik rupyay per litre mehngi ho gai aur aaj doodh bhee teen rupay per litre mehnga ho gya...aur oopar se these back breaking taxes!!!