02-18-2009, 09:55 PM
Awais,
Indirect taxation percentage has reduced over the period in Pakistan. It's not merely a statement of FBR chairman. One can search for and check out the analysis to know the facts.
There is no harm in eliminating all the taxes so that a kid eating chocolate must not pay the tax. But for doing so we will have to shoot up the direct tax percentages which will not be easier to digest. I told you that levy of indirect taxes has so many reasons and one has to consider whole social and economic set up. Certainly all the policy making people are not the duffers although we may find such instances as well.
Some people have been proposing to levy taxation on the basis of COST of living and EXPENDITURES instead of using the income approach. In my view emenating from a proper sruvey/investigative study, the expenditure based approach of taxation is the need of the hour. However, it will take much efforts which we may not afford.
You will appreciate that every child cannot purchase chocolates and cookies of Rs. 1000. You may also be knowing per capita income of Pakistanis. The kid who purchases such cookies has resources and reasons and earning hands to make such purchases. So the taxes added to the values of such chocolates and cookies are quite justified if we have to follow indirect taxes approach. This is just like; if some one has income below a certain level, he is not taxable and if he has income beyond that level it is taxable.
The taxes embedded in prices are always decided keeping in view the class of people getting affected. This is a general rule. You will appreciate that kids of so many people who declare their income below the taxable limit (or pay a nominal tax figure) are able to purchase such cookies, travel through planes, cars and jeeps, use branded clothes, study in elite class schools, use best quality lap tops, mobiles, and enjoy every facility which the declared figures of their elders' income don't suggest and cannot justify. Why it is so? We need to understand. Although we see that so many other people who genuinly declare such figures don't have resources to educate their kids in high profiled schools, colleges, to dress them up with branded clothes like minnie minors, levis and ben sherman etc, to arrange/use executive transporations, and to live in elite class residential areas. So, it is very simple. The one who affords to expense out should pay the tax and the one who will not afford will remain exempted. This is the concept behind. You might have heard people saying that heavy vehicles should be taxed at higher rates than the light/small vehciles.
While doing so, the policy makers do cause certain harms (sometimes) to the poor and middle class as well. We must remember that when we at large are dishonest, the differentiation may not be possible for the regulators to such a delicate level. However, I personally know and believe that they do so.
I once sent a brief about an idea to FBR for introducing "cost of living based plus residential status based" approach of taxation. They did not give an ear to such idea which I knew at the outset. In countries like Pakistan people living at different locations don't get same level of services from government and regulators. For example the one who lives at Tando Jam must not have the same facilities and opportunities as a person living at Islamabad or Karachi could have. Be it roads, electricity, internet, phone, hospitals and helathcare, education, security or whatever else. A variance exists every where. Same variance could be seen in income levels and cost of living because this commensurates from the origins giving variant level of opportunities and facilities. I suggested that the whole territory of Pakistan should be bifurcated into various taxation hubs in accordance with the level of good governance each location has, and tax rates for all such tax hubs should be different. This will carry so many benefits and incentives for the people and economy as a whole. The rush towards big cities may also be controlled this way. As expected no body replied my communication.
So dear when we talk about money matters, you should understand that money does matter. Economists have always been criticised for being wealth creators and promotors of bread and butter science since the times of Mr. Adam Smith. On the other side accountants are called number crunchers. I know while talking on economic issues we become crual but if it has to be implemented, cruality has to become its part somehow. Money matters!!
Regards,
KAMRAN.
Indirect taxation percentage has reduced over the period in Pakistan. It's not merely a statement of FBR chairman. One can search for and check out the analysis to know the facts.
There is no harm in eliminating all the taxes so that a kid eating chocolate must not pay the tax. But for doing so we will have to shoot up the direct tax percentages which will not be easier to digest. I told you that levy of indirect taxes has so many reasons and one has to consider whole social and economic set up. Certainly all the policy making people are not the duffers although we may find such instances as well.
Some people have been proposing to levy taxation on the basis of COST of living and EXPENDITURES instead of using the income approach. In my view emenating from a proper sruvey/investigative study, the expenditure based approach of taxation is the need of the hour. However, it will take much efforts which we may not afford.
You will appreciate that every child cannot purchase chocolates and cookies of Rs. 1000. You may also be knowing per capita income of Pakistanis. The kid who purchases such cookies has resources and reasons and earning hands to make such purchases. So the taxes added to the values of such chocolates and cookies are quite justified if we have to follow indirect taxes approach. This is just like; if some one has income below a certain level, he is not taxable and if he has income beyond that level it is taxable.
The taxes embedded in prices are always decided keeping in view the class of people getting affected. This is a general rule. You will appreciate that kids of so many people who declare their income below the taxable limit (or pay a nominal tax figure) are able to purchase such cookies, travel through planes, cars and jeeps, use branded clothes, study in elite class schools, use best quality lap tops, mobiles, and enjoy every facility which the declared figures of their elders' income don't suggest and cannot justify. Why it is so? We need to understand. Although we see that so many other people who genuinly declare such figures don't have resources to educate their kids in high profiled schools, colleges, to dress them up with branded clothes like minnie minors, levis and ben sherman etc, to arrange/use executive transporations, and to live in elite class residential areas. So, it is very simple. The one who affords to expense out should pay the tax and the one who will not afford will remain exempted. This is the concept behind. You might have heard people saying that heavy vehicles should be taxed at higher rates than the light/small vehciles.
While doing so, the policy makers do cause certain harms (sometimes) to the poor and middle class as well. We must remember that when we at large are dishonest, the differentiation may not be possible for the regulators to such a delicate level. However, I personally know and believe that they do so.
I once sent a brief about an idea to FBR for introducing "cost of living based plus residential status based" approach of taxation. They did not give an ear to such idea which I knew at the outset. In countries like Pakistan people living at different locations don't get same level of services from government and regulators. For example the one who lives at Tando Jam must not have the same facilities and opportunities as a person living at Islamabad or Karachi could have. Be it roads, electricity, internet, phone, hospitals and helathcare, education, security or whatever else. A variance exists every where. Same variance could be seen in income levels and cost of living because this commensurates from the origins giving variant level of opportunities and facilities. I suggested that the whole territory of Pakistan should be bifurcated into various taxation hubs in accordance with the level of good governance each location has, and tax rates for all such tax hubs should be different. This will carry so many benefits and incentives for the people and economy as a whole. The rush towards big cities may also be controlled this way. As expected no body replied my communication.
So dear when we talk about money matters, you should understand that money does matter. Economists have always been criticised for being wealth creators and promotors of bread and butter science since the times of Mr. Adam Smith. On the other side accountants are called number crunchers. I know while talking on economic issues we become crual but if it has to be implemented, cruality has to become its part somehow. Money matters!!
Regards,
KAMRAN.
