The recent expansion of indirect taxation in Pakistan has led to a hike in the prices of essential goods. The price of ghee, oil, medicines, milk, and other essentials has increased by over 22 percent since the budget. This surge in prices contradicts the government’s claims of controlling inflation
Inflation
The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down.
, highlighting the urgent need to address the structural issues within the country’s tax system.
Pakistan’s tax system faces huge challenges, including high levels of tax evasion by the super-rich and a reliance on regressive taxes. These issues curtail the government’s ability to generate sufficient revenue for public services and development.
Tax justice is in dire straits in the South Asian region, where inequality is surging because of massive tax abuses. There is an urgent need to raise finance that can be directed to just and equitable development, keeping climate justice issues at the forefront.
Countries are losing a total of $483 billion in taxes each year to global tax abuse committed by multinational corporations and wealthy individuals. The failures of global tax rules cost governments over one billion US dollars every day due to tax abuse committed by multinational corporations and wealthy individuals. This hinders our governments’ ability to raise the revenues needed to finance quality public services, ensure human rights, and deliver urgent climate action. It exacerbates inequalities within and between countries and disproportionately burdens the people and countries of the Global South. As such, we urgently call for a comprehensive, inclusive, and just UN Framework Convention on International Tax Cooperation, which is long overdue.
The present international tax architecture is the product of colonial domination, a relationship that persists to the present day. It is imperative that all people who stand for the principles of human rights, equity
Equity
The capital put into an enterprise by the shareholders. Not to be confused with ’hard capital’ or ’unsecured debt’.
, fairness, and transparency unite and take decisive action to rewrite the tax rules to finally work for people and the planet.
In a historic vote at the UN in November 2023, a resolution was adopted to begin the process of establishing a UN Framework Convention on International Tax Cooperation (UN Tax Convention). This signals the opportunity to’rewrite’ global tax rules and rulemaking towards making the international tax architecture truly work for people’s needs and rights. The success of the resolution, despite the resistance from the world’s strongest economies, demonstrates the strong demand from people and countries of the Global South for a meaningful voice on global tax rules—a voice which they have historically been denied. Paradoxically, Pakistan supported this UN Framework Convention on International Tax Cooperation. However, the internal practices of taxation by the present government are just the opposite of those that Pakistan has voted for.
We demand Pakistan must
Stay away from the OECD
OECD
Organisation for Economic Co-operation and Development
OECD: the Organisation for Economic Co-operation and Development, created in 1960. It includes the major industrialized countries and has 34 members as of January 2016.
http://www.oecd.org/about/membersandpartners/
-sponsored Pillar1-Pillar2 Solution. Pakistan must also wholeheartedly support the UN initiative on it by sending relevant FBR officers to participate in the process, and the government should commit to repealing all international economic agreements (tax, trade, and investment agreements) as well as those with IPPs forthwith.
Pakistan’s tax system is a byproduct of these colonial practices used by rich countries. Firstly, it has had a low tax-to-GDP
GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
ratio, causing an overall large budget deficit for many years. This unequal ratio can be improved by taxing the rich and not the poor. However, the government does otherwise, offering concessions to the rich and imposing indirect taxation on the poor. Secondly, there has been an overall dependence on indirect taxation that has caused the incidence of tax to be less progressive and more regressive in nature.
This examines the issues of unfair taxation in Pakistan, compares the situation with other South Asian countries, and proposes solutions to address these challenges. Pakistan’s tax system is characterised by multiple structural problems.
It is important to mention that government efforts in introducing an efficient tax mechanism are misdirected, to say the least. It has consistently targeted the middle and working classes to broaden its tax base, thereby burdening them with more and more taxes, while the elite and super-rich of the country are continuously exempt from any taxation efforts. The ordinary people of Pakistan are therefore essentially paying taxes to maintain the lifestyle of the super-rich. Such a system can’t be viable in the long run.
While all South Asian countries face challenges with inequality stemming from their taxation systems, Pakistan’s heavy reliance on indirect taxes, coupled with a relatively high standard rate and complex exemptions, contributes significantly to inequality compared to some of its neighbors. For instance, India’s multi-tiered GST system represents an attempt to introduce more progressivity into indirect taxation. However, Pakistan’s GST rate of 18% is the highest in the region, compared to Nepal (13%), Bangladesh (15%), and Sri Lanka (15%).
The current tax system in Pakistan results in several adverse effects: reduced government revenue for public services and development, increased inequality within the country, continued dependence on external financing and debt, and the undermining of national sovereignty and ability to rightfully tax multinational corporations.
To address these issues, Pakistan must implement measures to bring the country’s super-wealthy elite into the tax net without imposing additional burdens on the less privileged.
We demand implementation of the already introduced Super Tax. The government must reintroduce the first draft that was presented just after Shahbaz Sharif took over in 2022. An electricity bill includes the following taxes: electricity duty, TV fee, general sales tax, income tax, further tax, GST on fuel price adjustment, income tax on fuel price adjustment, quarterly tariff adjustment, surcharge, fuel price adjustment, and total fuel price adjustment.
These taxes amount to almost 50 percent of the total electricity bill.
We demand the withdrawal of these taxes from electricity bills. We also demand energy production by solar and other renewable energy schemes. We totally oppose the usage of fossil fuels for energy production. We must immediately stop using oil, gas, and coal for electricity production.
We also demand nationalisation of independent power producers, which are funded from the people’s taxation. The several types of taxes on the electricity bill must be withdrawn, and the conditionalities of the IMF
IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.
When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.
As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).
The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
http://imf.org
to impose more taxes on ordinary people must not be implemented. The unprecedented increase in electricity prices must be taken back, and a unit of electricity must not cost more than 10 rupees.
Enhancing digital transformation efforts within the Federal Board of Revenue (FBR) can improve efficiency and transparency in tax collection and refunds. Strengthening mechanisms to detect and prevent tax fraud is crucial, building on recent successes in uncovering large-scale evasion.
Shifting towards more progressive tax policies that distribute the tax burden more fairly will provide resources for sustainable development.
Furthermore, implementing Freedom of Information principles will ensure transparency in budget allocation and expenditure, allowing citizens to know how public funds are utilized. Addressing unfair taxation in Pakistan is crucial for economic development.
By implementing comprehensive reforms, participating in international efforts for tax justice, and prioritising progressive taxation, Pakistan can work towards a more equitable and effective tax system that benefits all segments of society.
Tax the Rich, Not the Poor! Tax Justice, Now!
By Farooq Tariq
General Secretary Pakistan Kissan Rabita Committee
Husnain Jamil Faridi,
Riffet Maqsood
Ayesha Ahmad
Contact: Husnain Jamil Fridi 0311-3366655
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