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    Rise in tax revenue fails to keep pace with economic growth

    Rise in tax revenue fails to keep pace with economic growth

    By Jawaid Bokhari


    KARACHI, Nov 24: The increase in tax revenue has failed to keep pace with economic growth, and
    the tax-GDP ratio has declined despite massive efforts mounted by the finance ministry, to raise
    revenues through tax amnesty schemes and documentation.

    According to the State Bank annual report, the federal government's revised receipts of taxes and
    surcharges were to the tune of Rs388.3 billion in fiscal 2000, as against Rs.386.3 billion in the
    previous year. Only tax collection alone has improved from Rs308.5billion to Rs351.6 billion.

    Economists say that the economic growth is currently agriculture-led which has no tradition of paying
    income-tax, though farm incomes contribute over 25 per cent of the GDP as against share of
    manufacturing which ranges between 18 and 19 per cent.

    The financial performance of the multinationals, somewhat improved, still suffers from many company's
    posting lower profits or even losses. Multinationals contribute a substantial portion of corporate taxes.

    Official figures for the last fiscal show that surcharges have declined substantially by Rs.41.7billion
    because abnormal rise in oil prices has not been fully passed on to the consumers. However, tax
    receipts picked up due to extension of GST to electricity, gas and petroleum products.

    Despite tax amnesty yield of over Rs.9billion, direct taxes have remained stagnant around Rs.110
    billion for the past two fiscal years.

    Financial analysts feel that the tax culture has yet to improve through voluntary tax compliance. A
    senior tax official, Munir Qureshi, says as much as 78 per cent of the total direct taxes is collected
    through no less than 25 types of withholding taxes, and in advance payments before regular
    assessment. Tax experts consider that just about 22 per cent of the collection can justifiably be
    classified as direct taxes.

    Sources admit that advance payments are often treated as expenses by companies and passed on to
    the consumers as and when it suits both the tax payers and the tax officials.

    Though efforts to extend the tax net is generally welcomed - except by small traders - industrialists say
    that the incidence of taxation lacks social acceptability in a stagnant industrial economy which needs
    incentives and concessions to pick up. It is heavy taxation and a weak rupee that stifle domestic
    investment and economic growth. And to many, efforts to increase the tax net appears to be in an
    experimental stage.

    "It is the right of a government to collect taxes, but linked to it also is the responsibility to use the
    revenues so collected to deliver", says a recent study by the Business Council for Economic Revival,
    proposing measures to raise tax revenue.

    To encourage tax payment, every rupee raised as tax must be well spent, says an industrialist and adds
    that the quality of government service must improve.

    The Business Council also points out that the taxation system should be based on equity so as to
    encourage all sections of society to pay their share of taxes.

    Traders complain that the tax officials fail to discriminate between honest and dishonest tax payers that
    does not foster tax culture.

    Instead of offering correct guidance as is the practice in developed countries, tax official start with the
    assumption that every tax-payer is a tax-evader. To make matters worse, tax amnesty schemes,
    floated periodically, offer premium to tax evaders and penalize the honest tax payers.

    =============================================
    This is not good at all.
    Yes our Income tax revenues have grown by 50 million, yet agri is not taxed at all 25% of our GDP.
    There need to many more reforms.
    What do you gives think???

    ------------------
    CROIRE A L'INCROYABLE
    You can't fix stupid. So might as well troll them!
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