Pakistan passes tax-heavy budget; experts condemn reforms amid crisis
Jun 28, 2024
Islamabad [Pakistan], June 28 : Pakistan's parliament on Friday passed a tax-heavy finance bill for the upcoming fiscal year amid ongoing negotiations for a new International Monetary Fund (IMF) bailout.
However, experts have criticized the flawed tax system, citing its contribution to widening economic disparities and increasing financial burdens on the populace.
Crisis-ridden Pakistan continues to grapple with maintaining a low tax-to-GDP ratio, with the budget setting an ambitious target of Pakistani currency (PKR) 13 trillion in tax collection.
The complex tax structure imposes significant compliance burdens on both businesses and individuals.
Allauddin Khanzada, an expert, remarked, "While salaries have seen a 20-30 per cent increase, inflation has skyrocketed by 200-300 per cent, pushing many below the poverty line. The middle class, once a buffer, has dwindled. Today, Pakistan seems divided between the wealthy and the impoverished."
Pakistan is currently negotiating with the IMF for a bailout package ranging between PKR 6-8 billion, aiming to stave off an economic default in a region experiencing its slowest growth.
The increased tax target includes a 48 per cent rise in direct taxes and a 35 per cent hike in indirect taxes. Non-tax revenues, particularly from petroleum levies, are expected to surge by 64 per cent.
"We pay taxes on essentials like electricity, water, and even basic items like tea and matchsticks. Despite this, the government claims inadequate tax compliance. We are unfairly labelled as non-filers," Khanzada added. "The current tax system is outdated and exacerbates disparities between the rich and the poor."
Critics argue that Pakistan's new tax-heavy budget exacerbates economic disparities and burdens the population, amidst ongoing negotiations with the IMF to avert a financial crisis.
