GOING by his recent TV talk, former Prime Minister Nawaz Sharif seems to believe that the solution to many economic woes lies in big fat tax cuts to banks, oil companies, sugar mills and rich wealthy individuals.

And Mian Sahib did not stop there. He went on to propose a 10 per cent uniform income tax that would burden the hardworking middle income households to foot the bill of these fat tax cuts to the wealthy elite.

It is no secret that Pakistan does not collect enough taxes. Tax collection was only 9.9 per cent of GDP in FY12, one of the lowest in the emerging markets and at par with African banana republics.

The problem is that the rich do not pay taxes, large scale exemptions and weak enforcement provides enough space for the rich to slip through the tax net. This forces the government to levy heavy indirect taxes, regressive taxes like GST that disproportionately burden the poor.

Even that is not enough to cover the budget gap, forcing government to print money to cover that gap. This leads to inflation, another regressive tax that disproportionately burdens the poor. Given the ground realities does it make any sense to burden the poor and dish out big fat tax cuts to the rich?

Maybe I must have heard him wrong! The tax rate for business is too high and corporate tax rate must be brought down to 10 per cent. The corporate sector includes big banks, oil companies, sugar and cement cartels, 5-star hotels and multinationals. Due to record earnings, the corporate sector contributed Rs450bn (2.2 per cent of GDP and nearly 25 per cent of total FBR collection) in FY12.

If the corporate tax rate is brought down to 10 per cent as Mr Sharif proposes, from 35 per cent today then that would result in a straight loss of Rs.320bn (1.6 per cent of GDP) in tax collection. This is two times the amount of money the government spent on the health of 180 million Pakistanis in FY12.

Such a massive tax break to big business will come at high cost to the masses. Lack of resources will mean less money for education, health and clean drinking water facilities for the poor households. Who stands to benefit? This money will go straight into the pockets of the big tycoons, wealthy investors and shareholders in the form of record profits.

How can Mian Sahib justify such irresponsible policy that effectively is taking money away from the poor and stuffing it in the pockets of the wealthy elite?

He promised to implement a uniform 10 per cent income tax rate.

Today a person making Rs10 lakhs a month will pay Rs193,000 a month in income tax. If the tax rate is reduced to 10 per cent the same person will only pay half that amount in tax (i.e. Rs100,000 a month). Effectively Mian Sahib promises to reduce the tax paid by the wealthy by a whopping 50 per cent. What about the rest of us?

Unfortunately no such luck. Today a middle income household earning Rs40,000 a month pays only Rs333 in monthly income tax.

Mian Sahib promise to implement a uniform 10 per cent tax rate will effectively mean that the same person who was paying Rs333 a month will now end up paying Rs4,000 in monthly income tax. This effectively slaps the hard working middle class worker, the backbone of this economy, with a massive 1100 per cent increase in tax burden. Will burdening the middle class worker and households, while doling out massive tax cuts to the wealthy elite, solve the woes of this economy?

If Mian Sahib is so big on tax breaks then why is there no proposal to cut sales tax? The sales tax is the single biggest burden on the masses; it is highly regressive in nature because it disproportionately burdens the poor.

Every person, rich or poor, pays the same 16 per cent GST on a pack of milk. Why is it that the tax that really hits the masses is the only tax that Mian Sahib does not want to cut?