THE tax hike embedded in the recently announced federal budget has rightly ignited an uproar in the country. To many, this increase is not viewed as a legitimate fiscal strategy. There is a troubling disconnect between the government’s budgetary proposals and their feasibility. The government seems to be continuing to disproportionately burden the salaried class once again with additional taxes.

The anticipated inclusion of retailers in the tax net has not come to fruition. Instead, the government has levied a 2.5 per cent withholding tax on manufacturers on behalf of retailers’ income tax. The assumption that this burden will not be passed on to the consumers is overly simplistic, and betrays the government’s disconnect with the ground realities. Manufacturers are unlikely to shoulder these costs. Instead, they will pass these expenses down the supply chain, ultimately impacting the consumers.

The economic ramifications of this strategy are alarming. By over-relying on the salaried class and manufacturers to bear the tax burden, the government risks stifling economic growth and increasing public discontent. The expected economic benefits of the tax hike may fail to materialise if the resulting financial strain on key economic players leads to reduced spending and investment.

This approach not only fails to address the issues within the broader tax system, but also risks exacerbating economic inequality and public dissatisfaction.

Gulab Umid
Turbat

Published in Dawn, June 28th, 2024