HERE are two key takeaways from Finance Minister Muhammad Aurangzeb’s speech at a business gathering in Karachi on Tuesday: the salaried class and documented businesses are excessively overtaxed; and there is a critical need for effectively taxing the untaxed and undertaxed sectors including agriculture, retail and real estate. “We are at the end of the road. We cannot keep raising taxes on the businesses and salaried class. We need to bring untaxed sectors into the net,” he said. Indeed, the salaried class and tax-compliant businesses must get some relief from this unbearable burden. The latest hike in personal income tax rates amounts to squeezing out the last drop of blood from salaried individuals. It is not just income tax that they are paying. They also pay a plethora of indirect taxes and non-tax levies — sales tax on goods and services, withholding taxes, petroleum levy, and what not — on every service and good they buy. The reason is well known: whenever there is need of extra cash, policymakers always target the easy prey — salaried people and documented businesses.

Pakistan has achieved a semblance of macroeconomic stability in the past one year, which must be preserved and deepened to ensure sustainable and faster economic growth if our financial state is to improve. That goal cannot be accomplished unless the state starts collecting taxes equitably from where they are due — irrespective of the source of income. At the same time, the government should take steps to revamp and reform the entire tax administration to ensure that no segment of society has to pay more than what is due. Currently, Pakistan’s economy is in a low-growth mode; and any push for accelerating it without creating sufficient fiscal space will result in a deeper and longer economic downturn. Therefore, the minister does not have to be so apologetic about equitably distributing the tax burden across all sectors and segments of the economy.

Published in Dawn, August 1st, 2024