During the past four years, the government increased revenue considerably, which prompted the Prime Minister to heap praise on Ishaq Dar; however the rise in collections has been mainly through withholding taxes which are not on income (from rent or shares) but on sale and purchase of goods and services. This implies that the withholding taxes, which at present account for around 70 to 75 percent of total collections under direct taxes, are in the sales tax mode and whose incidence on the rich is much less than on the poor. There is a need therefore to revisit this reliance and make appropriate policy adjustments. In effect, the primary need is to increase revenue through reform of the tax system by enhancing documentation on the one hand and reducing reliance on indirect tax collections which are inherently unfair.
Shahid Khaqan Abbasi’s decision to cancel all automatic weapons licences is unreservedly supported by this newspaper. Private militias of the rich and influential that include politicians, rich landlords and industrialists, have killed many who have mildly irritated the owner of such weapons and many innocent bystanders. One would therefore hope that before his term ends, which could be as little as 45 days, all licences for automatic weapons that have been issued are cancelled and more importantly the weapons confiscated.
One would also urge the new Prime Minister to heed good advice whatever its source. Sheikh Rashid in his speech to the assembly on the Prime Minister’s election day made some valuable comments. He pointed out that exports are declining and require some remedial measures. One would hope that Prime Minister Abbasi, a graduate of the well-regarded University of California (Los Angeles) with a Masters from George Washington University in electrical engineering would take the time to understand the causes behind the decline in exports. He needs to evaluate whether the Ministry of Commerce may not be the only one to blame for the decline in exports or whether the Ministry of Finance also be held accountable for an overvalued rupee and delay in refunds.
Sheikh Rashid also brought the heavy reliance on foreign borrowing during the past four years to the Prime Minister’s notice and, again, one would hope that he takes cognizance of this disturbing feature in our economy today which may be propping up the foreign exchange reserves but would, at the same time, hold the next government to ransom (with expectations of the country being compelled to go back on the IMF programme by next year or the year after); and is also debilitating the country’s capacity to invest appropriate amounts in social and physical infrastructure. Sheikh Rashid did not mention the heavy reliance on domestic borrowing but that too requires an urgent remedial measure.