Direct Tax on Consumption
By Naveed Khan
San Jose , CA

 

Floods have devastated the most impoverished segment of Pakistan ’s population. 20 million people have been displaced and have practically lost everything from homes to cattle, crops and stored grain.

Most of your readers may not be aware that the Pakistan government collects only 9.3% of GDP as taxes. This includes income, tariffs, duties, license fees, etc. It is one of the lowest in the world. Compare the meager collection to the impressive USA figures - 35-40% as taxes between federal government, state, and cities.
I would suggest that Pakistan should increase direct taxes on consumption rather than on income. Income can be easily hidden and can be earned in a clandestine manner whereas consumption is mostly all too obvious. Pakistan has been trying to implement General Sales Tax and Value Added Tax for the last two decades, however, it has been strongly resisted by the well-off people.
Pakistan needs to rehabilitate the people devastated by floods. It should introduce 20% direct tax on consumption that is assessed when people buy cars, consumer goods, restaurants, etc.

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Editor: Akhtar M. Faruqui
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