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Sunday, June 19, 2011

A note on the Budget of Pakistan

Ashfaque Nizamani, Canada
By Ashfaque Nizamani, Canada

A country's budget represents an annual income and expense account of a country (society/region/ nation). Direct taxes, indirect taxes, and deficit financing are the options available with a government to fund its expenses. When first and second options fail, then governments adopt the third option (deficit financing). Under direct taxation higher earning people pay more taxes; and generally, under higher indirect taxation, higher spending people (usually people with higher income) pay higher portion of the taxes. As, indirect taxes are usually levied on sales/consumption of the products, and people with higher incomes consume more products, hence, they pay higher portion of indirect taxes.

Under deficit financing, usually, governments borrow or print and float more currency in the economy, hence causing inflation, and reduction in the purchasing power of the currency. It hits hard the people with lower amounts of income. Poor becomes poorer, and the gap between rich and poor increases. This is the problem of Pakistan. The gap between rich and poor is increasing.

In developed countries, like Canada, every person files tax return. People with higher earnings are taxed at higher tax rates, and people with lower income are taxed at the lower tax rates. And people with very low-level incomes, receive various forms of aids (GST tax credit refund, child tax benefit grants, etc). Government collects more money from higher earning people, and keeps some money for its expenses, and distributes some money among the poor and needy as GST Credit, Canada Child Tax Credit Benefit, etc. Health coverage is free for all. Education is made affordable to all. Entire health system and education system is owned and managed by government in Canada. Poor and rich people get same level of health care and education. This is actually the concept of a welfare state, where, government takes care of the poor. This is, in fact, the philosophy of Islam, which is practiced in most of the Western countries, including Canada, but not in Pakistan.

Pakistan Finance Minister, Dr Hafeez Shaikh presenting 2011-2012 budget
In collecting taxes, the tax department, even goes after criminals and collects taxes from them on their earnings (tax on theft or looted / black money). Anyone earning, by whatever means, has to pay share (taxes) to the government.

In the scenario of Pakistan, it is in the interest of poor masses, that, government should go for direct taxation. This is what Americans and other donor countries/institutions are telling the Pakistanis.

A nation, where, its rich people do not want to contribute, and still want benefits, how long, that system will survive? Not for long, I guess. A rich person cannot survive for a longer period, while living among the poor hungry people. This is what Islam told its adherents 1400 years ago and imposed on Muslims a tax (Zakat), which Pakistanis refuse to pay, and still want to teach Islam to others. In Sindhi, they say: “Black buffalo taunts red cow, because, red cow has a black tail”.

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