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Archive for March, 1990

Abolishing the present – income tax system – III

(This is the CONCLUDING article in a series on the subject).

e have shown in the last article that by taxing the Rs 150 billion credit advanced in the present financial year by the scheduled banks of Pakistan at a flat rate of 10% at the time of disbursement of advance, income tax revenues amounting to Rs 15 billion could be collected at source, without the need of an Income Tax Department. This is in sharp contrast to the targeted Rs 15 billion this year, achievable only (and MAYBE) after paying a fair percentage, estimated at Rs 2-3 billion, for the upkeep of the Income Tax Department. Our basic premise is that in order to obtain a credit any corporate entity has to show a minimum 15% profit on investment, working through various financial permutations and combinations, this translates into a 12% taxable income or 6% of the total investment. Keeping the average commercial debt equity ratio of 60:40, this works out to a flat 10% of the debt (or the credit advanced by the bank).

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Bangladesh and Lebensraum – The AESSA concept

Three centuries ago, the area now comprising Bangladesh was renowned as the bread basket of India, multiple increases in population later, Kissinger called Bangladesh an “international basket-case” in the 1970s. Starting from the 1942 food famine, this has been a sorry litany of natural and man-made disasters, the poor Bangladeshis have been on the receiving end. At this time Bangladesh is a small country hemmed in by artificial borders and prone to disasters of various dimensions and magnitude. If it is not floods, it is drought, if not drought, then cyclones and so on, the greatest problem is over-population, too little land space for too many people. The leadership is able to cope today, what about the future? It is a losing battle, fully 40% of the Bangladeshi population is less than 10 years old.

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Abolishing the present – income tax system – II

(This is the SECOND article in a series on the subject).

No government can function without revenues, it goes without saying that the collection system must be efficient and honest. We have discovered through painful experience the futility of relying on our Income Tax Department to do either of the needful. While perfunctory threats have been hurled at tax evaders and their partners among income tax bureaucrats by successive finance ministers the successful and efficient have teamed up effectively with the corrupt to defraud the government exchequer at will and with abandon. In an unfair system the maximum burden has fallen on the limited earnings of the salaried class, thus the majority of the population of Pakistan depend upon their government to function on the narrow base of taxes collected from the very meagre minority of the successful and/or salaried few. It is a wonder that the salaried class has not rebelled, in effect an impoverished “Atlas” has not shrugged.

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Abolishing the present – income tax system – I

(This is the FIRST article in a SERIES on the subject).

The normal course of action available to any government bent on reducing budgetary deficits is to resort to higher taxation, very few establishments practice tight fiscal control. This is a Catch-22 solution as an increase in taxes tends to lower productivity, letting loose a vicious cycle of job depletion, economic recession, etc. While there is genuine public outcry on taxing farm income, we do not have any political kamikaze willing to go this route, a damned if you will, damned if you won’t political hot potato. Given that most of our legislators are agriculture landlords (and given the present political system will continue to be), imposing of agriculture taxes has as much hope as a snowflake in Jacobabad in the month of June. The result is that a majority of our population has a free ride on the taxes imposed on an unfortunate successful, efficient and/or salaried minority of the masses. Instead of an even spread of taxation, too many depend upon the income of the too few. In the meantime tax evasion has reached new levels of sophistication, the affluent employing an army of taxation specialists whose sole purpose in life is to discover tax loopholes and to exploit them to the detriment of public revenues. The richer you are the less likely you are to pay government dues, the salaried class, particularly the public officials and armed forces officers share the tax burden, the tax being deducted at source.

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De-Beirutizing Karachi

An irate business community recently threatened Syed Ali Nawaz Shah, Federal Minister for Industries, that they would close down their commercial and industrial ventures in Karachi if there was no security of life and property, tongue-in-cheek they said they would be obliged to refuse payment of taxes, whether of the official or unofficial kind was left unsaid.

A tax of sorts is being levied as a protection racket by unscrupulous elements newly armed with toys that go bang. The exchange of prisoners (of war?) between PPP and MQM was a horrifying exercise, besides being demeaning to the concept of democracy, two major political groups of Karachi (one the ruling Party of the country) have publicly acknowledged that they have armed elements that resort to kidnapping and torture, mayhem and murder was left unsaid. Significant was the supervision, mode and place of exchange, if the Pakistan Army has had to become the referee for deadly political games of the ultimate kind, can Martial Law be far behind?

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