Tax hikes increase poverty, smuggling and evasion
Taxes are affecting local industries’ export capacity
Instead of increasing taxes, spending should be reduced
May-09-2024: Dr. Shahid Rasheed Butt, the former president of the Islamabad Chamber of Commerce and Industry (ICCI), stated on Tuesday that rapidly raising tax targets is damaging the masses and the unsteady economy.
He claimed that raising taxes without taking into account local conditions encourages tax evasion and smuggling.
In a statement issued today, Shahid Rasheed Butt stated that taxes are also impacting the industrial sector’s export competitiveness; therefore, taxes should not be increased and expenses should be reduced.
The business leader claimed that because tax targets are rising more quickly than the nation’s economic growth, the size of the undocumented economy is growing.
Instead of finding new taxpayers, the burden on existing taxpayers is increasing, affecting business activities.
He noted that we must take into account that decreasing inflation will also hinder the realisation of tax targets.
Although the economy is growing at a negligible rate, Shahid Rashid Butt noted that the tax target for the upcoming financial year will increase from Rs 9.41 trillion to Rs 11.005 trillion, requiring the FBR to collect an additional Rs 1.59 billion.
He noted that the government had planned to register 3.2 million traders by April 30 under the Tajar Dost scheme, in which just 75 shopkeepers had expressed interest, which proved to be a failure as expected.
Increased sales tax is one of the reasons for the increase in tax revenue, but inflation has also played a part. Now that inflation is down, tax revenue will also be reduced.
He noted that raising the sales tax has a greater impact on the poor, so we should reduce non-developmental spending instead of raising it further.
He stated that the government’s policy of continuous tax increases is increasing tax evasion and smuggling, which is affecting the export capacity of local industries.
Currently, 30 percent of the diesel sold in the country is smuggled from Iran, causing Pakistan to lose 17 billion rupees per month.
In addition, smuggling damages the national treasury by bringing in gas, foodstuffs, dairy products, medicines, juices, and many other items.
He demanded that all targets be realistic and aligned with the ground realities.
