ECO401 Economics GDB 1 Solution Spring 2013

The case:

According to the record of NADRA, there are over 3.8 million potential taxpayers in Pakistan but only 0.8 million people filed tax returns in the last year 2012. In the recent budget 2013-14, Finance Minister, Ishaq Dar aimed to bring those people who are not paying taxes into the tax net by enhancing the tax machinery efficiency, removing anomalies, simplifying tax procedures, broadening the tax base and by several other measures. According to him, the focus of the budget is to improve the tax to GDP ratio to finally reach the targeted level of 15% by year 2018. In this budget, new taxes of Rs.209 billion worth have been imposed to meet the revenues and General Sales Tax (GST) has also been increased from 16% to 17%. Follow the given link of an article for further details of government taxation policy.



Being a student of Economics carefully read and evaluate this article. How this government taxation policy will affect the economy as a whole? Will these policies helpful in enhancing tax net and tax to GDP ratio?

Solution: This budget seem to crush the poor and middle class people. Increase in Gst, Patrolium products, Electricity and many more will directly effect the common people and will make their life more meserable.This shows the team who work for this documents are the people of another planet. They must give a 2ns thought to this un-realistic budget.May Almighty Allah give them wisdom and sencerity toward the poor masses of this country.

The Finance Minister, Ishaq Dar, following in the footsteps of his predecessors, has shown no intention to bridge the huge tax gap and punish tax evaders. On the contrary, he has relied more on imaginary figures to restrict fiscal deficit to 6.3 percent of GDP. The revised estimate of fiscal deficit for the current year is 8.8 percent – measures like reducing Prime Minister’s House expenditure may have political appeal but substantial economic impact is not there. No solution is offered for the Pakistan’s real malady that is open and blatant non-compliance of tax laws by the powerful segments of society and existence of a large untaxed economy. Since the rulers themselves are the principal beneficiaries, they are not ready to undertake any corrective action or implement an aggressive policy to streamline the entire tax system.