http://thenews.com.pk/daily_detail.asp?id=104973
Saturday, April 05, 2008
By Mansoor Ahmad
LAHORE: Te economists wonder how the present regime would deal with the issue of documentation of economy which the major coalition partners unsuccessfully tried to impose during their past tenures and opposed while sitting in opposition.
The economists the world over agree that general sales tax that documents every economic activity is the only way to fully cover the economy. Efforts to document the economy through this tax in Pakistan started in 1986 when the GST was recommended in the 1986-87 federal budget. However, the proposal was shelved after traders called the first countrywide shutter-down strike over the issue. Since then, the traders have successfully been avoiding the tax for the last 22 years. On the other side, India that decided to opt for GST or value added tax at the start of this century has finally been able to slap the levy in its states.
The Benazir-led PPP government in 1989, in its first tenure, proposed complete documentation of the economy through the General Sales Tax. However, the Nawaz-led PML-N opposition strongly opposed the move. On the same lines, the Benazir-led opposition in 1991 opposed GST proposal of the Nawaz government and the same pattern was repeated in the second tenures of both parties in 1993 and 1997.
Imposing GST would be a difficult job even for a strong coalition government in which the opponents of yesteryears have buried the hatchet and vowed to steer the economy through mutual cooperation. The military government too at the peak of its power in 2000 failed to tame the traders and had to compromise on a weak fixed tax regime.
The GST on traders has been replaced with a fixed turnover tax that has created distortions in revenue collection. According to the Federal Board of Revenue, traders’ share in the GDP is 16 per cent while their contribution to total tax revenues is less than four per cent. The traders would show their muscle again if the new government tried to impose the GST. The government would not like to open an avenue of confrontation at this juncture as it is already burdened with numerous other issues like price hike, food security, law and order and war on terror.
The experts point out that even the way of determining annual turnover is non-transparent. It has been left to the traders and the annual turnover declared by them is accepted by the FBR. Accordingly, the traders deposit 0.5 per cent turnover tax.
It is pertinent to mention that the turnover tax is imposed on all the traders running shops that have shutters. According to FBR, there are around 1.8 million such shops in the country. They say it is mandatory for all traders to pay the turnover tax but hardly one-fifth of them deposit the tax, which is nominal.
The experts point out that the GST eliminates all tax evasions if it is properly implemented during the entire cycle of an economic activity. It is basically a consumption tax that is paid by the consumers and all other individuals involved in the process simply collect the tax on behalf of the government.
For instance, they say, if a distributor gets a sales tax paid product worth Rs100 from a manufacturer and adds Rs5 as profit, he is required to add 15 per cent sales tax to Rs5 which would be Rs0.75. He charges Rs105.75, including the tax, from the retailer. Now if the retailer adds Rs5 as profit he would add another Rs5.75 to the price that would come to Rs111.50 that he will charge from the end-consumer.
The input supplier, manufacturer, distributor and retailer are required to deposit the sales tax with the ST department. The sales tax deposited reveals the gross income of each and thus tax evasion is eliminated.
Saturday, April 5, 2008
Nearly half of Pakistanis ‘food insecure’: WFP
source: http://thenews.com.pk/daily_detail.asp?id=104961
Saturday, April 05, 2008
ISLAMABAD: Nearly half of Pakistan’s 160 million people are at risk of going short of food due to a surge in prices, the World Food Programme said on Friday.
The WFP survey covering the year to March showed the number of people deemed “food insecure” had risen 28 per cent to 77 million from 60 million in the previous year.
The WFP estimates that anyone consuming less than 2,350 calories per day is below the food security line.
Sahib Haq, an official with the WFP’s Vulnerability Analysis & Mapping Unit in Pakistan, said food prices rose at least 35 per cent in the past year compared with an 18 per cent rise in minimum wages.
“There is a very big gap between the increase in prices and increase in wages ... the purchasing power of the poor has gone down by almost 50 per cent,” Haq said.
The latest findings comes a week after the World Bank urged Pakistan to make rapid adjustments and reforms to avert an economic crisis as it reels from the impact of high global prices for petroleum and food.
The price of wheat flour in January was between 24-25 rupees (38 US cents) per kg in three of Pakistan’s four provinces, compared with 15 rupees per kg in January 2007, the WFP said.
Prices have since moderated to around 17 rupees but are expected to shoot up 40 per cent or more in the coming months, according to grain industry officials.
“There will be a big crisis,” Haq said.
Wheat flour is used to make roti and naan, the flat unleavened breads that are a the central component of the Pakistani diet.
Pakistan consumes about 22 million tonnes of wheat a year.
Prices for rice, vegetables and cooking oil have also risen sharply, and the economic hardships faced by ordinary people played a big part in an election in February that resulted in President Pervez Musharraf’s political allies being thrown out of government.
The new coalition government, which took power last month, raised the support price it pays farmers to buy wheat to ensure adequate supplies, but Haq said the move would result in sharply higher flour prices in months ahead.
The consumer price index, a key indicator of inflation, rose 11.25 per cent in February from a year ago, mainly due to food prices.
Due to the previous administration’s reluctance to reduce subsidies for food and fuel, the government is saddled with a widening fiscal deficit. While wanting to alleviate the hardship of the poor, the new government will face some painful economic choices.
Saturday, April 05, 2008
ISLAMABAD: Nearly half of Pakistan’s 160 million people are at risk of going short of food due to a surge in prices, the World Food Programme said on Friday.
The WFP survey covering the year to March showed the number of people deemed “food insecure” had risen 28 per cent to 77 million from 60 million in the previous year.
The WFP estimates that anyone consuming less than 2,350 calories per day is below the food security line.
Sahib Haq, an official with the WFP’s Vulnerability Analysis & Mapping Unit in Pakistan, said food prices rose at least 35 per cent in the past year compared with an 18 per cent rise in minimum wages.
“There is a very big gap between the increase in prices and increase in wages ... the purchasing power of the poor has gone down by almost 50 per cent,” Haq said.
The latest findings comes a week after the World Bank urged Pakistan to make rapid adjustments and reforms to avert an economic crisis as it reels from the impact of high global prices for petroleum and food.
The price of wheat flour in January was between 24-25 rupees (38 US cents) per kg in three of Pakistan’s four provinces, compared with 15 rupees per kg in January 2007, the WFP said.
Prices have since moderated to around 17 rupees but are expected to shoot up 40 per cent or more in the coming months, according to grain industry officials.
“There will be a big crisis,” Haq said.
Wheat flour is used to make roti and naan, the flat unleavened breads that are a the central component of the Pakistani diet.
Pakistan consumes about 22 million tonnes of wheat a year.
Prices for rice, vegetables and cooking oil have also risen sharply, and the economic hardships faced by ordinary people played a big part in an election in February that resulted in President Pervez Musharraf’s political allies being thrown out of government.
The new coalition government, which took power last month, raised the support price it pays farmers to buy wheat to ensure adequate supplies, but Haq said the move would result in sharply higher flour prices in months ahead.
The consumer price index, a key indicator of inflation, rose 11.25 per cent in February from a year ago, mainly due to food prices.
Due to the previous administration’s reluctance to reduce subsidies for food and fuel, the government is saddled with a widening fiscal deficit. While wanting to alleviate the hardship of the poor, the new government will face some painful economic choices.
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