Pakistan's Taxation Dilemma

[Paul2]

But Taxation system is 100% broken in Pakistan

• May be sales tax is not getting to Government of Pakistan because the shop keepers or business owners are falsifying data in their filings so crack down is needed

Quick fix to sale tax:

• Make government retain the double of sale tax
• Upon providing the receipt, the buyer is entitled to return of half of sale tax
• Make the system fully electronic, or require sellers issue receipts on tamper proof paper.

In China, some northern provinces used such system for a few years, but ended the practice for unknown to me reason, but it was noted to be extremely efficient because it shifts the reporting duty on the buyer. Some speculate that the practice was ended exactly because it was "unreasonably effective"

 

[Gorgin Khan]

The basic flaw in your model is that its based on chocking the middle and lower middle class to death.

The assumptions on which you based your ST collection model is totally Irrelevant and fallacious. The figures are highly exaggerated and is not anywhere close to reality. On first hand it does not include the economic disparity among the different income classes (which is enormous), leave alone other factors. Our basic problem is not GST but rather income tax.

 

[AZADPAKISTAN2009]

Well the models are simple

Rich are Taxes
Middle class are Taxed
Lower class are taxed

Government can introduce laws and programs to help the lower class coup with taxes with special program

Yes we have lower class, but they buy less and pay less tax




So you can see , the poor , are not burdened with tax for rich , the rich pay their own taxes



Now the issue which needs to be fixed is

a) Are the businesses in Pakistan reporting Sales Tax honestly in Pakistan = Yes / No
b) Is there a problem in collection at city level , province level and not all money is reaching Federal level

#1 Means how , Sales Tax is defradued is by Paper Cash , a Customer pays sales tax by Cash and then the Shop owner , hides that money !!! becasue it was done by Paper

Simple calculation on sales tax per house hold from my first post

In a system where people's collected sales tax is 100% tracked and reaching government we should get 18 Billion Dollar just from sales tax alone !!!!





I suspect Tax THEFT is happening

a) Shop keeper level
b) Restaurant Owner Level
c) Business level
d) Oil company level
e) Grocery Store Level
f) Cell phone company level
g) Utilities Level
h) Electronics goods sales level


Paper Cash ~ is contributing to this theft

Customers are charged sales tax , but it is not deposited to government
or People are doing sales under the table not charging sales tax



This can be fixed by Sting Operations against businesses that operate on hard cash and do not issue receipts !!!


If Businesses are forced to use Digital Terminals vs Paper cash there would be good paper trail of sales tax collection

These systems are always connected to banks and then any sales tax collected is easily tracked

 

[nahtanbob]

Every one can work 2 jobs or 3 jobs

Monday-Friday
Job 1 : 9am-5pm
Job 2 : 7pm-11pm

Saturday-Sunday Job 3 : 4 hours
View attachment 546863

you must be joking

 

[AZADPAKISTAN2009]

Paying by paper money is problem in Pakistan

Fuel Tax : Hard to avoid , it is integrated in fuel price but are the Petrol Stations honestly
giving that extra cash to Government of Pakistan?

Utilities Companies Tax Collection:
Utilities company bill again is professional , and any tax is added but is that tax correctly calculated and given to Pakistani government?


Wide Sales Tax Theft Restaurants
Pakistanis Love to Eat outside and love food
majority of time these places run on paper cash so high % that sales tax is never
collected or if it is collected it is not given to Government of Pakistan

• Chai Wala
• Pan Wala
• Morning Breakfast resturants
• Lunch and Dinner restruants

All 100% on paper cash

 

[FuturePAF]

From my understanding IMF has always requested two things fix what is broken in economy

a) Taxation System
b) Sell off your Loss making Assets (Privatization)


They have given you a loan so it is in their interest you as a loan taken do not default on the loan or go bankrupt

I am not a big fan of privatization as I feel a Nationalized institute can still work greatly for country.

But Taxation system is 100% broken in Pakistan

• May be sales tax is not getting to Government of Pakistan because the shop keepers or business owners are falsifying data in their filings so crack down is needed

What specific industries don't you think should be privatized? There is no motive by Management in many industries to form their companies. I assume a major push can be made to straighten out the national companies with the help of global experts, but if those changes fail, then wouldn't it take the burden off the nation to privatize these companies. Losses and the interest will sink the overall budget if good money chases bad. Beyond national security concerns, Pakistan should privatize these companies to get enough money to save the rest of the economy, such as buying the equipment to getting our export industries going again. Side by side taxation needs to be phased in to cover the trade gap, and the coming payments for the loans.

 

[Paul2]

Paying by paper money is problem in Pakistan

Fuel Tax : Hard to avoid , it is integrated in fuel price but are the Petrol Stations honestly
giving that extra cash to Government of Pakistan?

Utilities Companies Tax Collection:
Utilities company bill again is professional , and any tax is added but is that tax correctly calculated and given to Pakistani government?


Wide Sales Tax Theft Restaurants
Pakistanis Love to Eat outside and love food
majority of time these places run on paper cash so high % that sales tax is never
collected or if it is collected it is not given to Government of Pakistan

• Chai Wala
• Pan Wala
• Morning Breakfast resturants
• Lunch and Dinner restruants

All 100% on paper cash

What do you think of the solution I mentioned above?

 

[FuturePAF]

Paying by paper money is problem in Pakistan

Fuel Tax : Hard to avoid , it is integrated in fuel price but are the Petrol Stations honestly
giving that extra cash to Government of Pakistan?

Utilities Companies Tax Collection:
Utilities company bill again is professional , and any tax is added but is that tax correctly calculated and given to Pakistani government?


Wide Sales Tax Theft Restaurants
Pakistanis Love to Eat outside and love food
majority of time these places run on paper cash so high % that sales tax is never
collected or if it is collected it is not given to Government of Pakistan

• Chai Wala
• Pan Wala
• Morning Breakfast resturants
• Lunch and Dinner restruants

All 100% on paper cash

Follow the money, Who has been getting rich in Pakistan over the last 20-30 years. What loopholes are the exploiting, and how is money moving in and out of the country. Local offices of NAB need to watch the top 1% of businesses and follow their money.

Here are Us industries by most profitable taxation: Source Financial Times
https://www.ft.com/__origami/service/image/v2/images/raw/http://ftalphaville.ft.com/files/2016/03/Ebitda-margin-ranks2-590x574.png?source=Alphaville

https://ftalphaville.ft.com/2016/03...cas-industries-by-profitability-and-tax-rate/

Areas where tax could be increased depending on further research:
Property tax on Retail/Commercial property
Tax on Phone and Internet Services
Wholesale (Bulk) sales between suppliers of raw materials and commercial users such as cement in the construction industry
Non-residential real estate (has to be rented out and taxed or taxed even more if the house or apartment is left empty)
Import of computers and other electronics (except if this goes against a specific free trade agreement)
Motor vehicles and parts
tax on sporting events (but specifically to pay for building parks and sports faculties around the country)
Food (Prepared or Raw materials) and Beverages can have a value added tax added at the producer, and the cost passed onto the supplier, that would pass it onto the customer; no need to tax more at the restaurant.
tax on recreational activities and hotels
tax on air travel (domestic flights need to be more taxed to subsidize bus and train travel)
tax on transporting goods (trucking or by train, plane or ship)

tax on oil/gas and generators so people switch to solar power, and build (or retrofit) their homes to better heat naturally in the winter and cool better in the summer. (rebuild natural temperature solutions that can be build locally and save billions per year on electricity and gas/oil; build windcathcers); This is hyderabad in Sindh nearly 100 years ago. We can use modern technology to rebuild this and do it even better.
Source: https://www.insideflows.org/project/ancient-wind-catchers-in-hyderabad/
http://www.flickriver.com/photos/globalprincess/19974110963/
"Wind catchers of Hyderabad in Pakistan have at least 500 years old. In 1815, Patinger, an English tourist, has said about Hyderabad: "All the houses of the government palaces to the humble cottages, have wind catchers"."

 

[313ghazi]

Most New graduates don't have a problem finding work around 25,000-30,000 range but 40,000 is very much common

Every one can work 2 jobs or 3 jobs

Monday-Friday
Job 1 : 9am-5pm
Job 2 : 7pm-11pm

Saturday-Sunday Job 3 : 4 hours



View attachment 546863

Why don't we just tie them. In chains and make them work for bread? If they refuse we can whip them until they agree.

 

[BATMAN]

If politicians can promise to change the outlook of Pakistan in 5 years... example turning it from what it looks today to how Dubai looks like, than public will pay tax happily.
However the situation is exact opposite, public pay tax but state don't even provide elementary education and adequate health facility.

 

[FuturePAF]

If politicians can promise to change the outlook of Pakistan in 5 years... example turning it from what it looks today to how Dubai looks like, than public will pay tax happily.
However the situation is exact opposite, public pay tax but state don't even provide elementary education and adequate health facility.

The government also needs to find ways to provide decent elementary education (through curriculum reform and Adult Learning Centers for Men and Women in the evenings; to infill the education they did not get and to make them a skilled labor force), and adequate basic health care (studying how other nations have done this to be frugal but still provide the basics)

Education reform can come from building the right curriculum. Some of the best results with some of the most disadvantaged children have been seen by teaching Cultural Literacy.


Here is the Core Knowledge Curriculum from Pre-School through 8th grade in New York at one of these schools.
https://rhes.svvsd.org/files/Curriculum_Core_Knowledge_Core Knowledge_Brochure.pdf
Here are the details as to how it was done:
https://www.educationnext.org/the-bronx-is-learning-content-rich-icahn-charter/
and more elaboration:
http://www.ascd.org/publications/educational-leadership/may93/vol50/num08/The-Core-Knowledge-Curriculum—What's-Behind-Its-Success¢.aspx

Here is how this is being adapted for the US in the 21st century. Pakistan can pick and Choose what works for Pakistan. Also, Very importantly, Islamic Scholars need to develop a great curriculum to teach religious knowledge so knowledge is not just retained, but so the students can understand and live what they are taught. If we are to become the New Medina, we must know what we believe and know what others believe and know, so we can confidently go out and compete.

Once someone has at least attained a decent Matric education in Pakistan, they are able to read and understand on their own. Small and medium businesses make up over 90% of table economies. training people in the 9th and 10th grade for skilled work in these businesses, if they are not heading to further education will have them reach age 16, fully able to start working, support themselves, get married, pay taxes, save up to buy and apartment, and have kids.

=========
https://news.stanford.edu/2017/01/1...evelop-20-cent-hand-powered-blood-centrifuge/

I don't care who we learn from, but we need to show our people the government can not only think big, but implement big. A person can get EMT/Paramedic training in 6-18 months and be given the tools to run basic clinics to treat malnutrition, and common illnesses, the people will have confidence in the government. They may start paying taxes.

Another, even more quicker option is professionalizing "health care providers" (in the form that the people already go to, such as the local medicine sellers) through training and accreditation.

you are right, the people need to see change. They need to be able to "See Naya Pakistan".
Also, elementary education needs to provide the basic skills of life, not just history lessons. Skills so that people can teach themselves. Farmers can read books and try to figure new techniques out on their own, such that when an expert comes to help them, they are not spending all of their time understanding the information, but how best to implement.

 

[AZADPAKISTAN2009]

Western cities these machines are present in all small businesses
No one carries paper cash


Less risk from theft as the card if lost can be cancelled by phone

This type of payment ensures money goes into traceable account, and Government can monitor # sales tax being collected

 

[FuturePAF]

Looks the Government will make Curriculum/Syllabus changes

Western cities these machines are present in all small businesses
No one carries paper cash


Less risk from theft as the card if lost can be cancelled by phone

This type of payment ensures money goes into traceable account, and Government can monitor # sales tax being collected

Use of electronic means need to be incentized or use of cash needs to be de-incentized as people's trusts need to be built up.

 

[AZADPAKISTAN2009]

What do you think of the solution I mentioned above?

Well double taxation strategy would be tough on the super poor and even folks who are just above the poverty lines
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Sales tax is a reasonable approach on good which each class buy ....

In Western world

a) All small business owners have to get a Bank account and deposit their weekly incomes in accounts

b) 90% of people use the cards to pay which are connected to their bank accounts, so biggest restaurants to smaller chai wala , all have this machine

c) Machine gives you receipt of Transaction , Money paid + Taxation break down

d) Money goes into your bank account and you or your accountant must calculate all the sales tax and deposit it every few months to Government

e) Only small money bills are in circulation all large bills are normally not accepted in all places

f) Petrol stations, Grocery stores, restaurants , barber , mechanics , textile merchants all must be forced to use electronic systems to track their sales



Benefits of this culture / system:

• If thieves steal your wallet you can cancel your card, all banks have your picture ID

• All transactions are tracked connected to your bank account

• For small business owners they can calculate monthly income reports and see how much sales tax they need to pay to government

• Government gets notification sent to it how much sales tax should be coming

• Small bills in circulation means bribery is low

• You can use the card to make payment no need to carry cash

The problem in Pakistan I think is

a) Paper Money
b) Not all merchants have bank accounts
c) No paper trail of monthly business
d) No sales tax reporting


#1 The only way to promote Sales tax number to grow is by making it mandatory that all
merchants (small / big ) must have bank accounts

#2 Every time good is exchanged a receipt number must be issued and money must go to bank account

 

[Paul2]

Well double taxation strategy would be tough on the super poor and even folks who are just above the poverty lines

But the advantage is that you can pull it even with cash if you use tamper proof paper for receipts.