“According to recent developments, in pursuit of $502 million loan from IMF, Pakistan has nodded in affirmation to impose Rs.40 billion worth in taxes.”
The penalty of tax abuse is inflicted on the nation for there is a heinous shortfall in revenue targets that was designed by IMF. According to Herald Finger, IMF Pakistan mission chief, Pakistan was expected to check all of the five goals directed by IMF but Pakistan failed in completing the task. Yet Pakistan failed in restricting the budget deficit to Rs. 306 billion and reducing the Net Domestic Asset (NDA) as well.
However such savage imposition of taxes impresses the lives of the common man and especially the middle class. Not to say of Foreign Direct Investment (FDI), even local investors aren’t going to enter such tax ridden market. Sustaining the already-about-to-start operating foreign investments is going to be the biggest challenge of all. Middle class, of all, faces the heat of vicious cycle of miseries brought up by unjustified increase in taxes.
The first and foremost attack by such taxes is on the incomes. A middle class person has very short ranges of money and he covers all his expenses from this very income. Imposition of such taxes narrows down the income bracket in both active and passive terms. The same wage which was appropriate before taxes becomes inadequate. Moreover, increase in taxes affects the prices of FMCGs (Fast Moving Consumer Goods) and other commodities of daily use, thus halting the life of common man.
Such increase is likely to engender joblessness in many ways. First of all the investment, be it local or foreign, won’t cling to such economy; hence job opportunity killed. Secondly, people who are already on job, except executives, are under the threat of “right-sizing” of the organization. A further narrative is more serious and alarming for joblessness leads to poverty, then crime and then social unrest on very large scale.
In addition to that the quality of products and services would drastically decrease. Imposition of taxes would make the corporate sector cut their corners for they have to offer same thing on same price. After imposition of taxes only way to main the prices and the customer is to reduce the quality of products and services. That’s how shoddy products would be thrown into the local market and it is middle class that is most likely to suffer the compromised quality of goods.
An economy with these symptoms is, without any doubt, at the cusp of recession. Ailment of such economy can be eradicated by addressing the issues like adjusting the prices in justified manner, making the wages appropriate, preemptively solving the joblessness and avoiding the recession. The most important of all is to collect the tax from elite class who escaped the tax net and are responsible for such loan and tax impositions in the first place. Otherwise it is just middle class man who will be crushed and burnt into the furnace of beloved country’s economy.