Revisiting taxation strategies

Pakistan is keen on securing a larger and longer International Monetary Fund (IMF) bailout package — the only thing the country can do when it cannot service all its external debts on time. There is no option of skipping the IMF and seeking more considerable, longer-term funds from friendly countries that have already rolled over billions of dollars worth of such funds offered earlier. Foreign exchange inflows from exports, remittances, and foreign investment hardly match imports and outward remittances, leaving little or nothing for foreign debt servicing. And foreign exchange reserves are not enough to fully cover even two months of imports. Given the weak external economy, achieving even modest economic growth requires accelerating domestic demand through the optimal use of production resources. At the same time, it is necessary to ensure that the accelerated domestic demand and the consequent growth in production are judiciously taxed along with fuller taxation of hitherto untaxed or undertaxed segments of income. This isn’t an easy job.