Taxation fears: is Pakistan taxing itself to death?

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Of all the countries in the world, Comoros has the highest corporate tax rate in the world at 50 percent. Look, Pakistan’s rate has increased to 49%. Comoros has killed itself. Other examples of countries that have imposed self-taxes include Côte d’Ivoire, Senegal, Zimbabwe, Nigeria, Haiti, Yemen, Mauritania, Uganda, Cameroon and Namibia.

Fact 1: Frequent changes in tax laws and the introduction of harsh penalties in Côte d’Ivoire, Senegal, Zimbabwe, Nigeria, Haiti, Yemen, Mauritania, Uganda, Cameroon and Namibia have created an unpredictable and volatile tax environment.

Impact: Businesses and individuals need a stable and predictable tax system to make long-term investment decisions. Unexpected tax policies in Côte d’Ivoire, Senegal, Zimbabwe, Nigeria, Haiti, Yemen, Mauritania, Uganda, Cameroon and Namibia created uncertainty and discouraged investment, as businesses and individuals feared that their capital would be lost. The transaction may be subject to unexpected tax liabilities.

Fact 2: Cote d’Ivoire, Senegal, Zimbabwe, Nigeria, Haiti, Yemen, Mauritania, Uganda, Cameroon and Namibia impose a very burdensome and harsh tax environment for businesses and individuals.

Impact: Overburdened tax environments have reduced profits, stifled innovation and discouraged new businesses from setting up shop in Côte d’Ivoire, Senegal, Zimbabwe, Nigeria, Haiti, Yemen, Mauritania, Uganda, Cameroon and Namibia. . This led to capital flight as businesses and investors began looking for more favorable tax jurisdictions.

Fact 3: Côte d’Ivoire, Senegal, Zimbabwe, Nigeria, Haiti, Yemen, Mauritania, Uganda, Cameroon, and Namibia have exhibited increased powers of tax officers and arbitrary enforcement of tax laws.

Impact: Arbitrary enforcement of tax laws fostered an atmosphere of fear and uncertainty among investors, undermining their confidence. This deterred both domestic and foreign investment, as investors became increasingly wary of potential legal risks and unpredictable enforcement practices.

Is Pakistan killing itself? Fifteen years ago, Pakistanis paid 1.7 trillion rupees in taxes. Imagine, last year Pakistanis paid 9.4 trillion rupees in taxes. During the same period, government expenditure increased from Rs 2.7 trillion to Rs 25 trillion.

The government has incurred massive losses: Rs 2.8 trillion in electricity sales, Rs 1.3 trillion in commodity management, Rs 825 billion from PIA liabilities, and Rs 224 billion from Pakistan Steel. This year alone, the amount of grants reached 1.7 trillion rupees while subsidies reached 1.4 trillion rupees.

The real problem is not taxes but runaway government losses. Higher taxes are just a symptom. Excessive government spending is the underlying disease. The real challenge is not how much tax Pakistanis pay, but in curbing wasteful government spending. Taxes provide the fuel, but government spending sets the direction.

Focusing on taxes while ignoring the root cause is like treating the symptoms without treating the disease. Raising taxes without addressing systemic failures is like treating a fever without treating an infection. Chasing higher taxes without addressing the underlying issues is like patching up a leaky roof without fixing the cracks. Prioritizing tax collection over structural reforms is like filling a bucket with a hole in the bottom.

If Pakistan continues down this path, it risks becoming another cautionary tale of nations that have plunged themselves into economic ruin. Real development lies not in squeezing more out of taxpayers but in addressing the systemic failures and careless costs that are bleeding Pakistan.