Traders pull down shutters across Pakistan against WHT

Faiez said:

I like indirect taxes better. Tax everyone the same, rich or poor. The gov. get a tiny cut on everything sold. I like that.

Direct taxes in my opinion are unfair unless the tax rate is the same for everyone.

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So you prefer regressive taxation over progressive systems that the rest of the civilized world tries to achieve?

Faiez said:

I like indirect taxes better. Tax everyone the same, rich or poor. The gov. get a tiny cut on everything sold. I like that.

Direct taxes in my opinion are unfair unless the tax rate is the same for everyone.

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Indirect taxes are unjustified if you look at earning of people, everyone rich or poor ends up paying the same amount of taxes on a commodity that they buy. And that is not a fair treatment.

Color_Less_Sky said:

Sorry buddy won't agree to that, when you have an unlimited number of SROs in addition to the Sales Tax Act, then the things get confusing. You don't know straight away what is exempt and what is taxable unless you have gone through all the SROs that form part of the Law.

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yes, but.......that's what you have the tax consultants for

Although, the gov. should do something to make it easier for businessmen to calculate their tax liabilities. Like a website where you enter the product you manufacture/sell etc and it tells you the upto date tax rates, plain and simple. But then that would kill tax accounting business and they'd protest so..................yeah.

Faiez said:

yes, but.......that's what you have the tax consultants for

Although, the gov. should do something to make it easier for businessmen to calculate their tax liabilities. Like a website where you enter the product you manufacture/sell etc and it tells you the upto date tax rates, plain and simple. But then that would kill tax accounting business and they'd protest so..................yeah.

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The system is already there, every sales tax registered person is required his monthly sales tax return on FBR's webportal and it calculates the liability etc. The understanding of the law and replying to notices is mainly when you need tax consultants

Color_Less_Sky said:

Indirect taxes are unjustified if you look at earning of people, everyone rich or poor ends up paying the same amount of taxes on a commodity that they buy. And that is not a fair treatment.

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The poor buy less as well. The rich buy more, hence pay more in taxes.

For example, poor guy spends 5,000 per month. Rich guy 100,000 per month. The poor guy just paying 850 in tax, the rich guy, 17,000. Now this money goes to the gov. And the idea is that the gov. will take tax from both, but give back only to poor. Meaning the entire (okay maybe not entire, but most of) 17,850 going to be spent on the poor guy. So the poor guy should be effectively getting a tax refund in the form of public services which the rich guy is probably never going to use yet is paying for (public schools, public hospitals, public transport etc etc).

So how's indirect taxation unfair ?

Syed.Ali.Haider said:

So you prefer regressive taxation over progressive systems that the rest of the civilized world tries to achieve?

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yes.

Color_Less_Sky said:

The system is already there, every sales tax registered person is required his monthly sales tax return on FBR's webportal and it calculates the liability etc. The understanding of the law and replying to notices is mainly when you need tax consultants

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never knew it's already there, have no experience with that....If it's already there then there should be no serious problem in calculating the liabilities and paying them...

Faiez said:

The poor buy less as well. The rich buy more, hence pay more in taxes.

For example, poor guy spends 5,000 per month. Rich guy 100,000 per month. The poor guy just paying 850 in tax, the rich guy, 17,000. Now this money goes to the gov. And the idea is that the gov. will take tax from both, but give back only to poor. Meaning the entire (okay maybe not entire, but most of) 17,850 going to be spent on the poor guy. So the poor guy should be effectively getting a tax refund in the form of public services which the rich guy is probably never going to use yet is paying for (public schools, public hospitals, public transport etc etc).

So how's indirect taxation unfair ?

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I am a poor guy earning PKR 100 and you are rich guy earning PKR 100,000, we both need wheat flour and go to shop to buy it, the retail price is same for both of us, we will both end up paying the same money on that commodity, you don't feel it because you have better purchasing power whereas I end up begging on roads. In that sense.

And GoP spending tax money on poor, you are not that naive

Faiez said:

never knew it's already there, have no experience with that....If it's already there then there should be no serious problem in calculating the liabilities and paying them...

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Don't ask ........................ this is one area where I can guarantee you that you won't ever get a genuine legal refund back. That is how much messed up indirect taxation aka Sales tax is.

I am not sure why people start complaining about tax. It is only 0.3% (correct me if I am wrong).
Federal Board of Revenue (FBR), Government of Pakistan

In UK direct taxes are 20%, 40%, 45% tax on salaries (£10.6k exempt). On top of this there is the national insurance charge paid by us all (To pay towards pensions and NHS). Then there is the VAT at 20%. CGT is charged at 18% and 28% in UK although in Pakistan I haven't seen it.
Inheritance Tax is paid at 40% in UK and nothing in Pakistan. Corporate taxes are low comparatively at 20%.

Shah01 said:

I am not sure why people start complaining about tax. It is only 0.3% (correct me if I am wrong).
Federal Board of Revenue (FBR), Government of Pakistan

In UK direct taxes are 20%, 40%, 45% tax on salaries (£10.6k exempt). On top of this there is the national insurance charge paid by us all (To pay towards pensions and NHS). Then there is the VAT at 20%. CGT is charged at 18% and 28% in UK although in Pakistan I haven't seen it.
Inheritance Tax is paid at 40% in UK and nothing in Pakistan. Corporate taxes are low comparatively at 20%.

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the highest tax bracket in pakistan is something like 37%. And that tax bracket starts at something like rs.7 million per annum. Compare that to uk, where the highest bracket starts from...........(I don't know where but I'm sure its higher than in pakistan).

You have corporate taxes at 25% for companies below rs.250m revenue per annum and 34% for all companies above that. With nothing in between, something that has been discussed many many times during several different governments, yet they do nothing to fix that. Even this "business friendly" gov. has not paid any attention to this matter.

Now consider the fact that pakistan is a developing country and uk is developed (sort of). Compare pakistani rates with other developing economies in its class for a fair comparison.

Color_Less_Sky said:

whereas I end up begging on roads.

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well then start working harder and smarter.....If you're going to keep on giving free stuff to people after forcibly grabbing it from others (who had worked hard and smart for it), that just punishes hard/smart work and subsidizes laziness and stupidity. Thats how I see it.

Color_Less_Sky said:

Don't ask ........................ this is one area where I can guarantee you that you won't ever get a genuine legal refund back. That is how much messed up indirect taxation aka Sales tax is.

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There's people who have made billions filing false tax returns using fake invoices and bogus companies from zero rated items........And then there's you who can't get what is legally yours....

Faiez said:

the highest tax bracket in pakistan is something like 37%. And that tax bracket starts at something like rs.7 million per annum. Compare that to uk, where the highest bracket starts from...........(I don't know where but I'm sure its higher than in pakistan).

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Well above £10.6k tax is 20% (above Rs 1,650,000) Plus national insurance is paid. The links below will explain.
Income Tax rates and Personal Allowances - GOV.UK
National Insurance rates and categories - GOV.UK
National insurance calculations are rather complicated but hopefully you will get the idea.

Faiez said:

Now consider the fact that pakistan is a developing country and uk is developed (sort of). Compare pakistani rates with other developing economies in its class for a fair comparison.

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Yes fair point but people need to understand that if they don't pay tax which maybe the case for majority of the traders then indirect taxes will be applied. The books will need to be balanced somehow. Either stop spending on projects or increase tax recovery.

Shah01 said:

stop spending on projects

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That's the right way in my opinion.....

Faiez said:

well then start working harder and smarter.....If you're going to keep on giving free stuff to people after forcibly grabbing it from others (who had worked hard and smart for it), that just punishes hard/smart work and subsidizes laziness and stupidity. Thats how I see it.

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Equal opportunities of education, training and growth? If we both don't get the same (again you have money to get better education and I have to worry about making my ends meet) then how can you expect me to be smart and become CEO of a corporate someday? I will be working hard like a labor but that does not pay off enough to compete with you.

Faiez said:

There's people who have made billions filing false tax returns using fake invoices and bogus companies from zero rated items........And then there's you who can't get what is legally yours....

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So in the end the system does have a problem. And we expect a corrupt faulty system to produce good results.

Faiez said:

Tax rates are amongst the highest in the world. There's a reason why people evade taxes.

It's not like they can decide how much tax to pay, it's a one way thing. Once you're in the tax net, there's no going back and you pay very very heavy taxes. So people have two options, either to pay a very very heavy tax (for which in return they get nothing by the way) or use illegal means to evade taxes.

If the government increases tax collection and starts actively targeting tax evaders, the economy will take a big hit. The country might even go into a recession.

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Can you give a comparison wrt other countries how much tax is being collected and your tax rates. This will give us an idea what can be done in India. Here in India only 2-4% of the rich and middle class pay taxes. Same here once you are in the tax net, there is let up on hitting you hard on taxes. It is not a level playing field because as a businessman you cannot be competitive with the ones who are evading the taxes. I don't know if this transactional tax on withdrawals is the answer. In fact our new Modi govt. was contemplating this kind of tax to increase the revenue. Because of its unpopularity it was dropped.

This tax and many other iniderect taxes are not acceptable.

This is because a govt which is led by money launderers and tax evaders cant broaden tax base.

I would like PTI to rejig its opposition to PMLN and build confidence of the people by doing issue based opposition. It does not mean taking part in rigging elections and forming a govt based on questionable mandate was not an issue.

my2cents said:

Can you give a comparison wrt other countries how much tax is being collected and your tax rates. This will give us an idea what can be done in India. Here in India only 2-4% of the rich and middle class pay taxes. Same here once you are in the tax net, there is let up on hitting you hard on taxes. It is not a level playing field because as a businessman you cannot be competitive with the ones who are evading the taxes. I don't know if this transactional tax on withdrawals is the answer. In fact our new Modi govt. was contemplating this kind of tax to increase the revenue. Because of its unpopularity it was dropped.

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I don't know about other countries much but I know this much that even many eastern european countries have lower income tax rates than pakistan. In Pakistan there is roughly 1m tax payers. And tax to GDP is around 10%.

And you are absolutely right with the rest of what you are saying.

Interestingly there wasn't as much of a protest as I thought there should have been against this with-holding tax. So the government may not drop it, it seems likely.

And yes, this is not the answer, the answer is to drastically lower tax rates and make FBR(the guys who collect taxes in pakistan) more effective at the same time.

Faiez said:

That's the right way in my opinion.....

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Do you what is the total expenditure by GoP on education, health service, security and other core institutions? Compare this with the tax receipts?

Faiez said:

And yes, this is not the answer, the answer is to drastically lower tax rates and make FBR(the guys who collect taxes in pakistan) more effective at the same time.

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Well maybe reforming the system will fix the problem. You may have mentioned simplifying the tax rates would help as well. So if a 10% (example) rate of tax is applied to everyone, maybe people will be willing to file tax returns? Filling and Collection should be electronic and FBR should only be there to monitor and not to take bribes.