The first two parts in this series discussed why we keep falling into crisis situations, and the need for the economy to grow. Low public and private investment are behind uneven growth and falling exports. For public investment, the government needs to both cut costs and increase revenue. Tax policy must serve export growth. Public and private finance must fund more investment and self-reliance would cut our import bill.
Tax policy to increase revenue and exports: We already see steps to widen the direct tax base. The government must go further and reduce exemptions. Many exemptions have outlived their utility. Apart from denying the government much-needed revenue, they redirect investment from the manufacturing and export sectors. It is time to reassess tax policy so that it serves our economic goals.
To enable private firms to compete globally, the government may help them scale up. In this regard, the policy to tax inter-corporate dividends needs review. According to the Pakistan Business Council, a number of tax measures hinder investment. Upfront payment of sales tax and income tax are an issue. These conditions also need revision.
It is unfair also to levy more tax on existing taxpayers. The FBR must set separate targets for revenue from existing and new taxpayers.
The problem of low investment: Public and private investment both have fallen. I would have liked the government to take note of this alarming trend and do something about it. So far, there is not even a...
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