Winning: The Tax On Low Taxes

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January 1, 2013: In the 54 months since a democratically elected government took over from a military dictatorship in Pakistan, the poverty rate has gone up (from 17 percent to nearly 25 percent), as has the percentage of Pakistanis who lack sufficient food (from 48 to 58 percent). The literacy rate of young (under 25) Pakistanis remains low (53 percent).

One of the main reasons for this is that the government has no money to do anything about these problems. The lack of funds is due to two problems. The first is that the military takes about 20 percent of the government budget. While there has been talk about cutting that, the politicians have not been brave enough to try it yet. The second problem is that the people with large incomes refuse to pay taxes. About two-thirds of senior government officials and officials in general pay no tax. That’s despite most of them being quite well off. While nearly everyone agrees this is a terrible state of affairs, no one wants to be the first to start paying and the government has been reluctant to pressure itself to pay.

Only about 9.2 percent of Pakistan’s GDP is collected as taxes. In neighboring (and more prosperous) India it is 17.7 percent and in the U.S. its 27 percent. It’s even higher in Europe. In neighboring Afghanistan it’s 6.2 percent and Afghanistan is the poorest nation in Eurasia.

 

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