Reformed GST


After quite the hullabaloo, the Senate body has passed the RGST Bill. Through extension, one assumes, the Senate will also pass it. Moving on from there, a passage by the National Assembly is inevitable as well, since the players involved are going to behave in a similar fashion in the lower house; some will abstain, others will support. The RGST Bill, much to the ire of many, will see the light of day.

But it was anything but an easy ride. The government was between the rock and a hard place here. On the one hand, there is a debate on the method with which the bill has been taken up in the centre, considering the fact that it requires, under the 18th amendment, the approval of the provincial assemblies. On the other hand, the IMF is breathing down the governments neck, threatening to stop payment of the next tranche of its loan program if the reformed GST regime is not implemented. Then, there was the immense public opposition. The media coverage of the RGST issue, especially on TV talk shows, has been particularly ill-informed, employing knee-jerk anti-tax rhetoric. In theory, opposition to indirect taxes on a whole can be understood. The assumption that taxes on consumption disproportionately tax the lower income groups and are thus regressive is not incorrect. But accepting the current GST regime and rejecting the revised regime almost amounts to playing into the hands of tax evaders. Amongst taxation experts, there seems to be a consensus that, even though the proposed system is far from perfect, it will reduce the space for tax evasion. Automation of the revenue systems will further make the process tougher to work around. Yes, it will also impose tax on several other areas, which is a necessity, given our financial dire straits.

The tax was yet another example of how the government doesnt have its media management right. If it had played upon these lines aggressively, detractors of the bill could have, not incorrectly, been painted as those toeing the line of vested interests. It is doubtful, however, that the MQM, like the media, needed to be explained the bill. Its opposition might have been more politics than anything else, indicating turbulent waters for the coalition in times to come.