Reformed GST


Pakistan is no different from any other democracy when public policy issues fall prey to politicking, as the RGST issue has at the moment. Different political parties view any piece of legislation more as an opportunity for a quid pro quo on another bit of legislation or perhaps even getting a cabinet portfolio. In vibrant democracies, however, it is the job of the media to create a contact between the general public and the chambers of legislation by ensuring that the debate does not deviate from the actual issue at hand. That it is not lost out in the wheeling and dealing.

Apparently that is exactly what has happened in the RGST issue. The media has devoted a scandalously scant amount of time exploring the technicalities of the issue. Opposition to the reformed tax in effect means support for tax evaders. In any other country, such a dubious moral position would have been torn asunder by a populist press. The chutzpah here is that the press is siding with the opposition precisely on populist grounds. Some vague notion of the poor man being crushed. The poorest 60 percent spend the bulk of their income on food and housing, two items that are exempt from the indirect tax. And this is not even to say that the new tax will drastically increase the burden of those who do pay it but will merely diversify the sources of tax collection. Consider the following;

Any sales tax is an indirect tax. It taxes consumption rather than income. Since the poor consume more of their income than the rich, indirect taxes are considered regressive. Fair enough. But opposition to the reformed GST would have made sense only if the parties opposed to the idea were opposing the GST to begin with. That is like saying that one is not opposed to the tax, but only if the said tax is not difficult to cheat. The proposed system basically taxes every stage of the value addition process, taking the present disproportionate load off from the retail end. Through this method, the government will disincentivise erroneous reporting by a particular company because it will need to get a refund of the amount which it paid to the preceding stage of value addition. Lying is nigh impossible because it will necessarily be at anothers expense.

Taking the government to task on corruption is all well and good; we do have a corrupt government. But criticising the government even when it gets something right isnt becoming of a vibrant media. A media isn’t really free if it isn’t free from its predilection for cheap, uninformed populism.