THE federal cabinet has approved two major new taxes, the Reformed General Sales Tax
(RGST), as well as a one-time flood tax. Both measures were announced by the Finance Minister at a press conference after the cabinet meeting, in which he said that both taxes would take effect from January 1, less than two months away. Both measures are extremely shortsighted,and both, especially the GST revision, have been undertaken at the behest of the IMF. One of the purposes of the GST revision, to broaden the tax base, cannot be achieved with the current taxation machinery, which is thoroughly corrupt, and will administer the revised GST in the same corrupt way. While the flood tax is supposed to be a one-time levy, the GST revision is to be aspermanent as the original tax.
While the GST lacks many of the characteristics of a genuinesales tax, the ending of its exemptions is not one of them. The GST revision has raised much controversy, and the income tax surcharge that is being levied under the guise of a flood tax is expected to raise Rs 28 billion in the six months it will be in force. It appears that this was sneaked past the cabinet along with the GST revision. That revision is expected to bring in Rs 30 billion in only six months.The extra 58 billion will not bridge the fiscal deficit, but the federal cabinet, in particular its Finance Minister, has taken no step towards any other means of bridging the deficit, which is the reduction – Nation