Super Tax Announced

Continuing the trend of taking tough decisions at the expense of political capital, PM Shehbaz Sharif has announced that the government will be imposing a 10 percent “super tax” on large-scale industries in order to control surging inflation. During his address to the nation, PM Shehbaz justified the move by explaining how the country finds itself in exceptional circumstances and that a default was becoming a serious reality.
According to reports, the sectors which will be subjected to tax include steel, sugar, cement, oil, gas, fertilisers, LNG terminals, banking, textile, automobile, cigarettes, chemicals, and beverages. The revenue generated from imposing these taxes will be directed towards poverty alleviation in order to provide some relief to the burdened masses. Furthermore, PM Shehbaz Sharif stated that cross-subsidy would be used to strengthen public services in the education and the health sector and elaborated that such policies were necessary to reduce the country’s reliance on foreign loans.
The intention to tax high earners so that more funds can be diverted towards education, health, infrastructure, skills education, and other important sectors should be applauded. However, the verdict is split on whether this was the best approach to adopt.
There is no denying such measures were urgently needed to revive the IMF programme. However, some argue that this move will only stifle growth and that taxing the untaxed would be a more appropriate course of action. There is also a valid argument about how both the real estate and agricultural sectors should be taxed as the focus should be on expanding the tax net. The markets too have reacted negatively to this news as the Pakistan Stock Exchange (PSX) crashed minutes after the taxes were announced.
Nevertheless, it would be unfair to completely dismiss this effort given the difficult circumstances the government finds itself in and also the time constraints. As the government has explained, this is a one-time tax on large-scale industry for one year which will help raise crucial revenue. It is now on the government to alleviate the concerns of the industrialists and convince them of their vision and strategy of how it plans on mitigating the ongoing crisis. At the same time, however, the government must pursue serious measures to broaden the tax net, regardless of the political cost and friction in question.

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