Why Government of Pakistan is Increasing Taxes

Economic overview

Pakistan is in the deep sea of poverty and financial crises. As per the recent data, the trade deficit of Pakistan is $24.78bln, which has doubled in the past tenure. The sharp rise in the deficit is due to the increasing import bills. It is the all-time high figure of Pakistan.

About majority of the population residing in Pakistan are suffering from high inflation. People are not able to fulfill their basic needs. It is due to several reasons. One of the major factors contributing to high inflation in Pakistan is an increase in tax rates. The government of Pakistan has started levying several taxes in order to compensate its liabilities.

Generally, when income and expenditures are not rightly balanced, the economy faces financial crises. Government should focus on generating more revenue by increasing production or by other avenues. But in case expenditures are more than the income then government goes for borrowings in order to cover those expenditures.

Types of borrowings

There are two different types of borrowing that are;

• Internal borrowings
• External borrowings

Debt Burden of Pakistan

Pakistan is badly trapped in a high debt burden. As per the recent statistics, there is around 5.5 trillion rupees loan that Pakistan has to pay off to its lending institutions. Out of it, around 20 trillion rupees are borrowed during the present government of Pakistan. The figures are also presented on the official website of the Pakistan Bureau of Statistics.

Sources of Revenue

There are 3 major sources of generating an income

• Direct and Indirect Taxes
• Export proceeds
• Home Remittances

Crux

Taxes are considered the major source of income for the government. So, the government has started levying it to the general public to cover its debt burden. However, the public is not able to bear this increase in prices due to an increase in the tax rate. Instead, the government should cut down its expenditures and increase its exports. In this way, the debt burden can be reduced, and the general public will not feel the burden of inflation.