According to reports, the coalition administration is pondering several difficult and politically difficult measures in light of the prolonged economic crisis’ disproportionate impact on the lower and middle classes. According to reports, the government is considering introducing a slew of new tax measures in the upcoming budget in order to raise around Rs300 billion in additional revenue in the fiscal year 2022-23 (FY23), and has given the Federal Board of Revenue (FBR) until the end of the week to finalize areas and sectors.
These new tax measures include a proposal for a luxury income tax, which will resemble a wealth tax and, if passed, will tax real estate, especially large residences in rich neighbourhoods. Furthermore, as part of the accord to resurrect the stalled IMF programme, owners of expensive automobiles could be added to this tax group.
While the word “wealth tax” may not be used, the main objective is to concentrate on direct taxation, particularly the income of the country’s rich class. This is an approach being examined instead of taxing sectors or products that disproportionately harm the poor.
If such steps are implemented, they will serve as an example of egalitarian policymaking, which is urgently needed. When the economy grows, the upper classes reap the majority of the benefits, while the poor and middle classes’ purchasing power only rises minimally, if at all. During economic downturns, however, it is the economically disadvantaged that face the brunt of the burden, while the impact on the wealthy is minor. It is the state’s job to redress this gap, and the only way to do so is to tax the wealthy.
It’s also encouraging to see the government focusing on real estate and luxury automobiles, given how tax breaks have made these two sectors the go-to investment strategies for the country’s rich. Both of these areas have billions of rupees in untapped earnings, and the government is correct to pay its attention to them in the upcoming FY23 budget. Of course, if the administration decides to go ahead with these measures, it will meet strong opposition from the country’s elites. However, this is what is required in the national interest at this time, and the progressive taxation model has proven to be successful in many parts of the world.