Why we should pay high income taxes when we are paying higher fuel prices What is Fuel
Why we should pay high income taxes when we are paying higher fuel prices
What is Fuel ?
It is basically a substance that provides us heat or power, fuels can be solid, liquid or gaseous. Some different kinds of primary and secondary fuels used in everyday life are : wood, coal, oil, petrol, diesel, gasoline, kerosene, natural gas, coal gas, water gas.
Importance of Fuel :
Fuels are of great importance, because of them we are able to heat our homes, run our vehicles, power industry and manufacturing, and get electricity. With passage of time, the price of fuel is constantly varying in market leaving behind several issues.
What is Income Tax :
Income Tax is imposed by Government on income generated by businesses and individuals within jurisdiction. Income Tax is collected on all forms of Income such as salaries, wages, commissions, investments and business earnings.
Taxes in Pakistan :
In Pakistan, the personal income tax stands at 20 % & tax rate averaged at 20.77% from 2006 – 2018 reaching and all time high of 30 % in 2006 and record low of 20 % in year 2007. As we know that economy of Pakistan is under developed, and about 60 % of our population lives below the poverty line. Following are the prices of fuel in our country in year 2016 :
Product Prices (Rs/per liter)
Petrol 64.27
Light Diesel 43.35
Hi-Speed Diesel 72.25
Kerosene Oil 43.25
Type Price
Premium (Super) Rs. 97.83 /Ltr
High Speed Diesel Rs. 112.94 /Ltr
Light Speed Diesel Rs. 82.44 /Ltr
Kerosene Oil Rs. 86.5 /Ltr
Present rate of Fuel prices (2018) :
The changes in prices are taking place at very unpredictable rate, the excise duty on fuel has also been increased, with such big differences in prices and energy crisis, the question of paying higher taxes has been highlighted.
Retail price of petrol :
The actual amount of petrol is 62.38 per litre and all the amounts charged above amounting to 35-40 are various forms of taxes.
The cost of transportation of petroleum products from depot to petrol pump is also included in the 1 litre of petrol and diesel. In reality, the petroleum product prices are based on ex-factory prices and 100 additional cost including taxes and margins or expenses under different heads. Besides an ex-factory price of petrol and diesel, a consumer pays off General Sales Tax and Petroleum Levy to the Government.
It is worth mentioning that petroleum products are major contributor in the overall collection of indirect taxes in Pakistan.
Percentage of Tax payers :
According to International Development Committee, Pakistan has lower than average tax take, facts and figures shows that only 0.57 % of Pakistani population pays tax, means 786,000 out of 190 million.
Burden on actual tax payers :
The above stated problem is the biggest issue of immense increase in market prices of fuels and other substances, goods and etc. The amount of taxpayers being very low leads to increase in prices of economic goods or service, the people who are regularly paying taxes are also troubled due to people being dishonest to their country and nation, that’s why high tax rates are applied on ordinary taxable income.
Economic chart going down :
The economic development chart of Pakistan is declining day by day but the entire blame does not belong to any single entity or individual but our government is involved as much as others, the biggest reason is immense amounts of internal and external debt and the amount of tax being paid is not probably invested in any required project .
Reasons of higher income taxes :
We all know that when politician themselves do not pay taxes , it evokes much anger but we must remember before complaining and amongst us there are such people who are oblige to pay tax but they do not.
GDP of Pakistan :
The 1.1 % of GDP of Pakistan is of tax money.
Assumption of government :
The main problem is that Pakistan current tax policy assumes that government has good information on both good tax base and capacity to collect taxes at little cost but we face major challenges on both counts leading to widespread invasion and inadequate collection of taxes. This makes government harder to pay for vital infrastructure and social development projects to raise income, reduce poverty and address inequality.
Reforming the tax administration :
Reforming the tax administration is the only one way forward but this is difficult and will take time. A growing body of evidence suggests there is one way: focus on innovative methods that suits our ground realities and our current administration can use to collect more revenue.
Change in 2018 :
This year government is trying to reduce fuel prices but Pakistanis still paying more because global prices went up.
Conclusion :
Income taxes are a source of revenue for government, they are used to fund public services, pay government obligations and buy goods for citizens. These taxes are imposed like: Individual income tax, Business income tax, State income tax, Local income tax, Sales tax and Property tax etc. But the amount of taxpayers being very low leads to increase in prices of fuel and higher income tax and the people who are regularly paying taxes are also troubled due to people being dishonest to their country and nation. Because of politicians not paying proper amount of taxes and such people who are oblige to pay tax but they do not are the reasons behind high tax rates and fuel prices are applied on ordinary taxable income.
Recommendations :
Government’s responsibility :
The government needs to work on its infrastructure and take serious steps against non-filers plus collect authentic filers data.
Tax payers information :
Government should have perfect information on tax payers so the government can spread burden of tax collection in an equitable and effective way.
Collecting tax payers information and Government focusing on this serious issue will hopefully, fulfil the agenda of a progressive Pakistan and bring the prices of fuel, income tax rate and other resources at a reasonable rate.
