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AnalysisThe Need for RGST Pakistan desperately needs to increase its tax revenues by adopting a more wide-ranging, modern sales tax on products and services. The Sales Tax Act of 1990 was based on established value added taxation principles but due to revenue exigencies and political compromises, it became increasingly narrow-based and distorted, with ever-growing list of exemptions, multiplicity of rates, special regimes and a number of other deviations from the best international practices and concepts, making it more ineffective over time. Consequently, not only has the tax base of income and sales taxes been crumbling but insufficient data on the national economy has also proved to be a substantial obstacle in the implementation of a sound tax policy. The PPP government has already stated that reforms in General Sales Tax has become inevitable in the post flood conditions. Apart from helping the government achieve the annual revenue target it has set for 2010-11, RGST would also generate resources for flood victims. The government had set a tax collection goal of 1667 billion rupees for the current fiscal year; however, following the devastating floods, it is believed that it would only be able to collect 1604 billion dollars. To cover the shortfalls during the period of January 1, to June 30, 2011, according to an estimate reported in the media, rupees 30 billion were to be collected through the imposition of RGST, 40 billion from Flood Income Tax Surcharge, while Special Excise Duty was to produce around 12 billion. |
If approved, the RGST will be implemented on commission-based agents, doctors, lawyers, engineers, financial services, courier services, advertisement services, customs, construction, edible products and other general goods. The new tax system.