Sunday Nov 27, 2022

Victims of thoughtless taxation – Newspaper – DAWN.COM –


There’s a growing trend across the globe to use fiscal and tax policy measures as interventions to improve public welfare levels, end malnutrition and protect the environment.

Governments tend to avoid taxation that impacts these broader goals directly or indirectly for sustainable economic growth. A close link between the tax policy goals with broader economic, health and environmental targets is especially needed if the economy is faced with a myriad of structural challenges, ranging from low productivity to sluggish exports to increasing poverty levels and inequality to climate change. The need for aligning tax policy with these long term objectives in Pakistan was never felt more strongly than now.

Yet, the focus of tax policies in Pakistan remains more on revenue generation to finance the government expenditure instead of on public wellbeing. The extremely narrow tax base and one of the lowest tax-to-GDP ratios in the world mean the fiscal authorities are always hunting for easy taxable targets to boost revenues at the cost of environmental sustainability, public health, malnutrition, etc. The finance supplementary bill introduced in the parliament by the Imran Khan administration is yet another reminder of the misplaced and regressive tax policies.

If nutrient-rich food in the form of fortified milk products is made costlier, the nutrients also become unaffordable and inaccessible, leading to malnourished adolescents

The major victims of thoughtless taxation will be renewable energy and child and mother nutrition as the mini-budget withdraws sales tax exemption on solar energy and a range of nutritious food items: butter, cheese, yoghurt, infant formula milk, baby food, etc. While increased prices of solar equipment will badly hit the adoption of solar energy by the middle-class homeowners as a cheaper, environment-friendly alternate to costlier, erratic grid power, the food taxation is feared to increase malnutrition in low-middle-income groups, particularly women and children, the cost of which for the economy is going to be way higher than a few billions the government hope to rake in.

Read more: ‘Mini-budget’: What will get costlier?

According to various studies, there are strong economic and health rationales for using tax and fiscal policies to improve diets and prevent non-communicable disease, particularly when prices of products don’t fully reflect their full social benefits or costs. Fiscal policies can be used to alter retail prices to increase consumption of nutrient-rich foods and conversely.

“Taxation and financial policies directly impact the health and nutritional status of vulnerable groups,” Dr Riffat Aysha Anis, professor at the IBADAT International University Islamabad, says in response to a question. “Development of an effective fiscal policy to improve diets takes into account political economy and the potential benefits to public health. Higher taxation and inflation increase malnutrition, especially in low-income individuals, by reducing their power to buy nutrient-rich foods, especially proteins. Multiple forms of malnutrition result in reduced schooling, cognitive impairments, labour productivity loss and higher healthcare costs that slow down a nation’s economic growth.”

The high prevalence of all forms of malnutrition is a major concern in Pakistan as the country is confronted with the burden of childhood stunting and wasting or under-nutrition and micronutrient deficiencies for decades, which have a marked effect on young children and women of reproductive age. Globally, Pakistan is home to the highest number of stunted (low height for age) children after India and Nigeria. Over 40 per cent or 12 million of Pakistan’s children under five years of age are stunted and 17.7pc or around 5.3m are wasted (low weight …….


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