An Asset-backed, Asset-based Taxation policy - Answer to PTI's Economic Policy

[AsifAmeer]

The issue I am questioning is here
http://tribune.com.pk/story/372711/federal-treasury-state-banks-hidden-liabilities-swell-to-2-1b/

By the time they had closed the year, their liabilities at approached $3 billion and only $530 million were hedged i.e. net exposure of $2.48 billion. Add the already existing NET SWAP liabilities of $1.7 billion from the liquidity statement, you are looking at around $4.25 Billion... Mind it that SBP is sitting on only $9.8 billion with 1.5 billion due by Feb. Subtract these from the reserves and you are looking at $4 billion.. by Feb of the losses cant be roled over.

These $4 billion cant be treated as Equity but highly leveraged assets.. This creates the base of the Rupee in the forex market. When things start to get worse, currency dealers, International Investment and commercial banks start to pull their money out of SBP and the $4 billion simply evaporates. Bear Stearns had $2 billion in its account the night before it went bankrupt. Banks are like Stars.. when they die, they die very quick and spectacularly.. Problem is SBP is not an INvestment bank but a sovereign bank. I do think SBP will break in literal sense lekin Rupee will take a huge plunge in the forex overnight or over a week suddenly. This is gonna wipe of expat Pakistanis who have huge amounts of dollars in Pakistani banks and are basically playing the carry trade. They are gonna get wiped out... along with the Pakistani bond market. Here's my take on it
http://blogs.thenews.com.pk/blogs/2012/06/the-looming-currency-crisis/

http://tribune.com.pk/story/454598/...crambles-for-funds-before-next-imf-repayment/

 

[Omrkhan]

http://tribune.com.pk/story/444128/held-to-maturity-securities-no-longer-allowed-as-collateral/

 

[InsafianPTI]

ok about your main thread!
I liked the idea....very good to tackle those who buy property to double their earning etc....and pay no taxes....
This is much needed, including the agriculture land.

I very much like the idea of recording the agriculture land But I don't think everyone owning house should pay tax on land too,

for example low earners with big families might struggle too much....maybe we need to differentiate or think of making it fairer.....below average ppl should not be under the threat of losing their house...if they have only one....

Omer, you talking about the SBP losses in the Forex market?

This may not be the easiest task because it involves M2 statements, Reserve Statements and the Liquidity Statement from the Central Bank. If you are familiar with with accounting, shouldnt be that hard to follow. I have simplified the issue in my link mentioned above.

 

[AsifAmeer]

I have stated in the article that exceptions, exemptions and exclusions are an admission of intellectual failure. They only open the doors for corruption.

Coming to your point of residential homes getting exemptions because they arent businesses. Question is, dont the residential homes use roads, police, water, electricity and other social services? Someone would have to pay for that. And like I said in the article, if your enemies pay for your services, you will pay a very dear price for those services.

I am not saying that it should be 0.5% of the property value. Make it 0.1% lekin keep that taxation rate consistent. Otherwise its injustice and opens the door for corruption. And let me share with you what will happen because of this policy.

1. Everyone's house prices will FALL in Pakistan to a point where they come in line with the income of the general population. Because if you dont have an income to pay the property tax, you arent going to live in that property. This will mean less buyers. Hence the prices will fall.

2. From the buyer's prospective, properties will become more affordable. I know a few guys in Karachi who are IVY-league grads from the US with MBAs but cant afford to buy a house in Karachi even when they make good monthly income.

3. Suppose someone is very rich and wants to live in a Rs50crore mansion. Regardless of how this rich person made his money in the past, now this guy is going to pay Rs25 lakh every year. Now lets look at a poor family. Suppose they own this small apartment which is for Rs25lakh. They pay an annual property tax of Rs1.25 lakh per year. You break it down to monthly amount and it comes out to be Rs10,000. Understandably, one may argue Rs10k every month is not a small amount. Lekin there is another factor playing here. With these tax receipts coming in, the Govt will have a balanced budget and there will be NO inflation, maybe a slight deflation. Imagine food prices going down etc etc.. Thats the direct result of this tax system.

Honestly, I think EVERYONE should contribute to the well being of the society, including the poor. Because once you exempt the poor, then comes the lower middle class who thinks they too are poor, then comes the middle class who thinks they arent rich. Then comes the rich saying since no one is paying taxes, why should they..

ok about your main thread!
I liked the idea....very good to tackle those who buy property to double their earning etc....and pay no taxes....
This is much needed, including the agriculture land.

I very much like the idea of recording the agriculture land But I don't think everyone owning house should pay tax on land too,

for example low earners with big families might struggle too much....maybe we need to differentiate or think of making it fairer.....below average ppl should not be under the threat of losing their house...if they have only one....

 

[mehwish_ali]

For me, we Pakistanies are missing the trick.

Instead of this Pakistanies should concentrate a lot on "Population Control". This is the biggest bomb ticking at heads of Pakistanies. May be it will prove more deadly than the Taliban bomb.

 

[Altaf Lutfi]

my entire intent was to find common grounds among your vision, reality on the ground, historic lessons learned and above all suggesting a mutant strategy that can hold masses behind the leader, not out to blacken his promising manifesto, in a country prone to conspiracy theories. Any leadership with toothless face will find itself isolated soon as agitated people will be galvanizing around the very same culprits who would do their best to unseat the government. We have witnessed the same in UP recently where corrupt queen Mayawati looks making inroads fast only because Akelash has failed to act at fast pace and in a fighting mood.

Your proposal is decent and logical in principle but then the same type of solutions have been taken lightly many times in the past and culprits ridiculed the law of land. Some will mark it as another NRO too. Our 65 years history is of lawless bands inching forward and the state pulling back each time. Civility and decency is taken as weakness because government fails to prove its writ always. And it fails to prove because its political will fails to conceive people's aspirations or law makers betray the nation. Given the worms of yesterday turned Pythons of today, I have no illusion that one more toothless conventional administrative set up will not take long to give in to utter anarchy. Pakistan is overstretched and almost make or break conditions prevail.
US is not enemy # 1 from strategic point of view for a commander choosing targets. It must be the system which is to replace. It is an open secret that US dictates appointment of Finance Ministers and Army Chiefs. At times US lends Prime Ministers too if need warrants. But given the chemistry of the system itself, US has encroached beyond limits and I do not know how to rate US as enemy # since it is not # 1 but still it is much more than # 2.

 

[AsifAmeer]

Be prepared to get bombarded with FATWAS against you from Binoria town. Meanwhile I continue to struggle to get a fatwa against the Central Bank of the Islamic Republic of Pakistan.

For me, we Pakistanies are missing the trick.

Instead of this Pakistanies should concentrate a lot on "Population Control". This is the biggest bomb ticking at heads of Pakistanies. May be it will prove more deadly than the Taliban bomb.

 

[mrk123]

For me, we Pakistanies are missing the trick.

Instead of this Pakistanies should concentrate a lot on "Population Control". This is the biggest bomb ticking at heads of Pakistanies. May be it will prove more deadly than the Taliban bomb.

I completely agree with you - I also think that of all the challenges facing Pakistan - explosive population growth would be on top of the list for me.

 

[InsafianPTI]

what about those who don't have jobs....double digit unemployement figures?
If one is already struggling to get food for his family....you deprive him of his house too, that he probably inheritted?

I can understand your logic behind No exceptions, exemptions etc...I totally get it.....But I think for that we need to have proper systems in place first.....a fairer economic system...

Maybe this is something state should try to achieve...your suggested land reforms...But maybe it should be implemented slowly and step by step.

I'm actually worried about its negative effects,thats all.....thinking how can they be avoided.

I have stated in the article that exceptions, exemptions and exclusions are an admission of intellectual failure. They only open the doors for corruption.

Coming to your point of residential homes getting exemptions because they arent businesses. Question is, dont the residential homes use roads, police, water, electricity and other social services? Someone would have to pay for that. And like I said in the article, if your enemies pay for your services, you will pay a very dear price for those services.

I am not saying that it should be 0.5% of the property value. Make it 0.1% lekin keep that taxation rate consistent. Otherwise its injustice and opens the door for corruption. And let me share with you what will happen because of this policy.

1. Everyone's house prices will FALL in Pakistan to a point where they come in line with the income of the general population. Because if you dont have an income to pay the property tax, you arent going to live in that property. This will mean less buyers. Hence the prices will fall.

2. From the buyer's prospective, properties will become more affordable. I know a few guys in Karachi who are IVY-league grads from the US with MBAs but cant afford to buy a house in Karachi even when they make good monthly income.

3. Suppose someone is very rich and wants to live in a Rs50crore mansion. Regardless of how this rich person made his money in the past, now this guy is going to pay Rs25 lakh every year. Now lets look at a poor family. Suppose they own this small apartment which is for Rs25lakh. They pay an annual property tax of Rs1.25 lakh per year. You break it down to monthly amount and it comes out to be Rs10,000. Understandably, one may argue Rs10k every month is not a small amount. Lekin there is another factor playing here. With these tax receipts coming in, the Govt will have a balanced budget and there will be NO inflation, maybe a slight deflation. Imagine food prices going down etc etc.. Thats the direct result of this tax system.

Honestly, I think EVERYONE should contribute to the well being of the society, including the poor. Because once you exempt the poor, then comes the lower middle class who thinks they too are poor, then comes the middle class who thinks they arent rich. Then comes the rich saying since no one is paying taxes, why should they..