ECONOMY (CLUTCHING AT STRAWS)
A present-day 'dhaba'
By: Nasser Yousaf
WHEN you next hear someone of Pakistani origin, or more precisely a denizen of the province of Khyber Pakhtunkhwa, talking of a revolution, be assured that it has got nothing to do with unrestrained mayhem or bloodshed directed at bringing about a change in the country’s doddering system of governance.
In fact, the matter in the foregoing case could be as simple, if not frivolous, as bringing down the prices of tomato through governmental intervention, which the eager beavers in the bureaucracy would describe as ‘revolutionary,’ on banners hung from the skies.
Similarly, making the wretched of the land pay through their noses to fill up the empty official coffers is also regarded as a matter that must also be dyed in revolutionary hues in the bureaucratic machinery so as to present it as a glorious achievement of the government of the day.
Keen to present its humane face while also wary of its meagre kitty, the Government of Khyber Pakhtunkhwa (GOKP) has announced cuts in various categories of sales tax on services. This is as good as it could get, especially from the point of view of the end consumers on whom the incidence of sales tax on services fall.
But wait! The policy, as apparent from the advertisement announcing reductions in the tax rates, could not have been more bizarre, and indeed absurd, as it stipulates a tax @1 % on ‘dhaba.’
Typically, a ‘dhaba’ is a roadside eatery in the mainstream South Asian countries. A ‘dhaba’ (which also finds mention in some English-language dictionaries) caters to the gastronomical requirements and tastes of labourers and travellers, notably truck drivers travelling at night time. It provides very sweetened milk tea called doodhpatti’ to its weary customers who relish it no end. Rest of the menu consists of traditional lentils, an assortment of vegetables, fried minced meat and chickpeas.
An average meal for one person at a ‘dhaba,’ invariably washed down with a cup of tea, comes @ Rs. 150/. No hard math is involved in calculating tax @1 % on this paltry sum. Certainly, in fewer if any, cases would the bill go up to Rs. 200/.
In the last mentioned case the tax liability from a customer availing services at a ‘dhaba’ would come out to be Rs. 2/. Now, since the Sales Tax Law allows certain adjustments to be made out of those two rupees to the restauranteur in lieu of utilities expended in the preparation of food served, the final amount payable as sales tax on services to the tax authority would be reduced further.
In the absence of any verifiable information as regards the total number of ‘dhabas’ in KP, one could safely assume that the number must be in many thousands. A ‘dhaba’ sits snugly ensconced in popular perception, as one could literally bump into one around every next corner across the urban and rural landscapes, particularly on our road networks.
Certain assumptions would help us understand the quantum of revenue from the levy of sales tax on ‘dhabas’ very easily. If, as a result of a survey we come to know that there are 5000 ‘dhabas’ in KP, where an average of twenty five persons consume meals @ Rs. 200/ on daily basis, sales tax @1 per cent would give us a daily revenue of Rs. 50/ from each of these places where food is served. The annual revenue from the ‘dhabas’ would thus be: 50 × 365 × 5000 = 91, 250, 000/ (nearly half a million US dollars).
We must know that the foregoing numbers in terms of total servings per eatery are highly exaggerated in favour of the tax authorities. The actuals could be far less as most of the wretched ‘dhaba’ owners barely manage to carry out their businesses on day-to-day basis, neither do people at the lowest rungs have the power to spend Rs. 200/ on one meal.
Any professional and savvy tax officer would know what it would take in terms of human and technical resources to reach out to 5000 ‘dhabas’ in the informal sector spread out over an area of nearly 75 thousand square kilometres. Of course, a dabbler would never know this, and we have many of them here in the system in Pakistan.
Unfortunately, the cost of collecting half a million US dollars would be four times as much as the total product, if at all the quixotic product is achieved. But the gravest cost of such a policy would be inflicting unimaginable misery on the poorest of the poor.
It is better not to mention how fraught the sales tax on services is with a myriad intricacies and litigations. Basically, a western concept, a society keen to levy sales tax must have a culture conducive to the object for it to be effective and productive.
But dabblers always have their way. and they are the favourites of the officials in the donor agencies. The officials rolling their ‘r’ and drumming their ‘d’ during their bi-annual tours to Pakistan love to interact with officials least equipped with knowledge of the subject matter.
In 2018, one of the leading donor agencies told KP that it could easily garner eight billion rupees annually from the hospitality sector. Hospitality sector comprises hotels, restaurants and wedding halls. The donor, out of sheer vanity and basing its conclusions on econometric models having little to do with ground realities, found little difficulty in convincing a callous and ignorant audience.
At that very point in time, both Punjab and Sindh were collecting sales tax of less than two billion rupees each from their vast and prosperous networks of hospitality sectors.
The point to make here is that the world is falling apart due to rampant lack of intellectual integrity.