The Pakistan government needs to read this.
[quote]Look at the litany of technocratically inspired examples of privatisation and deregulation in the 1990s. Banking “reform”, for example, frequently required government bailouts, leaving a few people much richer, but the country much poorer. These failures suggest we should have less confidence in the supposed skills of technocrats – or at least less confidence than they have in themselves.
….But there is a fundamental difference between developed European countries and emerging markets: the size of the informal sector, from which VAT is not collected. This vast “black economy” makes VAT inefficient in most developing countries. Indeed, because VAT is a tax on the formal sector whose incomes and expenditures can easily be traced (as distinct from those of the cash-based street vendors, village enterprises and poor farmers) – [b]VAT impedes development[/b].
Developing countries that impose VAT perversely encourage production to remain in the informal sector. But it is the formal sector that produces higher value-added manufactured goods that compete with developed countries.
>>[url=http://www.guardian.co.uk/comment/story/0,3604,998822,00.html]Guardian: Joseph Stiglitz[/url]