Most states have abolished their grocery taxes, which now exist in only 11 states in the United States. State sales taxes usually exempt groceries. But in Pakistan, the world’s fifth most populous country, it’s a different story. Taxes are rising a lot there, on milk:
Milk prices in Pakistan surged by more than a fifth after a new tax was applied, making the dairy staple more expensive than in France, Australia and some other developed nations.
Ultra-high temperature, or UHT, milk now costs 370 rupees ($1.33) a liter in supermarkets in Karachi. That compares with $1.29 in Amsterdam, $1.23 in Paris, and $1.08 in Melbourne, according to data collected by Bloomberg. An 18% tax was applied to packaged milk as part of taxation changes approved in the national budget last week. Previously, it was tax-exempt.
Before the impost, which resulted in retail prices increasing by as much as 25%, milk costs were comparable with developing countries such as Vietnam and Nigeria…Costlier milk will add to rising inflation in the South Asian country, where wages have stagnated, eroding spending power. The increase may also worsen child health. About 40% of the nation lives in poverty.
“It will deny nutrition from a population that is already suffering from malnutrition”…About 60% of Pakistani children under 5 years suffer anemia and 40% suffer from stunting. Pakistan raised taxes by 40%, the highest on record, in last week’s budget aimed at meeting conditions set by the International Monetary Fund for a new bailout.
Last year, Pakistan had a disturbingly large budget deficit equal to 8% of the size of its economy. Its national debt has grown to 80% of the size of its economy. That’s very big for a poor country with a bad credit rating, which makes it harder for Pakistan to keep borrowing money than if it were a rich, stable country like the United Kingdom.
Twenty years ago, Pakistan was wealthier than India, but now it is poorer. It ranks 164th out of 191 countries on the Human Development Index. But it has a lot of people — It ranks right after the U.S. in population, with more than 245 million people.
In the U.S., states continue to eliminate state-level taxes on groceries. This March, Oklahoma Gov. Kevin Stitt signed a bill to eliminate his state’s 4.5% sales tax on groceries. In the last couple years, Virginia eliminated its state grocery sales tax, and Kansas enacted a phase-out of the tax that will be complete in 2025. Like Oklahoma’s measure, Virginia did not eliminate the local sales tax on groceries (which is 1% in Virginia).
