Economic Prosperity in days instead of years and months
Freedom from national debts in shortest possible time
MUTUAL BENEFIT BOND SYSTEM
A complete, Perfect and permanent solution for all problems of Pakistan
Dr. Niaz Ahmed Khan
PhD. Economics, Finance and Business Administration
Mobile : 00971 50 7273799
MBBS is a simple system. In this system, all goods and services under government control are offered to end users and consumers at two prices. The first price is the current or prevailing market price and includes all types of taxes and duties a government collect to meet its budget requirements. This price is much higher than the price offered through MBBS, and it includes most of the taxes and duties. The second price is much lower than current market price because it is offered at almost cost price by the government if purchased at the cheapest price (i.e., six bonds per rupee), and it also depends on the price of a MBBS bond. This lower price is the incentive for consumers and end users to participate in MBBS.
In order to obtain this lower price, the buyer has to pay for a commodity or service under government control with a certain number of MBBS bonds. The number of bonds will be shown on the bill provided by the government authority. In addition, the bill will also show the current prevailing price, which can be easily calculated by the purchaser because it will always be double the amount of bonds at the current price in rupees: For example, X rupees is the present price, which can be paid in bonds in the form of 2 times bonds. The number of bonds will be two times the amount of rupees. The consumer would pay X rupees or 2 times bonds. Two prices are used in MBBS in order to calculate the bond price of a good or service. In addition, the current price is kept because it shows how expensive a good or service would cost if a consumer decides not to use MBBS bonds. The savings to the buyer can range from 20% to 60% or more, depending on the rate of bond. As a result, the consumer gets more for less.
In addition to lower prices, MBBS encourages buyers to participate in the scheme by offering discounts on bulk buys of bonds. As a result, a buyer can establish a price for a commodity or service by timing the purchase of bonds to take advantage of discounts. These discounts also include allowances for duty-free imports instead of cheap bonds or both, and they are offered in the first, second, and third months of a financial year. After the discount period expires, the rate will be fixed for the rest of the year.
MBBS bonds would be available from a nongovernment organization (NGO) and its agents, and the name of this agency will depend on the government. For example, in Pakistan, this agency could be called the Pakistan Monetary Fund (PMF). Organizations would bid for the right to sell bonds, and the agency selected to operate the monetary fund would employ agents who would receive a 10% commission on all bond sales. The organization with the lowest bid and the ability to put the scheme into operation in the shortest time would receive the contract. The second-, third-, or fourth-lowest bidders as well as the government would audit the monetary fund. These auditors would work independently on a fixed fee paid by the monetary fund plus a 50% penalty imposed on PMF, which would be 10 times the amount of any discrepancy or fraud. The government would receive the remaining 50% of the penalty.
No rational business, organization, or individual can afford to ignore this scheme if it is offered; therefore, it is reasonable to assume the following:
- People, businesses, and organizations will purchase large quantities of bonds.
- They will purchase them in the early part of the year in order to take advantage of discounts.
- Bonds will be purchased for a number of reasons other than simply paying bills: for example, saving bonds, speculating in sales later in the year, and holding bonds as a hedge against unexpected expenses.
- Bonds will be used at every opportunity to reduce the cost of producing goods and services, from government imports to the point of sale to the end user.
In addition to lower costs, MBBS would include lucky draws everyday, which are like a lottery but without any cost to a person. These draws would encourage people to hold their bonds in the hopes of winning the draw. As a result, the government would have more money than expected because bonds are not being used, the government is not paying interest on them, and they would not be recalled unless the value drops below a certain level. If the value drops below a certain level, the government would buy back the bonds at a low rate in order to increase the value of the bonds.
MBBS has a number of benefits for a government that is having problems collecting enough revenue to meet its needs:
- At the beginning of each year, the monetary fund would offer MBBS bonds for sale without restriction. MBBS bonds would cover all government-controlled goods and services throughout the entire economic chain; therefore, there should be a large demand for these bonds. The cash raised by the sale of these bonds would go straight to the government through the monetary fund. In many developing countries, the initial sale of bonds will produce enough funds to cover the financial needs of a government for several years because the underground economy will merge with the mainstream economy.
- In this scheme, a government takes the lead in price reductions by discounting fuel, electricity, telephones, and so forth, which would reduce household, agricultural, and industrial costs. This would have a significant, positive impact on economic activity because a reduction in the prices of all essential goods and services with free imports would bring down factory prices and, at the same time, increase profitability, which will be an attractive incentive for new investment.
- A government would benefit from increased liquidity, investment, and economic activity. In addition, as the economy grows, the government would sell more bonds.
- This new economy is attractive to all parties, and people engaged in the black economy found in many developing countries will migrate to MBBS. It will no longer be attractive to work outside the system because it will be impossible to compete with it on price.
MBBS is a unique, risk-free approach to raising revenue for governments. It does not require a government to give up its current tax system until MBBS proves it is capable of raising enough money to meet a government’s needs. Once the system is in place, it will transform dysfunctional economies often found in the developing world into open, transparent, free markets in which the government and citizens co-operate to drive prices down, create surplus budgets, and increase investment. Once a government has accumulated more than enough money to run the country for a year, it would announce a complete tax holiday in which no further income tax would be imposed on any person or businesses. This is the starting point for an industrial revolution.
The following definitions describe Pakistan’s economic system under MBBS:
Rupee Value: Rupee value is a current prevailing market price. This price is not applicable to consumers and is only used to calculate the numbers of bonds needed to purchase a good or service. According to the most conservative estimates, if all the direct and indirect taxes were abolished, production cost would be reduced by 50%. This reduced cost, which includes actual cost and profit, is the rupee value in MBBS.
Bond Value: The MBBS bond value is the price of goods and services, which is twice the value of a current rupee value.
Bond: A MBBS bond replaces direct taxes, indirect taxes, custom duties, excise taxes, surcharges, and all other levies. The cheaper the bond, the less tax paid by a consumer or business.
Actual Price: In MBBS, the actual selling price is the price a subscriber or consumer has to pay, and this price depends on the cost of bonds. The cheaper the bond, the cheaper the price of the commodity or service provided by the government.
Production Cost: In MBBS, production costs will be reduced by 50% because all direct and indirect taxes, duties, surcharges, and other levies are abolished and replaced by bonds. These taxes are eliminated because the government is able to collect enough money within a few days of implementing MBBS to meets it annual budget. In Pakistan, 20% of the population (i.e., 30 million people) can easily spend 100,000 rupees in the first few days to reduce their daily bills by two thirds of the previous cost and this is an investment with at least 100 % return within a month and much more if one can hold on to these bonds for a longer period of time as the bond price will appreciate in the coming months HOW this is explained in detail in the next section of the book. This will raise at least PKR 3 trillion for the government, which is more than enough money to meet the government’s budgetary needs. Once this money is raised, Pakistan would be declared a tax-free heaven, even for the foreign investor. This is one of the doors through which money will flood into GOP’s treasury. There are five more doors through which money will flow to the government.(Please see the Book Islamic Economic Revolution of the Century for more detail)
In MBBS, a current prevailing market price is the rupee value, and the other price is the bond value. The bond value is a subsidized price, with an average discount of 40% to 60% compared to the prevailing market price. The price of a bond will vary between 4 and six bonds per rupee, depending on the amount purchased, time of purchase, or whether they are purchased under special registration rules (up to six bonds per rupee during the whole year, depending on the type of registration) and also the rate will fluctuate on daily basis ( open market rate)
These bonds will reduce the cost of production by at least 40%, which will reduce the cost of living. This reduced price will not be below the actual cost of a good or service and will carry at least a 10% mark-up on the cost price provided by the government.
In addition to taxes, businesses in Pakistan are affected by high duties on imports. In MBBS, it is possible for businesses to use a duty-free option. This option would stop the rampant smuggling that occurs in Pakistan, and it would increase the import of technically and extremely useful high-tech industry products more than 100 times the present rate. MBBS would also increase all other types of imports because of the demand and supply factor. This duty-free environment would not hurt the government because all these imports would be carried out by the private sector, and the only role played by the government would be the removal of these unnecessary duties, which only earn the government PKR 100 to 150 billion a year. Under the special directive the government announce 10 million duty free option for only one month provided at least 1000 euro or multiple of it are remitted to state bank of Pakistan who will in turn will issue a 10 million duty free certificate .This duty free option is valid for one year only and will be applicable to imported and locally manufactured goods so that home made goods will also be much cheaper and the home market will not suffer. It is estimated most conservatively that at least 3 to 5 hundred billion of euro will end up in government account within a month without lifting a finger .For the simple reason that all black and looted money will merge in the economy considering a figure of 400 billion dollar entering in the country through smuggling rackets on which at least 5 % kick back is paid .Then why not bring all the money from abroad and from home and make at least 100 profit in the next month when the duty free option is no more available so the holder of duty free option will import goods and sell it in the market at a profit or even sell his duty free option to others and make 100 % profit by selling it even at double the price . As there is no tax and no question asked and at the same time one is not bound to declare his or her identity because the money is being given to the state
These duties hurt Pakistan’s industries, and there is no incentive for the creation of new businesses. As a result of the duties, the private sector imports or smuggles goods from neighboring countries where these products are cheaper than they would be if Pakistani businesses tried to produce them. For example, the government spends approximately US$2 to 3 billion a year to import fuel. In MBBS, the duty on fuel would be almost nonexistent, and the black market in fuel would become a legitimate market. In MBBS, fuel would be imported by the private sector, and the government would become a partner in this deal and control the price of fuel.
MBBS provides a revenue collection system for the Government of Pakistan, and it is based on a nationwide, dual pricing system for all goods and services and associated profits. This applies not only to GOP-controlled goods and services, but also to goods and services provided by the private sector.
In order to enjoy lower prices, citizens prepay for a MBBS bond that is used for buying goods and services that have two prices. The revenue from the sale of these bonds goes to the government through a national monetary fund that sells bonds and collects money. In Pakistan, this national organization would be called the Pakistan Monetary Fund (a private contractor) (PMF), and it would pay revenue collected from the sale of bonds directly to GOP accounts.
MBBS is a revenue system, not a tax system. In effect, the scheme asks businesses and consumers to help the government, and it encourages people to use this system by offering lower prices for goods and services. MBBS is attractive to consumers because it appeals to people’s desire to find the best deal for a good or service. In MBBS, there is no statutory obligation to buy bonds. The scheme relies entirely on the basic human instinct of getting the best deal for the money. Unlike Pakistan’s current tax system, MBBS will attract people because it offers guaranteed discounts on goods and services.
The lower prices available with MBBS bonds will attract at least 10% of the population. In addition, it will attract consumers because they will pay a higher price without a bond. MBBS will eventually attract enough participants to enable Pakistan to eliminate its current tax system. In addition, because bonds will be bought at the start of a financial year, the government will know exactly how much money it will have to fulfill its obligations during the year.