Towards tax reforms?

In a move meant to promote some measure of equality, the Tax Reforms Commission (TRC) has proposed that tax exemptions extended to high-ranking public officials —including the president, prime minister, all federal cabinet members, provincial governors, services chiefs and corps commanders — should be abolished. The commission, which was formed by the government with an aim to increase dwindling tax collection and suggest reforms to improve the tax culture, also suggested increasing the minimum threshold for income tax exemption from the current level of Rs400,000 to Rs500,000 per annum. The two proposals will now be taken up by the Federal Board of Revenue (FBR), for further consideration before they are included in the Finance Bill.



For decades, Pakistan has been plagued by issues of tax evasion and tax exemptions, which have done much to harm the economy. Despite being aware of the different loopholes exploited by many, the FBR has been unable, and perhaps unwilling, to enforce laws, inviting scathing criticism from all quarters. With a budget deficit that tends to increase every year, efforts are only concentrated on increasing the rates for those sections of the economy that already pay tax. Despite promises of broadening the tax net and increasing collections, figures for the ongoing fiscal year present a sorry picture for the government, and this will continue to be the case. This is mainly due to the hypocritical nature with which tax laws are enforced in the country. The FBR has been a toothless body, unable to leave any mark on the culture of tax evasion and tax exemptions. The TRC has taken a bold stand in its attempt at including the many varieties of perks that high-ranked public officials enjoy within the tax net. It is also trying to introduce tax reforms in real estate holdings. While these efforts are appreciated and need to be considered, the proposals have been sent to the FBR — a body that does not need to be told what reforms are needed but has still been extremely lax about introducing them. Maybe, the FBR is where the restructuring needs to take place first before it can be expected to bring about positive change. The elite have always been able to get away with bending the rules. And they have been able to do so since they are the ones making them.

Published in The Express Tribune, May 6^th,  2015.

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