Taxing ideas

The finance minister’s rhetoric that accompanies the annual budget presentation, no matter which party is in the saddle in Islamabad or for that matter which uniformed president is holding the whip-hand, makes the balance sheet for the incoming year appear more like the ultimate financial panacea for all our economic ills and one that would take the nation to a social welfare utopia in no time.

And every year when the annual budget is about to be presented, a number of feel-good stories start appearing in the media, backed by officially gathered evidence. It is only at the conclusion of the fiscal year that targets would begin to seem unachievable and officials would be heard talking about how a number of exogenous factors had upset their well-planned economic apple-cart.

One only hopes that such a fate is not awaiting the recent claim of the Federal Board of Revenue (FBR) that it has received more than a million tax returns for the tax year 2015 as against 800,000, a figure that had remained the budgetary feature for a number of years now. Also, the claim is highly intriguing because it does make one wonder how an increase of a mere 20,000 or so filers could help the collection soar by 19 per cent to Rs2.103 trillion. And by the way, isn’t it a matter of shame at least for the FBR to take pride in reaching a figure of a million filers in a population of 200 million?

The problem has always been the FBR itself. Every tax reform or the so-called effort to broaden the tax base has been turned into one more lucrative avenue for the FBR staff to milk the taxpayer at the cost of the treasury. Also the very people who are supposed to legislate these reforms are the ones who indulge in massive tax evasion and avoidance with the help of these very FBR tax collectors.

One has been hearing for many years now that the FBR would go after tax evaders by using information obtained from their transactions in the real estate sector, purchase of vehicles, foreign travels and also by assessing, in the long run, their bank accounts to calculate the extent of tax evasion they are committing. The fact of the matter is that this information has been in the possession of the FBR for the last several years. And the collectors also know all the tricks that enable the evaders and avoiders to escape the net which if unavoidable is punctured by greasing the palms of the right people.

Indeed, it is such a lifting experience to hear how the FBR is making Herculean efforts to broaden the tax base to raise the tax-to-GDP ratio and how it is trying to plug the loopholes in the current taxation system and overcome its weaknesses and evolve measures to improve the system.

Who would disagree with the suggestion that compliant taxpayers, an independent tax authority, simplified tax laws and procedures, and a vibrant tax machinery are essential for a robust tax system. But who will bell the cat? It is the cat itself which holds the bell! And why would all those fat cats who frame policies and relevant laws like to see a fair tax system in operation in the country that would impose an equitable tax burden across the entire taxable population and load individuals proportionate to their ability to pay taxes?

Not only are we too short of financial resources needed to stand on our own feet and reduce our dependence on foreign dole which comes with strings attached but we are also too short of energy without whose adequate supplies we simply cannot produce enough to consume and export to earn enough foreign exchange to pay for our imports.

Both CASA 1000 and the Tapi gas pipeline are essential for the game changing China-Pakistan Economic Corridor to take off. But unless we improve our relations with Afghanistan, one does not see the benefits of these projects reaching Pakistan. At the moment, the only way one can win over the Afghans is to offer them a transit trade route to India and back. But sadly, due to a number of genuine and some not-so-genuine reasons, one does not see this happening, at least in the foreseeable future.

Published in The Express Tribune, May 7^th, 2016.

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