An unfair proposal

As the federal budget announcement looms closer, a proposal by the FBR has come to light that aims to tax the income of various funds including service, pension and military regimental, while also tapping the business income of non-profit organisations. The FBR has proposed the withdrawal of the tax exemption facility and the imposition of income tax on these institutions at half the standard tax rates. At a time when there is an ongoing public trial of politicians in view of their offshore assets as exposed by the Panama leaks, such measures that aim to tax pensioners and non-profit organisations will not be received well. The proposal only aims to generate Rs5 billion, so it is clearly not a huge revenue-earner. The intent also appears to be to end so-called discriminatory treatment that has been extended to certain segments of society, conveniently ignoring that tax exemptions to these particular segments are there for a reason.

While the FBR is proposing to go after only the business income of non-profit organisations, these proposals also seek to tax pension funds, which is arguably the worst way to widen the tax net. After working for years, paying their taxes and saving their incomes in funds, pensioners are now in danger of being told to pay taxes on their pensions as well. These measures will only agitate a public already filled with disgust at the antics of the rich and powerful who often hold assets abroad in order to avoid taxation. The FBR clearly lacks vision when it comes to reforming the taxation system. Its strategy is simple — increase tax rates for those who already pay taxes or who have little power to demand concessions. It has failed to go after the big fish. Its toothless attitude has already made the informal economy thrive and tax evasion soar. Policymakers need to devise a long-term strategy — the end to discriminatory tax practices that the FBR is harping on can be kick-started by taxing those who have thus far been let off the hook.

Published in The Express Tribune, May 19^th, 2016.

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