Glossing over details

Tax net has not widened and those who have historically paid their tax dues have repeatedly been ordered to pay more

Finance Minister Ishaq Dar has wasted no time in blowing the trumpet on Pakistan meeting its tax collection target for FY2016, but refrained from discussing the measures applied to achieve it. He has also talked about how Pakistan’s foreign exchange reserves had touched a record level of $23 billion, a figure that includes commercial banks’ holdings. His recent speech on PTV was yet another reminder of how the ruling elite view the public — gullible, easily misled and mostly uneducated. What people got to hear during Mr Dar’s speech were numbers, devoid of any context. The finance minister said that the collection of Rs3.1 trillion in taxes was an increase of almost 60 per cent from the 2013 figure — the year in which the PML-N came into power — but did not bother to state how much of the figure was in the form of stuck refunds and indirect taxes that were collected by authorities on behalf of the government.

Mr Dar didn’t bother going into details, where it would have emerged that the tax net has not widened and those who have historically complied and paid their tax dues have repeatedly been ordered to pay more. An area where collection could have taken a hit provided a major boost as Pakistan not only consumed historic levels of fuel but also paid unprecedented taxes on petroleum products. As prices went down, the government got away with increasing tax rates as consumers were willing to use more fuel. Mr Dar didn’t mention stuck refunds in this speech, but every now and then gives a statement reiterating that they would be returned. Meanwhile, the FBR keeps the money, balances its books and collects advance tax in billions to show higher collections. Increasing tax collection, in a growth-led model, signifies greater activity in the economy. Has Pakistan’s economy really picked up that much to justify a 60 per cent increase in tax collection? The simple answer is no. Increased indirect taxation, overburdening existing taxpayers and taking advantage of the global oil supply glut have favoured the PML-N and it has taken full advantage. It knows how to present a good picture of the economy. While one can appreciate its intention to penalise non-filers, the fact that the number of filers hasn’t really gone up tells us that something’s amiss in its strategy.

Published in The Express Tribune, July 3^rd, 2016.

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