NTN tax filers

The next time one dines at a restaurant for which a hefty luxury tax of 13-17 per cent is levied, it will not be enough to ask the vendor to present a registered national tax number (NTN) on the basis of which the enormous tax is charged. The investigation should require the vendor to report whether he or she files an annual income tax return. As per the latest tax directory released by the ruling PML-N, only 29 per cent of NTN holders filed an income tax return in the fiscal year 2015-16. Hence, Pakistan’s tax-to-GDP ratio remains one of the lowest in the world. Although Finance Minister Ishaq Dar and his team boast about recruiting more citizens under the tax net and either instilling fear or ethical conscience in them, the number of actual taxpayers is much smaller than required to sustain the country’s expenses.

The taxation system in Pakistan is sloppy and further complicated by corruption and tax evasion even by those in the corridors of power. Hence, regular citizens have also become very resourceful in employing tactics to evade or avoid taxes, both of which are technically illegal. The “kacha-pakka” system is recognised as an actual system rather than a crime. Although the PML-N has had some success in boosting the number of tax filers, a significant portion of those filers were not required to pay taxes due to low incomes and the tax gap remains a major challenge for the country.

When traffic constables are tasked with halting vehicles and manually checking whether taxes have been paid on them — especially in Karachi, where they direct thousands of cars daily — there is a visible indication of a lethargic and ineffective taxation system wherein even large transactions, such as motor vehicle purchases, are able to go undetected by the tax deities. Until penalties are dealt ubiquitously, it will continue to be a slow process towards bringing all citizens under the tax net, from the mom-and-pops shop owner in some remote area to the affluent politicians with properties abroad.

Published in The Express Tribune, August 14^th, 2017.

Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive all updates on all our daily pieces.