In a bid to widen the tax net and encourage better documentation of the economy, the government has decided to turn national identity card numbers into national tax numbers from January 1, 2012.
Testifying before the Senate finance committee, Federal Board of Revenue Chairman Salman Siddiqui said that the government had inserted a clause in the text of the finance bill which proposes that the government begin using computerised national identity card (CNIC) numbers as a replacement for national tax numbers (NTN). Once implemented, said Siddiqui, the change would be permanent.
Currently, there are 2.9 million people in the country with an NTN, which is required for any person filing their tax returns. FBR officials say only 1.5 million people file their income tax returns. By contrast, officials at the National Database and Registration Authority (NADRA) estimate that nearly 95% of all Pakistani adults have a CNIC.
The decision to begin using CNICs was made by the government as a substitute to introducing the value added tax, also known as the reformed general sales tax (RGST), which had previously been the government’s primary strategy to help document Pakistan’s large cash-based, undocumented economy, which experts estimate is anywhere between 50% and 70% of the documented economy. The latest economic survey estimates the size of the country’s gross domestic product (GDP) at Rs18 trillion ($210 billion).
Sources inside the FBR say that one of the major reasons the FBR resisted the RGST was because it would remove their powers to issue statutory regulatory orders (SROs), through which civil servants had the power to reduce tariffs on any item or even for a single business, without any supervision from elected officials.
FBR officials say that the government will try to increase its income tax collection by first registering annual sales of businesses across the country. The FBR chairman admits that the government can increase tax revenues by as much as 79% simply by cracking down on tax evasion.
Parliamentarians approve plush retirement packages
At a time when the government is striving to increase the tax base by bringing the richest of the country in the net, parliamentarians, many of whom are accused of paying virtually no taxes, are now eying even more privileges.
The Senate finance committee on Wednesday unanimously recommended giving privileges currently available to the highest ranked retired bureaucrats to all those Senators and Members of National Assembly who have completed a five year term.
These include free medical treatment, access to VIP guest houses, use of VIP lounges at airports, issuance of special passports and permanent access to all government departments and offices. The only thing they did not demand is allotment of two residential plots that all grade-22 officers get on retirement at the expense of taxpayers.
“The Parliamentarians are only demanding respect”, said Senator Ahmed Ali of MQM. He claimed that not all parliamentarians were rich, particularly those belonging to Balochistan.
“Are you not availing perks? Why are you reluctant to give the same treatment to parliamentarians,” asked Senator Ali of Finance Secretary Waqar Masood.
The finance ministry did not give its consent for the proposal and said that it would review the financial impact of such a retirement package for legislators.
Last year, the Senate finance committee approved special post-retirement perks and privileges for former chairmen of the Senate.
For a second consecutive day, the committee also faced quorum problems due to the continuous boycott by opposition senators on the issue of appointing Maulana Ghafoor Haideri of the JUI-F as the Senate opposition leader. Only four members attended the meeting, including the chairman.
The finance committee also unanimously recommended increasing the income threshold for income tax exemption to Rs400,000 from the finance ministry’s proposed Rs350,000. It also proposed to increase minimum wage to Rs8,000 from Rs7,000.
Published in The Express Tribune, June 9th, 2011.