Computerised economy

The Federal Board of Revenue has made it compulsory that a copy of Computerised National Identity Card (CNIC) is submitted for any purchases worth more than Rs50,000. The stated purpose of the new rule is to document larger business-to-business and consumer transactions as a means to avoid unverifiable and fictitious business transactions, which cause losses in sales tax revenue.

But since there are only 41,484 sales tax registered persons in the country, the new rule will do little to stop sellers who are not registered or encourage them to get registered. Additionally, even though the rule imposes no penalty on sellers if an incorrect CNIC is provided, as long as the seller can prove the transaction was conducted in good faith, defining ‘good faith’ can be problematic. This is compounded by the fact that women are allowed to use the CNICs of their husbands or fathers, opening another avenue for fraud.

Given the protests and opposition to the measure by the business community, which is already riled by the imposition of a slew of new taxes and astronomical increases in the rates of existing ones, it has become clear that the government is not particularly interested in granting concessions, even if a few changes were withdrawn. But despite all of the government efforts to reform the economy, the approach is still ‘old school’ — a 20^th-century solution for an economy that claims to be in the 21^st century.

A better approach may have been to invest further in the digitisation of the economy and transitioning away from cash. There has been some buzz around the elimination of a few very high and very low currency notes, while the Re1 coin seems to be firmly set in the realm of nuisance rather than blessing.

Fleeting opposition to this is misplaced, while the benefits are tremendous.

The increasing prevalence of cell phones and phone-based financial services, including those offered by cellular service providers themselves, would make digitisation fast and relatively painless, while also helping verify transactions as they take place and without the need for additional documentation.

But then, the bureaucracy of Pakistan is not known for making life easier for the citizenry.

Published in The Express Tribune, July 24^th, 2019.

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