Can we do taxes better?

“Doing taxes better” was the question raised in the second of the series of conferences organised by the Pakistan Institute of Development Economics (PIDE) on March 11. “Doing Development Better” was debated in the week before. Since the second coming of the ever-questioning Nadeemul Haq as the Vice Chancellor of PIDE, the oldest hamlet of researchers is humming with life again. The conference raised more questions than it answered. This is not surprising. For far too long, taxes have been levied without any policy framework that in turn requires serious research. Research has suffered because policymakers have no demand for it. In the event, all researchers can do is ask questions. Holding the conferences in the auditorium of the Planning Commission is, perhaps, aimed at forcing the researchers to move out of their ivory towers and to shake the policymakers and implementers out of slumber.

The conference challenged the narrative of a tax-cheating nation. Everyone who buys something, pays something to the exchequer. Scepticism was expressed about the thoughtless pursuit of the tax to GDP ratio. GDP is just a set of transactions. No transaction has been left untaxed. That only hurts growth. Is that the objective of whatever exists in the name of tax policy? Talking of objectives, the singularity of the objective of revenue mobilisation attracted a lot of criticism. In its target-chasing hysteria, the FBR moves up an import duty and, in the process, determines the trade policy of the country without involving any stakeholders, including the commerce ministry. Similarly, an adjustment of GST makes or mars the industrial policy with the industry ministry as not even a sleeping partner. Around 46% of the yield is import-related. The IMF representative termed this reliance excessive. Jamil Nasir showed the anti-poor bias of the regime, with a duty as high as 26% on used clothes. The canon of convenience is misapplied with impunity. Where does this leave tariff policy, wondered Dr Manzoor Ahmad. Opening up rather than closing doors has transformed the economies of Vietnam, Turkey and more. Our “infants” just refusing to grow up.

Documentation has now gone into overdrive. The Financial Action Task Force (FATF) is the latest excuse to demand more of the same information. For the first time, the so-called informal sector, which keeps the economy going while the rent-seeking formal sector goes under, has been brought to a standstill. According to Dr Athar Maqsood, the contribution of the textile industry to the exchequer is negative when rents and concessions are brought into the equation. A lot of paper continues to be used, despite claims of an expanded use of technology under donor-funded programmes. Instead of using the vast information sets now available with the FBR, the client is invariably asked to provide more and more attested copies of the same.

Dr Ikramul Haq presented a programme of reform that this writer has also been outlining in this column. These include the establishment of a single tax authority, the merger of GST on goods and services and its inclusion in the provincial domain, the broadening of the definition of income under the federal income tax by adding agricultural incomes and the devolution of property tax to the local governments for effective public service delivery. Billions are stuck pending court proceedings. His solution is setting up of a National Tax Court.

Are those with policy power listening? Other than some present and former FBR persons, nobody of any consequence was there despite the convenient “P” Block location. How can we do taxes better if no one listens?

Published in The Express Tribune, March 13^th, 2020.

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