Growth momentum should be prioritised in the upcoming budget, but if the cash economy of Pakistan is left unchecked, it will become a menace, said former Federal Board of Revenue (FBR) chairman Shabbar Zaidi.
Speaking at a webinar titled “Raising Tax Revenue: The Budget and Beyond” on Tuesday, Zaidi termed presumptive taxation a massive issue in the tax mechanism of Pakistan and lamented that its reversal could take many years.
He recalled that presumptive taxation had been introduced in the 1990s and it continued to hinder tax collection till today.
Detailing about the presumptive tax, he said it was a kind of levy in which tax on import, export and supply became final liability.
“Due to this, no trader is paying tax on a net income basis,” he said. “Transformation in the tax machinery is direly needed.” He was of the opinion that traders used the excuse of harassment by FBR officials to evade taxes. According to him, one market in Karachi (Lalukhet) paid higher taxes than any market in Islamabad or Lahore.
The former FBR chairman lamented that 40% of tobacco production in Pakistan was undocumented along with 30% of batteries.
He recalled that 300,000 industrial and commercial connections of Sui gas had been identified during his tenure as the FBR chief, out of which only 40,000 were registered.
“I made efforts to resolve this issue, but authorities failed to act in this regard,” he regretted. “When I introduced the CNIC condition for buyers and sellers, a majority of Pakistanis turned against me.”
He highlighted that out of 45 million bank accounts in Pakistan, only 8 million were registered against taxpayers.
Speaking on the occasion, Economist Ammar Habib Khan termed it extremely difficult for the government to levy more taxes in the budget keeping the pandemic in view.
“Real income has declined substantially over the last two to three years and slapping additional taxes will curtail it further,” he said. “In addition, overall consumption in the economy will fall.”
Turning his focus towards imposing taxes on real estate, he said that there was a lot of wealth concentrated in the sector. Referring to the parliamentary tax directory, he said that there was a huge discrepancy between the lifestyle of politicians and the taxes paid by them. “A common man pays more tax than some parliamentarians,” he said.
Published in The Express Tribune, May 26th, 2021.