Need to widen tax base
As the government endeavours to carve out a new tax regime, the suggestions that have come its way are lopsided. Pakistan has an unsymmetrical tax base, and the machinery to collect the revenue is inefficient and corrupt. There are no qualms in saying so because consecutive governments and commissions have struggled to broaden the tax network, and have met with half-successes owing to lethargy of bureaucracy and inbuilt nepotism. So was the outcome of the Reforms and Resource Mobilisation Commission (RRMC), whose interim report categorically says that it faced resistance from the FBR and agencies concerned in getting access to relevant data and records. The country’s biggest revenue problem is tax evasion, and a gigantic pie of the informal economy that is run by black-marketers, hoarders and mafias.
The RRMS’s recommendations are, however, debatable. It seems either it lacked homework or was on the unrealistic side in taking a holistic view of the performing economy. It has proposed tax on the elite strata on their future dividends, as well as on all types of movable and immovable assets. That is fair enough, but what has raised eyebrows is that it has hinted at slapping more taxes on exporters, a segment of society that must otherwise be facilitated as they are the backbone behind earning foreign exchange. Rather, all unnecessary imports must be scuttled.
Other pointers of the commission are well received, such as measures to broaden the tax umbrella, plough leakages and improve enforcement of laws by writing them anew. The suggestion to amend Section 111 of the Income Tax Ordinance, which allegedly provides for a parallel tax-free economy, is on the mark. Likewise, a 5% advance income tax on future dividends of listed companies and 7.5% on non-listed companies; slabs on the distributable reserves of taxpayers such as 1% tax on active payees, and 4% on unregistered ones seem to be compounding the equation. There is no such thing as non-filers in global tax vocabulary, and the same must be undone in Pakistan too. Time to document and broaden the revenue generation.
Published in The Express Tribune, May 2nd, 2023.
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