10 million taxpayers

The government is edging closer to the symbolic mark of 10 million registered taxpayers, but less than half of them actually filed returns, and only about a quarter paid any taxes at all, according to a World Bank report. Amazingly, the taxpayer figures still reflect an improvement over the previous year, when only three million of eight million registered taxpayers even bothered to file returns, and even that number was only reached on the back of a filing deadline extension.

The report, which is tied to the World Bank-funded $400 million Pakistan Raises Revenue project, also confirms that the government is more than happy to bleed honest taxpayers dry rather than making concerted efforts to address tax evasion or otherwise widen the base. The failure to get even existing registered taxpayers to file shows that the focus on improving data collection should be less of a priority than enforcement. Whether this is done with a carrot — such as tax credits for all filers — or a stick, getting every registered taxpayer to file should be prioritised. A secondary layer could then be to ban unregistered persons from most transactions necessary for anything above a subsistence level existence, such as real estate and automobiles.

But this is probably beyond the FBR, which has failed to meet the IMF condition of recovering most of its “collectible arrears”, which are mostly large debts owed to it. The agency still hasn’t even addressed the software and network issues that led to massive hacks and data leaks over the past few years. Meanwhile, Pakistan is also miles off its paltry tax-to-GDP target of 17%. For comparison, the US has a tax-to-GDP ratio of 27%, while Germany’s is almost 40%, and even India’s rate is approaching 18%. Pakistan, on the other hand, is at barely 9% this year, down from a relative high of 13% in 2018, meaning we are among a handful of countries that have seen tax recovery rates actually fall over the past eight years.

Published in The Express Tribune, October 18^th, 2023.

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