Tightening the tax noose

The prime minister's approval of new restrictions on non-filers of tax returns has generated a range of reactions, with the consensus being that while aggressive reforms were necessary, the punitive nature of the changes could well backfire. Among the more controversial changes is banking restrictions on non-filers, meaning that, in theory, salaried individuals whose taxes have been deducted at source may end up facing restrictions because they did not bother to file a return.

While the government continues to simplify tax filing process for salaried individuals, filling in tax forms is still relatively complicated compared to other countries, which offer free tax filing software that feels more like a video game - albeit a terribly boring one - than an accounting exercise. Improving the tax filing experience, including reducing the amount of calculations that users are forced to do, could significantly increase people's willingness to sit through the filing process. Similarly, carrots in the form of guaranteed refunds for filing - especially among lower-income salaried people whose taxes are deducted at source - might also encourage adoption more than the stick of punitive measures. Better data sharing between employers and the FBR could reduce the amount of data entry required from users. At the same time, restrictions on high earners and more effective monitoring of transactions involving property, cars and other big-ticket items will provide less intrusive ways to monitor tax avoidance and evasion, since most people buying and selling these things are likely among the highest earning categories.

Moves to digitise the economy by reducing the amount of cash in circulation could also yield great results, but more needs to be done to ensure the technology required is universally available. Unfortunately, the government is its own worst enemy when trying to implement this. The US did not shut down mobile networks on 9/11 or January 6. We turn them off - and all related payment networks - when a political rally is taking place in a neighbouring town.