Tax tilt

The FBR is in a fix of its own. While it claims that it has enhanced its efficiency and managed to receive 5.215 million returns for the tax year 2024 until November 6, accounting for Rs132.259 billion, compared to Rs77.132 billion in the same period last year, it has a flip side of arithmetic. Notwithstanding an increase of 76% returns to this date, the nil-filers to the tune of 2.051 million are in the spotlight. Owing to harsh penalties and restrictions imposed on those who do not file their returns, the non-filers have sneaked in the tax net by submitting their one-time financial transactions to take advantage of lower tax rates for placement on the Active Taxpayers List. This is another enigma of sorts in a country where revenue generation is classified in terms of filers and non-filers, a unique of its kind, leading to a plausible downslide in projected tax targets.

These statistics were made possible after two extended deadlines, though. The FBR's reforms package had proposed that non-filers would be prohibited from engaging in any financial or investment activities as well as travelling by air, until they document their income and assets. This led to a see-saw and people, who to this day were in shadows, came out to stake claim in the formal economy. But that has not bred the desired results as their tendency to conceal real income and still become part of the so-called tax net is at the root-cause of ills. This necessitates a more holistic approach wherein taxation is determined at the genesis of income and spending, as is the case worldwide, and not to leave it at the courtesy of voluntary individual filing of returns.

With a proposed tax generation target of Rs.12 trillion for the current fiscal year, the receipts to this day are dismal. This could lead to a mini-budget, torpedoing public spending expenditures as well as other allocations. Fixing the tax machinery on foolproof lines is a challenge, and the least that needs to be done is not to rely on an already burdened segment and go on to net ruthlessly the holy cows and evaders.