Symbolic measures on taxation

The recent measures announced by the government are far more symbolic than effective.

It is by now a cliché to say that the government of Pakistan has a far too low ratio of taxes to the total size of the economy. What is disappointing is that despite being well aware of this reality, and despite being under significant pressure from the International Monetary Fund to take action, the Nawaz Administration has absolutely no intention of actually cracking down on tax evasion.

The latest manifestation is the recent measures announced by the government, which are far more symbolic than effective. For instance, the government has decided to publish a database of the nearly one million people whom it can verify as taxpayers. This may sound impressive at first glance, but we are tempted to ask the question: what on earth is this meant to achieve? In a country with a poor law and order situation, how many people are going to be encouraged to pay their taxes if they know that their financial information is going to be made public through a government database? And why is the government focusing its attention on the people who are already paying their taxes? Why not focus on the three million people whom the Federal Board of Revenue (FBR) and the National Database and Registration Authority have identified?

Since the very first budget speech by Finance Minister Ishaq Dar, it has been evident that while the government is genuinely concerned about the budget deficit, it seems to have no intention of genuinely addressing the problem of rampant tax evasion, which is the cause of the deficit in the first place.

The one measure that we do commend the government on is the publishing of tax payment information of all legislators in the country. This is indeed a good first step, since it may well encourage more people to pay their taxes if they feel that even the rich and powerful are being made to pay their taxes. However, this measure will only be effective if it is followed up by FBR auditors asking those legislators questions about the very obvious discrepancies between their lifestyles and the information they choose to declare on their tax returns.

Half-baked measures are no longer enough. The government needs to take the problem of tax evasion far more seriously than it currently does.

Published in The Express Tribune, March 2^nd, 2014.

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