Why are we so tax averse?
The country’s tax machinery has been unable to enforce tax laws, enabling businesses and citizens to hide
The writer is Business Editor at The Express Tribune
Someone out there is making more money than you, yet paying less in taxes than you are. There are human beings wealthier than you are, but get away with contributing peanuts towards the country’s revenue streams. These thoughts are more than enough — if the inclination to save money alone isn’t — to ensure that literally everyone makes a valiant attempt to escape the horror of being subjected to what is called Pakistan’s tax system.
Less than a million tax returns were filed last year, a shameful statistic for a country boasting a population of 190 million — oh wait, official data on population is not available since the last census was held in 1998. And, here lies the problem. The government, represented by many faces over the years, does not do enough, say people who don’t file tax returns, arguing that their hard-earned money goes to waste when it makes its way to the national kitty. We pay sales and income taxes, don’t we, they continue the argument. The government doesn’t invest in us, doesn’t utilise taxpayers’ money efficiently, so why should we pay taxes? It is an endless, pointless debate. Maybe.
A significant portion of the country’s population is unaware, even the more educated ones, that filing tax returns is binding on every citizen. Income taxes, mostly deducted at source, are not the only tax one needs to pay. All assets, cash or otherwise, need to be declared in these forms so that the government can tax appropriately. This doesn’t happen. A motorist will take the wrong way if it saves time and fuel, conditioned also on being able to escape the wrath of the traffic police. Why would he want to opt for making a turn located far away, beyond his convenience and reach? You do this by making it expensive for him to disobey the law. This is how enforcement of law is meant to be carried out.
The ‘beauty’ of Pakistan’s tax system is that it is less expensive to evade taxes than to pay them. The country’s tax machinery has been unable to enforce tax laws, enabling businesses and citizens to hide in what should ideally be a shamed corner. Things have started to change though. The government, in the latest budget, has increased tax rates for non-filers — mostly by using other channels to enforce the law on its behalf. Be it through the excise and taxation departments in each province or banks placed at every nook and corner of every city. This development is worrying because here, too, the Federal Board of Revenue (FBR) has escaped a much-needed overhaul.
This has irked the common man. Why hasn’t the FBR been held accountable for its performance that has clearly led to this situation? Traders and various business groups, at the very forefront of protests against these ‘draconian tax measures’ as they call it, have threatened with calls of strikes and shutting down their work. The government may be accommodating, but will not back off from its stance. It has a point to prove to its international lenders and will go all-out in showing its might. The common man, however, will continue his simple calculations — is filing tax returns, given its long, tedious and extremely difficult process, really worth the trouble if the government wouldn’t be giving much in return? Perhaps, here the government can show that the steps it has taken recently have been in good faith. It can start by simplifying the process for filing tax returns and taking other much-needed measures to fix the country’s tax machinery. Everyone wants an assurance that their money is being put to good use. International lenders seek the same guarantee. Why can’t Pakistani citizens be extended the same courtesy?
Published in The Express Tribune, August 6th, 2015.
Less than a million tax returns were filed last year, a shameful statistic for a country boasting a population of 190 million — oh wait, official data on population is not available since the last census was held in 1998. And, here lies the problem. The government, represented by many faces over the years, does not do enough, say people who don’t file tax returns, arguing that their hard-earned money goes to waste when it makes its way to the national kitty. We pay sales and income taxes, don’t we, they continue the argument. The government doesn’t invest in us, doesn’t utilise taxpayers’ money efficiently, so why should we pay taxes? It is an endless, pointless debate. Maybe.
A significant portion of the country’s population is unaware, even the more educated ones, that filing tax returns is binding on every citizen. Income taxes, mostly deducted at source, are not the only tax one needs to pay. All assets, cash or otherwise, need to be declared in these forms so that the government can tax appropriately. This doesn’t happen. A motorist will take the wrong way if it saves time and fuel, conditioned also on being able to escape the wrath of the traffic police. Why would he want to opt for making a turn located far away, beyond his convenience and reach? You do this by making it expensive for him to disobey the law. This is how enforcement of law is meant to be carried out.
The ‘beauty’ of Pakistan’s tax system is that it is less expensive to evade taxes than to pay them. The country’s tax machinery has been unable to enforce tax laws, enabling businesses and citizens to hide in what should ideally be a shamed corner. Things have started to change though. The government, in the latest budget, has increased tax rates for non-filers — mostly by using other channels to enforce the law on its behalf. Be it through the excise and taxation departments in each province or banks placed at every nook and corner of every city. This development is worrying because here, too, the Federal Board of Revenue (FBR) has escaped a much-needed overhaul.
This has irked the common man. Why hasn’t the FBR been held accountable for its performance that has clearly led to this situation? Traders and various business groups, at the very forefront of protests against these ‘draconian tax measures’ as they call it, have threatened with calls of strikes and shutting down their work. The government may be accommodating, but will not back off from its stance. It has a point to prove to its international lenders and will go all-out in showing its might. The common man, however, will continue his simple calculations — is filing tax returns, given its long, tedious and extremely difficult process, really worth the trouble if the government wouldn’t be giving much in return? Perhaps, here the government can show that the steps it has taken recently have been in good faith. It can start by simplifying the process for filing tax returns and taking other much-needed measures to fix the country’s tax machinery. Everyone wants an assurance that their money is being put to good use. International lenders seek the same guarantee. Why can’t Pakistani citizens be extended the same courtesy?
Published in The Express Tribune, August 6th, 2015.