Of Tax and Amnesty Schemes

Tax collection has forever been a concern for Pakistan. I don’t remember the last I heard that the tax collection was as per the potential. But since it never happened, our budget deficit continued to increase every year and we had to resort to borrowing to fill the gap. Over the years so much effort put in to increase the tax net but it never reaped the desired results. According to the 2018 report an astonishing 1% of Pakistan’s population is tax payer. This is beyond belief. How can a country survive, run and give for its people in such a scenario?

Growing up, whenever I asked my dad, a seasoned journalist and hardcore patriot, about tax collection in Pakistan he always said that people are not sincere with country. Further he used to say that one must stop all those persons driving luxury cars and should ask them how much tax they have paid but no one has ever done that. Then he used to give example of tax collected from Liberty market, Lahore which was PKR 80,000 to 90,000 in the mid-1990s not even peanuts compared to the business of the market at that time. This was something late Benazir Bhutto also mentioned in one of her talk and listening to her words gives you the horrific picture of how the authorities are least bothered leaving a sitting Prime Minister helpless and in duress.

One of the arguments of not paying tax is that they will not spent on the country’s development and instead will go into the pockets of the politicians. I will not lie; I used to think on the same line until the reality of things got in my head and I realised my assumptions were wrong. The countries across the globe survive primarily on the money received from tax along with other sources and this leave no reason to not pay the taxes. The question and concerns can wait. It is our duty as nationals not a choice.

Amnesty schemes one after the other launched to somehow bring the tax evaders into the tax net but have predominantly failed to bring in the required numbers. And instead of doing analysis of why the scheme failed we prefer to launch a new lucrative one. If people are not paying taxes then the institution (Federal Board of Revenue) is also not working as it should because of the inefficiency. Such schemes can only work if the reforms in the institutions are also made and the non performing elements should be shown the door. It needs overhauling more than anything else. There is nothing in terms of resources that the institution lacks apart from commitment to the cause, perhaps. It is otherwise well equipped to cater the needs of the modern times, if used properly can give the desired result. We don’t need a new system. We need change in the mindset, definition and assertions.

The last amnesty scheme launched by PMLN on 30th June 2018 saw more than 55,000 people availing it and paying PKR 97bn. The numbers are not quite appreciative but still it started the process by giving them discounts and no questions asked like benefits. However, it faced strong opposition and criticism from PTI all across. They did every imaginable thing to discourage people but despite of all that people volunteered which also included Imran Khan’s sister Aleema Khan.

Then we saw PTI coming into power after the process of selection and after much deliberation they also joined the amnesty bandwagon only after a year of voicing against it. But now it seems fine. Before launching their own version of the scheme they made amendments in the ordinance promulgated by the President of Pakistan which prohibited non filers from the buying of land and car through mini budget. We will now have to see how it panes out amidst high hopes from the government on this ‘Halal’ amnesty scheme. Despite of the assumed benefits what was the point of doing it all over again?

This is where we have been wrong for all these years – lack of consistent policy. We never gave those who availed schemes in the past to develop the habit of paying the taxes. Every incumbent government launches its own plan instead of carrying on the already implemented one. They don’t realise that it creates a negative impact. How impatient are we for point scoring that we forget everything else. We first dent confidence of the tax payers and then expect them pay the tax. It cannot happen like that. In a society like ours where tax evasion has become a moral responsibility presents a strong case for educating the people and gaining their trust. But the institution has continuously been doing the opposite. The frequent amnesty schemes and others have not yielded the desired result that’s why we still have just 1% of total population paying taxes, majority of them salaried class. Initially they look productive but in the long run they have failed and that is only because of the ever-changing regulations. Any scheme should at least last 5 – 7 years at the same rate and once they have become use to pay taxes the percentage can increased gradually. The institution must not forget that every little helps and its better than nothing.

The institution itself pushes people towards tax evasion and then cries foul. They keep sending people notices and chase them after they have availed the benefits of the reprieve. They want to suck every rupee out of them in one instance. Ideally the institution should leave them alone and wait for the right time. There is a potential of increasing tax collection but it needs patience, persistence, conviction and application. And the people in Federal Board of Revenue lack them dearly but expect the tax payers to have them. The institution also lacks enough data and the system to get to the neck of tax evaders. It is time we take giant strides in digital economy.

Once the rich and wealthy are in the tax net and have become consistent then the attention should shift to the undocumented part of the economy – street vendors, taxi drivers, mobile and computer sellers and other such businesses. This would need further planning, laying the slabs per their affordability and take it further step by step. The main hurdle will be educating the people and the local bodies can be utilised effectively for this task. Let’s just hope we as a nation can step up and become implementer(s) in addition to the planners, something we have always faltered in.