In an interview with Bloomberg news agency, Prime Minister Shahid Khqan Abbasi hinted at using national identity database to build a profile of potential taxpayers. He said that a plan will be drawn up to plug the leakages in tax collection, encourage correct property valuation, lower individual tax rate and offer tax amnesty.
It is very pathetic that less than one percent out 210 million people pays direct taxes and greater reliance is on indirect taxes for revenue generation. The International Monetary Fund (IMF) has expressed concern over the lowest tax to GDP ratio which is hardly 12 percent. The business community resists the levy of direct taxes because agriculture income is out of the tax net. The big landlords of Punjab and Sindh show their income from industrial and business enterprises under the agriculture income and succeed in massive tax evasion. The Federal Bureau of Revenue (FBR) has failed to retain even the existing taxpayers. In 2016 14 million tax payers filed tax returns but heir number dropped to 1.22 million in 2017 showing a decrease 0f 180000 tax payers. The question is not increasing the number of taxpayers alone. The real problem is how to bring the wealthy people under the tax net. A reasonable amount of data of potential tax payers is already available with the FBR from 2010. According to that data some 3.8 million new tax payers can be brought under tax net but it is entirely the political expediency that keeps them out of the tax net. There will be no use of CNIC based tax profiles if the data is utilized for expanding the tax net. The government has always shown leniency towards the non tax filers. About 43 percent of registered companies and partnership firms do not file tax return but no action is taken against them. Morover, the tax official fail to collect actual amount of tax either because of political pressure or corrupt practices and billion of rupees of tax is evaded. The leakages in tax collection system can be plugged by freeing the tax officials from political pressure and strict monitoring to prevent them from colluding with the taxpayers for paying less amount of tax.
The national data base tax profiling is not an easy task if the failure of door to door survey for collecting the data of potential tax payers in General Musharraf military led government is any guide. The move failed due to political expediency. Likewise, the tax amnesty plans also ended in fiasco. In the purely military government of General Zia the Whitener Bonds could only yield Rs. 1.5 billion in tax revenue. That is why the three amnesty schemes of the present government proved to be exercises in futility. The last tax amnesty plan resulted in just 0.3 percent increase in the number of tax payers. Hence the economist s are not very optimistic about the intended tax amnesty plan about the offshore assets worth $150 billion. They believe that owners of offshore accounts and immovable properties will use their political clout and will succeed in getting a certification about the legitimacy of their ill-gotten wealth stashed away abroad through money laundering. Broadening the tax base needs political and moral will which seems to be an extinct commodity in our political culture strengthened by the political elite inside and outside the corridors of power.
