The federal government has collected over Rs. 2 trillion in tax revenue during the first seven months of the current fiscal year, but fell short of target by Rs. 74 billion as growth in collection slowed down to 17.7 percent. The shortfall will make it difficult for the government to achieve the revised budget deficit target despite decent revenue collection by the Federal Board of Revenue (FBR). The shortfall may add 0.3 percent of the gross domestic product (GDP) to the budget deficit. The parliament has set the budget deficit target at 4.1 percent and had approved Rs. 4.013 trillion tax collection, which need 19. 2 percent growth.
The main thrust of the successive governments has been revenue collection through indirect taxes like sales tax, import duty, petroleum levies, surcharges and service charges in utility bills and turn-over tax. The indirect taxes have little buoyancy and are inelastic for increase in revenue. On the other hand, personal and corporate income tax, agriculture income tax, capital gains tax and broker’s tax are elastic in nature for revenue generation, giving the desired amount of revenue. There has been no serious efforts and legislation for the documentation of the economy. Even the half hearted campaigns for documentation of economy have to be abandoned because of political expediency. Tax collection authorities either succumb to political pressure and shut their eyes on tax evasion or do not tax the wealthy individuals, companies and partnership firms according to their real incomes and profits.
Amid its failure in expanding the narrow tax base, the government has now started a survey of commercial and high rise residential buildings across the country to scout people who have bought properties in plazas but do not feature in the tax net. The World Bank is of the opinion that data on the real state business is already available and there were media reports in 2010 that such data about 3.8 wealthy people out of tax net is very much on the record of FBR but the political leadership is not interested to bring them into the tax net though at nominal or flat rate of tax. The fresh survey will help update the already available data of potential tax evaders. However, the people are not optimistic about the success of the apparently the first comprehensive ground exercise in almost 17 years as door to do door survey of military led government during2000-2002 failed due to political expediency.
The number of tax return filers has steadily declined due to the leniency of the feudal-mercantile class dominated oligarchic government. In 2016 1.4 million tax payers filed tax returns, but in 2017 1.22 million tax return have so far been filed, and FBR has failed to retain even the existing tax payers. Hence, instead expanding the tax base FBR has let 180000 people of the hook. The government has announced to give tax amnesty on the offshore assets worth $ 150 billion acquired through money laundering which like the past two tax amnesty schemes may not result in expanding the tax base. This demonstrates the lack of seriousness on the part of the government to earnestly pursue a policy against tax evaders and bring them under the tax net. Instead of generating more revenue by taxing the rich people it provides them lope holes for tax evasion on the money accumulated through corrupt practices. On the contrary, any easy recourse is taken to reckless borrowing and the burden of debt servicing is borne by the poor people. After eating up $ 2.5 billion two months ago, the government is floating Euro Bonds worth $ 1 billion this month and for these loan transactions tax waivers are to be sought for. International market for fresh loans is tested days after Fitch, one of the three top global Credit rating Agencies, has downgraded the countrys’economic outlook from stable to negative. The tax laws need streamlining and strict implementation if the government really wants to increase the number of tax payers.
