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Tax evasion – Perception and reality

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Prime Minister Imran Khan time and again during his address to the nation and short speeches made at international forums always says PAKITANI TAX CHOOR HAIN. What a compliment to a nation that has sacrificed everything to make Pakistan an atomic state and is charged with the title of TAX CHOOR. Secondly Prime Minister often seen repeating this rhetoric that out of 200 million people only 1% pay taxes is simply ridiculous as this is not correct. It is understandable that when Prime Minister says anything on tax matters it is FBR officials feed back to him. Therefore the PM should say that the information being passed on is from FBR, but at the same time before he says anything he has to ensure its correctness because it is coming from no less than a person of Prime Minister. We all know our Prime Minister is not an economist nor he is expert in Tax matters because he has always been a great sportsman and brought fame to Pakistan in cricket by winning world cup in 1992. Entered in to politics and spent 20 years struggling to bring change in political culture, do away with the status quo, people voted him to become Prime Minister of Pakistan pitching high hopes in him. Now it is different story people are disappointed but still has hope that things will improve
To accomplish task he has brought specialists in his economic team to increase the tax numbers to collect taxes. Undoubtedly large number of steps has been taken to increase the tax base to overcome revenue shortfalls. It is very unfortunate that FBR has miserably failed to give proper tax system to country for the past 70 years. Adhocism has reigned as a result no proper system could be established. The tax payers are made to sit on benches for hours to meet the tax collectors who sit in well furnished air conditioned officers enjoying these facilities due to tax payers. No system is good or bad but those who implement it are responsible as they devise means to interpret law suiting to their convenience. As you enter the tax commissioner office your heart rate starts beating at much faster rate and a sharp rise is also observed in the blood pressure for unknown fear. Although there are very decent nice officers who behave friendly but majority believe in arrogance. No one has ever thought how to change this situation and make it friendly for the tax payers. You can co relate it with Thana culture in Pakistan where feeling is no more different. By calling people Tax Choor you shatter their confidence.
It is incorrect to suggest that only 1% people are paying taxes. The fact is whether poor, rich, young and old everyone is paying tax to state. Mostly it is in the shape of indirect taxes which is around 70 % of the total tax collected by FBR. To give a simple picture withholding tax is collected on utility bills and bank accounts which should roughly reflect the number of tax payers in Pakistan. The FBR figures do not include 133 million mobile phone customers, 2.4 million landline customers, and consumers of water, power and gas and bank account holders. The figure runs in crores as for as tax payers are concerned. The figures reflected by FBR pertain to the people who have been issued NTN numbers. Once CNIC becomes NTN number the figure of tax payers will run in to crores. Since FBR is not collecting tax by its own efforts, and it is generally through indirect means automatically, so both the figures collected by the tax collectors and tax payers are not correct.
In our country economy is not documented, efforts were made in the past but scheme had to be abandoned under protests and shut down of businesses. If we have the proper system of tax collection we can increase the number of tax payers beyond imagination from Karachi leaving aside the rest of the country. We evolve a system good or bad and leave plenty of room for tax evasion intentionally. Just imagine the roadside barbecues operating in Karachi and big cities of Pakistan are doing roaring business. The payment is on cash basis, mostly without any receipt, and if a receipt is issued its authenticity is doubtful. Likewise doctors, businessman, small or big are doing handsome business but paying very little or no tax. Unfortunately we evolved a system to put more burdens on those who regularly pay taxes and again doing action replay by opening their files, raiding offices and their home. In the whole bargain the major sufferer is the common man, who is paying heavily in the shape of indirect taxes and getting no relief.
In nut shell the defective system has partially been responsible for most of our problems like fiscal deficits, capital flight, concentration of wealth in few hands, large scale tax evasion, maladministration within the tax department, arbitrary powers to tax officials, and inadequate infrastructural investments. The problem with our system has been that while framing instructions one important factor of literacy is not at all taken in to account. When the instructions are issued even the tax people get confused and are unable to explain it to the public at large and end their discussion by blaming FBR for making faulty forms. The reforms have not been able to provide relief to common man. The prices are shooting up on daily basis in necessities, food, energy, transportation, housing and health. Expenditure on these is much more than 70% for the poor. Wages and price control are the key factors in fighting inflation; until they are attacked no amount of reforms by Shabbar Zaidi will bring relief. Federal budget is cut and paste of previous budget with minor adjustments in figures. Taxing already the taxed people is no solution to the problem. Pakistanis are not tax thieves, they are paying more than their share whereas government is not providing them proper facilities, cost of business is going sky high forcing entrepreneurs to shut down the businesses The government is spending much more than the earnings. We must focus our eyes on economic growth not on taxes, don’t put more burdens on business community in the name of taxes. It will give you temporary relief and in longer run it will be counterproductive and disastrous for the country and ultimately end up in ruining the economy of Pakistan. In the words of former US late president Ronald Reagan “THE PROBLEM IS NOT THAT THE PEOPLE ARE TAXED TOO LITTLE.THE PROBLEM IS THAT GOVERNMENT SPENDS TOO MUCH.