Landmark tax reforms and amnesty scheme

PRIME Minister Shahid Khaqan Abbasi, on Thursday, announced landmark tax reforms along with a tax amnesty scheme that have the potential to address woes and concerns of the taxpayers as well as potential taxpayers and also to bring substantial revenue to the national exchequer. In the first phase of the tax reforms package, income tax rates have been reduced significantly while tax amnesty scheme is introduced in a bid to give incentive to people to declare their hidden assets both at home and abroad after paying an affordable penalty, thereby allowing them to whiten their wealth and assets.
Focus of critics and political leaders remains on the amnesty scheme, questioning government power to launch such a comprehensive scheme without first taking the National Assembly into confidence as only the lower house is empowered to make financial legislation. But we believe that decision of the Abbasi government to bring down the rate of income tax from exorbitant 30% to a maximum of 15% has come as a major relief to taxpayers especially the salaried class. The exemption limit has been scaled up from the existing Rs 400,000 to 1.2 million rupees as was directed by former Prime Minister Mian Nawaz Sharif. It was generally believed that excessive rates of income tax were serving as disincentive for people to come into tax net and were a burden on those already in the tax net. So big is the relief to existing tax payer that questions are being asked whether the government would lose more or gain more by giving such a major exemption and bringing the tax rate down.
At the moment, taxpayers are fraction of the total population and among 1.2 million people who filed their tax returns; only seven hundred thousand paid some tax while the rest paid nothing at all. Of those who paid the tax, 90% belong to salaried class whose tax is deducted at source, which shows that those voluntarily paying income tax are negligible in the overall context. This is shameful for a country where businessmen are minting millions yet but pay no or a small amount as income tax. This state of affairs is unacceptable and therefore, one must give credit to Prime Minister Shahid Khaqan Abbasi for introducing reforms aimed at bringing more people into tax nest and that too so close to general election. Conversion of CNIC number into tax number of every citizen, merger of databases of different kinds of users and use of latest technology to identify potential new taxpayers would surely help realise the dream of expanding the tax base provided the scheme is implemented in letter and in spirit by officials of the Federal Board of Revenue. Citizens continue asking more in terms of development and welfare benefits but regrettably majority is not willing to pay their due share of taxes, forcing the government to resort to indirect taxation like increase in tax rates on POL products and utilities.
It is hoped that people would avail the opportunity extended by the government and voluntarily become part of the community that pays their due taxes as responsible citizen. Previously, there was an element of harassment at the hands of tax officials but with the introduction of e-filing system, the tax payment procedure and filing of returns has become simple, trouble-free and therefore there is no justification for those who are still out of the net to continue with their habit of tax evasion. The government spends hugely on developmental activities as well as on administration, security and defence of the country and obviously requires revenues to meet the ever-growing expenditure. People who earned millions and billions and paid no taxes on their wealth have also been given an opportunity to become part of the normal system by declaring their wealth. Such schemes in the past did not yield desired results and brought no substantial income to national exchequer but the situation should change now, as no one would be able to escape the tax net because of introduction of digital technology. As for the criticism that why these measures have not been got approved first by the National Assembly, there is provision in the law to do so through promulgation of ordinances and the government has followed that route. Ultimately, the ordinance will be laid before Parliament for adoption and conversion into an Act of Parliament. The only drawback of the reforms introduced by the government is that these have come at the fag end of its tenure and scepticism is being expressed about their total implementation because of time constraint. And no one knows what would be the policy of the caretaker government and the government to be formed after the general election.

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