SINCE 1947, Pakistan has grappled with fiscal and current account deficits. Despite numerous models and policies, the country has struggled to overcome these challenges, especially the persistent fiscal deficit. International institutions like the IMF consistently advocate for expanding the tax net, placing a significant burden on the salaried class. However, businesses and landlords often employ various techniques to evade taxes, exploiting a system that tends to favour them. Landlords, for instance, are exempt from taxes on agricultural land, arguing that their produce sustains the broader population. Meanwhile, businesses, claiming losses, frequently escape tax obligations and those engaged in charitable activities or running trusts also enjoy tax exemptions. In contrast, the salaried class, receiving income regularly, bears the brunt of taxation, despite not contributing directly to mass welfare or engaging in business activities.
In attempts to boost tax revenue and reduce the informal economy, the government has implemented various measures, inadvertently burdening the salaried class with additional taxes. Unfortunately, these efforts have failed to narrow the fiscal deficit or diminish the informal economy. Authorities cite several reasons for the challenges in reducing the informal economy and dealing with non-filers, including high compliance costs. These costs involve significant expenses related to manpower, paperwork and the requisite framework. Moreover, addressing this issue necessitates training for newly hired personnel. The entire process involves extensive human resources, planning and financial investment.
The author proposes a solution that could save time, eliminate the need for grassroots training and obviate the requirement for hiring additional personnel. The suggested policy framework, coupled with careful planning and prioritization, could effectively address the problem. Specifically, the author recommends engaging employees of the Federal Board of Revenue (FBR) from Grade 17 to 9 or 8. These employees would be assigned a month-long task to discreetly collect income information from wholesale and retail owners, salons, restaurants, clinics, hospitals, schools, tuition centres, institutes, gyms and food stalls in their localities and surrounding areas. Essentially, all potential businesses and activities that could be brought into the tax net would be covered. This approach not only leverages the existing knowledge of FBR employees but also minimizes the need for extensive training. The task could be undertaken during a period of low work burden within the FBR.
Implementing this measure would not only bring non-taxpayers into the tax net but also result in significant cost savings for the government. This approach stands in contrast to the proposed establishment of 145 District Tax Offices as part of the tax system restructuring measures.
—Email: [email protected]
views expressed are writer’s own.
