Tax reforms

ADVISOR to Prime Minister on Finance, Revenue and Economic Affairs Miftah Ismail has declared his intention to introduce significant tax reforms in the five months that the Government has at its disposal before general election. In an interview to a foreign news agency, he said the Government plans to go for reforms aimed at broadening tax base, simplifying tax structures and slashing personal tax rates to encourage more people to file returns.
Similar claims were made by successive governments in the past but political and other considerations prevented them from taking practical and tangible measures to realize these objectives. The present Government too tried to introduce some schemes and as a result it succeeded in jacking up the tax collection significantly but still the true potential remains untapped because of lack of will on the part of the policy-makers, rampant corruption and the growing culture of tax evasion where even parliamentarians do not care to file returns, not to speak of paying their due taxes. Miftah Ismail is man of vision and a doer and one hopes he would make some progress towards the stated goals despite the fact that he has a limited period to realize his plans. Reduction of rate of income tax to 15% would be widely welcomed and might encourage non-filers to become tax-payers and similarly there is also longstanding demand for simplification of procedures and forms but broadening the tax base is the most difficult part of the plan. So far focus has only been on increasing tax rates, imposition of unfair withholding taxes even on withdrawal of cash from bank accounts levy of taxes and increase in their rate on POL products and electricity. The Government might have got something through these coercive means but cumulatively these hurt the national economy and discouraged savings or transactions through banks. Broadening of tax net should mean making all those pay their due taxes especially businessmen, property dealers, builders, lawyers, doctors, hotels, shops, labs and private schools and medical institutions that are earning handsomely but not ready to pay tax at all or pay only symbolic tax. If a system is evolved to assess their income fairly and tax is paid honestly then there would be no need to impose any new tax in the country for the next few years. We would also propose to the Advisor to do away with the requirement of filing tax returns by salaried class and pensioners as is the practice in some other countries.

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