Trade policy and tax reform policy
TAXATION is the backbone of any country’s development and improvement of infrastructure and revenue. The country with the best tax reform policy will progress day and night; its people will get more relief, and they will always be happy. Paying taxes is our national duty as per the rules of taxation in any country. If there is a proper reform policy and a proper systematic way of taxing traders in any country, the country will undoubtedly raise revenue. Unfortunately, in Pakistan, there is no proper tax reform policy for traders, so traders can’t pay proper taxes and the government can’t collect tax from them properly. The government does not have a proper data base that can be used to make appropriate taxation policies. We can only get information from general phenomena and make tax policies as well; that’s why we can’t get the desired goal of collecting tax.
Trends are such that a trader’s income in the billions pays tax in the thousands, while another trader’s income in the millions pays tax in the hundreds. A person who has a relation to a politician or is himself a politician is exempt from tax. The ones in power never pay taxes. Politicians are the primary cause of low tax collection. Some big traders are part of the cabinet, so how is it possible for the tax department to get the proper tax from them? They submit fake income papers and get relief from taxation like this. This is how the tax system works and how the country raises its revenue. So, if the government increases the tax on daily-use items, certainly the inflation will rise. Due to the lack of a proper tax reform policy, we can’t collect the tax properly.
How to make proper tax reform and how to implement it. There are no proper records for all the traders in Pakistan; how can it be possible to bring all traders under the tax reform policy? If the government doesn’t have the records, on the other hand, the traders feel it is their national duty not to pay the tax and hide the annual income; they don’t want to make an annual income record to save the tax. Just assume that private sector workers, traders and small and medium businessmen in Pakistan know how much their annual income is and how much they pay in taxes because the government doesn’t have any data to make a proper tax reform policy and everyone gets benefits from it.
One thing to think about is how to involve all the traders—small and medium businessmen—in the tax network so everyone must pay the tax as per the rules of the country. To reform the tax policy, it is very important to collect the data of all the traders, small and medium businessmen, and even every kind of trader. This implies that the government must engage in trade with Pakistan. so that the government first must make a database for all the trades, then it will be easy to make tax reform policies and implement them. From the trade data, the government can categories all the trading and traders, and according to the categories, it can make a proper tax reform policy, so everyone knows how much tax, by law, he has to pay every year.
After completing the trade agreements, the government should get help from our policymakers and economists to make tax reform policies for the trading and traders for the betterment of Pakistan. Better under government, there should be a committee of policymakers and economists for tax reform policies. And every year there should be a trade census to know the potential of the market and to develop policies accordingly. And, every year, a trade census should be conducted to determine the market’s potential, and policies should be revised in accordance with the goals established for each year. Any political member or stakeholder should not be under pressure from the committee. It would be better if the committee were under the federal finance minister.
There are some important points to discuss. In Pakistan, there must be a government license for all trades, even for small and huge businesses and trades. Those who don’t have a license for any activity must get one within a given period of time from the government. After the time frame for the license has passed, they must stop their trades and first get the license from the government. These licenses must be renewed every year as they expire so that the government has the proper data for everyone, including small, medium and large traders. And the fee for the license must be as per the nature and description of the business. Even the very small self-workers like Tharra Wala, fruit shops and all other kinds of shops must work under license. It will not be allowed to do any work related to business until it gets a license with an ownership nomination. So, after trade agreements, the government will have access to all desired data in Pakistan. From trade records, the government will learn who is doing what and the capacity of his business or trade activities. So, after that, it was easy to reform tax policies and their implementation.
From time to time, the government gets the data on population and infrastructure but never collects a database on trades, so it’s time now to make it mandatory to file trade declarations and make a proper database of the trading in Pakistan. Trade filings must be done every year to update the database so that the government must know the new trends and phenomena in business and trade. May be the first time it is much more difficult to do trade censes like our society and country, but after the first term database, it will be easy and sequentially without any hassle. Because our traders and society do not trust the government, it is natural that tax is collected to meet our goals, and the government will give relief from taxation to collect money so that the people of Pakistan will appreciate and participate in the tax network. The government should take the initiative to collect data and create a proper database of traders and businesses, while traders must welcome the government and fully support the government’s efforts to regulate trade in Pakistan.
—The writer is a Project Associate at Sustainable Development Policy Institute, Islamabad.
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