THE remarks made by Rashid Mehmood Langrial, Chairman, Federal Board of Revenue (FBR) during a television programme clearly show that our planners and decision-makers have the necessary vision to address the challenges in the realm of economy but actual implementation makes a big difference.
He stated that Pakistan was poised for growth, but caution must be exercised. The FBR Chairman acknowledged the viewpoint of other participants about excessive taxation for some sectors but added that adjustments in higher tax rates could not be achieved overnight.
We have been hearing from the government leadership that after stabilization, the country is now ready for a growth trajectory coupled with claims that Pakistan will not, hopefully, go back to the International Monetary Fund (IMF) again but this is now being linked to our ability to implement the ongoing reforms programmes successfully. The unfortunate aspect of the situation is that it will not be because of the ordinary citizens or sectors paying their due taxes that the country will need another IMF programme but clearly because of the inability of the government to make potential sectors and some segments of the society pay. Why should the entire country suffer because of pressure tactics of influential lobbies and sectors, which have been frustrating efforts of the successive governments during the last over seven decades to document the economy and bring all sectors under the tax-net.
The strategy to burden honest tax-payers because of massive tax-evasion by others is highly flawed and a source of acute frustration among patriotic citizens. The FBR Chairman conceded that the tax rates for corporate, salaried and manufacturing sectors were on the higher side, adding there is a tax gap of Rs1.7 trillion in income tax side for 5% top quintile of income earners, while one percent top earners close to 0.6 million possess tax gap of Rs1.2 trillion. Finance Minister Muhammad Aurangzeb too has been acknowledging this sorry state of affairs but the question arises who will change this unfortunate trend.
Excessive taxation has also made otherwise booming sectors of real estate and dairy as unattractive and the worst aspect of the entire episode is that the government is finding it difficult to reinvigorate them for fear of the IMF. Same is the case with the electricity tariff, which is highest in the region but the government is delaying passing on the relief to the consumer despite finalizing revised agreements with Independent Power Producers (IPPs).
Some of the steps as enumerated by the Chairman FBR might help resolve the taxation dilemma to some extent including the faceless customs system, now in place in Karachi and to be implemented in the entire country besides the decision to go for production monitoring to check gaps in sales tax. Langrial also acknowledged that the FBR transaction taxes were on the higher side, which was not the right policy. Similarly, he hinted that Capital Gains tax would remain intact but the withholding taxes would be rationalized.
The interaction of the FBR Chairman with some industry leaders can prove fruitful if the government gives serious consideration to their input about taxation policy and economic reforms. Their suggestion to spur indigenous growth and avoid import-based growth needs to be firmly incorporated into the overall budgetary framework. They also pointed out that the inflation was still on the higher side, emphasizing the need to focus on the supply side. The proposals to rationalize taxes for shipping and aviation industries and development of new areas like data centres and the IT industry have the potential to increase employment and export services. People, who have suffered hugely due to the bitter policies of the government during the last two-three years, rightly expect that the mistakes of the past will not be repeated when growth proved to be a temporary phenomenon forcing the authorities to slow down the economy and devalue the currency.
