The World Bank's decision to link a $120 million grant to reforms in the Central Board of Revenue, the country's main tax collector, is a wise move. Out of a population of over 140 million, barely one per cent, or 1.5 million, file income tax returns in Pakistan.
The general consensus is that there should be at least three million taxpayers in the country. The relatively small number of taxpayers has meant that the government has increasingly relied on indirect taxes to raise revenues in the past.
Widening Pakistan's narrow tax base has been a challenge that most governments have failed to measure up to despite all intentions to do so. The present government seems to have taken up this issue in all seriousness but it can succeed only if reforms of the CBR are carried out.
In the past, the government has tried a number of other initiatives to achieve the objective. Tax rates have been reduced and rationalized and taxpayers given a variety of options and incentives for payment. A massive drive was launched in 2000 to contain tax evasion.
But neither of these steps met with much success. What is needed is an integrated approach towards making the CBR more efficient as well as introducing laws that would make it autonomous and duly empowered to deal with all manners of tax evasion.
Such a step came in the form of the Pakistan Revenue Authority Bill, which was presented to parliament in 1998 but never enacted into law. Successive CBR chiefs have complained that they do not have the power to move against the errant tax payers.
That is why any move to widen the tax base must also include giving autonomy to the CBR in respect of its financial and administrative functions so that the it can make its own recruitment of officials, deal with their postings and transfers and devise its own policies.
If this is not done, and the tax base remains as narrow as at present, there is a danger that economic progress would stagnate or else the government would have to resort to heavy borrowing as was done in the past.
Reduction in phone charges
The information technology minister's announcement of reductions in PTCL's international and nationwide call charges and installation fees for urban areas are measures that need to be welcomed.
In addition, local calls made on the PTCL network will be free of charge between midnight and six in the morning. The information technology minister said that this particular decision had been made in response to public demand.
Many telecom operators, especially those in developed countries, either have no charge for local calls or have rates that are very nominal. Some years back, PTCL introduced multi-metering on all local calls under which a new call is charged after every five minutes.
While this sizably increased the company's earnings it came at the expense of telephone subscribers. So, it is good that the corporation has finally acted to provide some relief to the subscribers by setting aside some time when local calls will be free.
Perhaps the end of PTCL's monopoly as a service provide is the main reason why the charges have been reduced. This way it will remain better placed to face competition when others enter the field.
The reduction in installation charges for urban areas will also increase the customer base of the organization and make it a formidable force for new entrants when they enter the fixed land-line field.
Hopefully, the corporation will use the increased revenue and profits (which were over seven billion rupees, after tax, for the first quarter of 2004), to improve the quality of its services and to devote attention to customer care, especially when handling subscriber complaints.
In addition to this, the Pakistan Telecom Authority for its part needs to expedite the deregulation of the market, especially with respect to the award of licences for local and long-distance calls, since greater competition will further benefit telephone subscribers.