The government has decided to issue taxpayer cards to all return filers starting this year, according to a report published in this paper. It has also decided to publish the tax directory on March 1 every year. The idea is to incentivise people to file their returns.

Publication of the directory has been supplemented with a drive to send notices to more than 120,000 non-filers, with the aim of adding 100,000 new taxpayers to the tax net. The response thus far has not been good. Just over 17,000 new taxpayers were registered voluntarily as a result of the exercise, which gives us a hit rate of around 15pc.

Moreover, the incremental revenue that the exercise yielded has been a paltry Rs306m. This is hardly a significant step towards bridging a deficit of Rs1.7tr budgeted for this fiscal year. The publication of a directory of all filers coupled with a campaign to serve notices on all non-filers is part of a larger strategy seeking to promote a culture of compliance with tax laws.

The strategy has attracted the ire of critics, with some arguing that publishing their tax details potentially makes them targets of kidnapping rackets. Others have argued that serving notices on non-filers is not fetching enough revenue in return for the effort invested in the exercise, and therefore should be abandoned.

It would be short-sighted, however, to give in to these criticisms. Those who are afraid of being targeted by kidnapping rackets should know that criminal elements do not need a tax directory to identify high-net-worth individuals. And those pointing to the limited quantum of revenue realised through the effort need to understand that this is not about the money, but about creating a culture where filing one’s returns is seen as an obligation.

In the absence of such a culture, punitive measures come to be perceived as victimisation. Before reaching out to those outside the net, it would be a good idea to rationalise how those within the net are treated.

As it stands, our tax system has two categories of taxpayers within it: those who are paying taxes but not filing their returns, and those who are filing their returns but concealing their real incomes. Getting these parties to file their documentation properly is a key step towards broadening the overall tax base, and all efforts to pursue this goal deserve to be encouraged.

Published in Dawn, August 1st, 2014