IN a country of 220 million people, no more than 1.2 million, or less than half a per cent of the national population, file income tax returns. This means that an overwhelming majority of people earning a huge amount of income do not file tax returns and do not pay the tax that they owe to the state. The Federal Board of Revenue (FBR) obviously has no choice except issuing notices.
A person who owns a house and a vehicle is very likely to have taxable income and should discharge his/her legal responsibility by paying taxes, but most Pakistanis, it seems, prefer to be tax-evaders rather than tax-payers. The pun ‘returning the return’ has no basis in reality as even returns declaring losses are also accepted and scrutinised, and, if found verifiable, the losses are carried forward to the next year.
The government should proceed against the big tax-dodgers with all the legality that is in its favour and the dodgers should be made to pay. But how do you find them? You can do that only by issuing notices to as many citizens as you can.
To be fair though, filing a tax return is a difficult proposition. The FBR authorities should simplify it, but this should not be — and can never be — turned into an excuse for not filing the return.
Income tax is the only equitable tax, as it encumbers people according to their capacity to pay. Unfortunately, its share in the country’s total tax collection is less than 17 per cent. In progressive countries, income tax constitutes more than 70pc of the total tax revenue collected. Indirect taxes hit the poor the most, and that in part explains the horrendous poverty in the country.
Published in Dawn, November 24th, 2020