Unmet tax targets

Published May 4, 2021 - Updated May 4, 2021 06:32am

THE FBR has increased its tax collection by 14pc to Rs3.8tr this year during the 10-month period from July to April — up from Rs3.3tr a year ago. But this amount is not enough. At the current pace, it will not be possible for the board to meet even the revised tax target of Rs4.7tr for the entire year. The poor performance of the FBR remains a source of concern for every stakeholder— government, multilateral lenders and the public at large. Year after year, the FBR has failed to meet its tax targets although millions have been spent on restructuring the board and ‘reforming’ tax administration over the last two decades or so. Little wonder then that Pakistan’s tax-to-GDP ratio remains one of the lowest in the world. But it would be unfair to lay the entire blame on the tax collectors. Successive governments — civil and military — have also contributed to the current state of affairs by postponing tax reforms to broaden the base of taxpayers, as well as allowing exemptions to the wealthy out of political expediency. Consequently, less than 1pc of the population files income tax returns. This is in spite of the official claims that the board has credible data of more than 7m people whose withholding taxes are deducted, but who do not file their returns. They also include over 3m people who, according to the FBR, frequently travel abroad, live in large homes in posh localities and drive luxury cars but do not pay income tax.

The narrow tax base means that the share of direct taxes, especially income tax, would shrink in the total tax revenue, which is worrying given the established relationship between poverty and the high incidence of indirect taxation. Even the bulk of direct taxes is collected ‘indirectly’ through imposition of withholding and presumptive levies, which shifts the burden of the wealthy onto the poor and middle-income segments of the population, while powerful lobbies such as big farmers and retailers/wholesalers get away without paying their share of taxes. A narrow tax net also restrains the government’s ability to reduce the burden of taxes on the organised sector at the expense of new investment and jobs. Raising the ratio of tax revenues to the size of the economy will remain a pipe dream without meaningful restructuring of the FBR to plug leakages, reduce inefficiencies and eliminate corruption in addition to reforming the entire taxation regime to make it equitable and fair.

Published in Dawn, May 4th, 2021

Opinion

Trouble in Camelot
Updated 06 May 2021

Trouble in Camelot

The electorate knows better than to swallow the government’s rhetoric.
Time to wake up
Updated 05 May 2021

Time to wake up

The criticism reflects our failure to counter rising religious intolerance and bigotry, and also exposes a diplomatic debacle.

Editorial

Proceed with caution
Updated 06 May 2021

Proceed with caution

The slightest loosening of SOP protocols could send us hurling in the direction where India finds itself today.
06 May 2021

IPP dues

THE ECC decision to pay the first tranche of outstanding dues of one set of IPPs, and further delay the payments of...
06 May 2021

Violence against doctors

HEALTHCARE workers and doctors’ associations in two major hospitals of KP are adamant that the KP Healthcare...
05 May 2021

Path of growth

FINANCE MINISTER Shaukat Tarin finally specified the future direction that the country’s economic policy will take...
05 May 2021

Human rights 2020

THE human rights situation in Pakistan, almost predictably bleak every year, was deeply impacted in 2020 by an...
Unreasonable behaviour
Updated 05 May 2021

Unreasonable behaviour

Usman Buzdar should reprimand Dr Awan for her coarse behaviour and make sure she tenders a public apology.