ENSURING “good governance”, one of the present government’s agenda items, has been greatly appreciated within the country and the abroad.

The objective was to ensure elimination of ills of bribery and corruption, to bring discipline and to change attitude of state functionaries by making them ‘true’ public servants and to raise self-esteem of the nation by developing self-reliance in all walks of life. A key factor, in the self-reliance and well being of our nation, is the mobilization of all resources.

In this context, improvement in ‘tax effort’ and voluntary compliance would make us less reliant on loans, and take us out of the debt trap in a short span of time.

The resource mobilization is necessary as a part of macro-economic policy to ensure strong economic foundation enabling the Government to provide social goods and services and to carry out development plant simultaneously ensuring reduction in budget deficit for good economic health of the country.

Taxes are the main resource-base for budget-making. The tax policy, as reflected in the current budget, is manifestation of the economic priorities of the government and its earnest endeavour to pull the country out of the economic morass.

Taxes, particularly the direct ones, ensure distributive justice by transferring resources from affluent to the poor class, and giving overall economic benefits to the society and maintaining a social balance.

A good tax policy enables dispersal of industries, investment in special fields of economic activity, and in upliftment of backward areas. To achieve these cherished goals, government collects taxes on the basis of ability and capacity to pay.

Levy and collection of taxes is an attribute of sovereignty of a state. It is a mandatory requirement of a state to generate financial resources which are needed for running the state and for achieving the goal, namely, to establish a welfare state. In view of this, the legislature enjoys plenary power to impose taxes within the framework of the constitution.

Taxes that we pay, are a price for establishing a civilized society. All those citizens who are earning or receiving income or are engaged in some economic activity in Pakistan are required to pay the taxes.

Similarly, indirect taxes on commodities services and consumption have also to be paid to make the country financially strong and prosperous.

The present government took over in October 1999. At that time, the budget deficit was more than 6 per cent of the GDP. The number of return-filers was about 1 million. There was a great resistance to the payment of sales tax to the extent of resorting to shutters-down and strike calls. The tax collection figures were static at Rs300 billion.

The policies were out-moded, corruption was on increase and existing taxpayers were burdened beyond their capacity. There was also multiplicity of taxes and taxpayers faced a number of difficulties in discharging their national duty.

The government took notice of all these factors affecting taxpayers and initiated reforms as a part of the agenda to ensure proper administration of taxes to curb tax evasion and to increase tax-base by bringing unreported, untaxed, undocumented and un-registered incomes to the tax net through documentation of the economy. Reduction in multiplicity of taxes by further ensuring that taxes due are paid by taxpayers on time and refunds due to tax payers are issued promptly were made the hallmark of the tax policy.

On the administration side, the Government has created ‘enabling environment for tax payment by eliminating corrupt practices thus bringing discipline in tax departments. The CBR is now ‘business-friendly’, and private sector’s coordinated effort is there for nation-building.

To bring reforms, committees and task forces were constituted to restructure the CBR and functional formations and to make tax laws simple so that a reasonably educated person understood and met his/her obligation towards the state.

For addressing the grievances of taxpayers and to settle the issues arising from malpractice and maladministration, an independent institution of Tax Ombudsman has also been created under the law.(The author is Member (Direct Taxes) and the spokesman for the CBR)