Only 0.3% of Pakistanis, or a mere 500,000 individuals, pay direct tax, according to a report by advocacy group Research and Advocacy for the Advancement of Allied Reforms (RAFTAAR).In other words, there are more people on airplanes around the world at any given moment than there are Pakistanis who pay direct tax. (Direct taxes are taxes paid directly to a tax imposing authority, e.g. income tax.) In contrast, roughly 32 million, or 3%, Indians pay direct tax, even though they have a larger proportion of their population in poverty. The report found that while overall state expenditure has steadily risen, Pakistan’s tax revenue collection has remained flat for most of last decade. With a tax-to-GDP ratio of 9.4%, Pakistan falls close to the bottom in the ranking of countries on the basis of revenue collection. The main causes of this low ranking, the report says, are a narrow tax base, with only about 10% of those employed paying tax, and a skewed tax structure, with 68% of the tax revenue being generated from indirect taxes. (Indirect taxes work by increasing the price of goods and services, e.g. sales tax.) Other reasons cited in the report are an inefficient tax administration, a complex and non-transparent tax system, corruption and tax evasion, and a non-supportive political environment. Pakistan’s total debt has already reached Rs17 trillion and budgetary deficit is met through borrowing at high interest rates. The perception survey, meanwhile, focused on the distrust between the tax machinery and the general public as the key area that needed reform. This is where Pakistan’s problem lies. The Federal Board of Revenue has been seen cracking down on tax evasion in an autocratic manner. But it is still perceived as a largely toothless body because of its inability to go after the big fish. Despite being able to identify wealthy tax evaders, the tax collection box remains empty. Filing tax returns has also been made a cumbersome task and the government has found it easier, instead, to increase indirect taxes that are hard to avoid. With other entwined issues that have existed for decades and a public that is keen to avoid tax, problems are only compounded. The perception of the government’s corruption and fear of taxpayers’ money being misused only add to the difficulties. Only a systematic reform agenda pursued with sincerity and transparency can increase tax collection.
pk.shafaqna.com
