Enhance tax base

ACCORDING to FBR officials, the country’s tax to GDP ratio
declined to a historic low of around nine per cent during the last fiscal year compared to 11.1 per cent in 2017-18. Despite imposition of 17 per cent sales tax on five leading export sectors in budget 2019-2020 and other taxation measures to the tune of Rs735 billion, the tax-to-GDP witnessed a constant decline.
It is surprising that successive governments including incumbent one undertook several policy and taxation measures but instead of enhancing the tax base, they only overburdened the existing tax payers. Today the country has almost the lowest tax to GDP ratio compared to other Asian countries like Sri Lanka which has thirteen per cent and India sixteen per cent. The country’s tax structure is characterized by massive tax evasion, a large number of concessions and exemptions, regressive tax regime, reliance on indirect taxes and tax administration challenges. Present government had made claims of substantially enhancing the tax revenue which indeed is of paramount importance to steer the country out of debt trap but so far it appears to be a task not easy to be achievable owing to many reasons. One may be dubbed as frequent changes at the top hierarchy of the FBR. The fact of the matter is that our people are not ready to pay taxes and whenever any effort is made to bring the potential sectors into the tax-net, there is stiff resistance and one saw it from the business community when Shabbar Zaidi was the Chairman of tax collection body. The success crucially hinges on political will to bring improvement in tax administration, adopt rational tax policies and promote higher tax compliance. The carrot and tax policy is need of the hour. Those willing to pay taxes must be facilitated and those trying to dodge the government must be taken to task. Direct taxation should be promoted without putting extra burden on those already paying their taxes honestly. The main focus should be on bringing the affluent class and potential sectors in the tax-net without making any compromise. Then the procedure for filing tax returns must be simplified to encourage the people to file their returns. Increasing tax collection is important to remove economic imbalance and take the country towards self-reliance.