Lottery schemes for GST

Pressure is mounting on the government to implement key conditions of the stand-by arrangement (SBA) with the IMF. Apparently, the Fund has indicated that it is losing its patience with its counterparts in Islamabad. Enough is enough, seems to be the message emerging from the donors.
For nearly four months now, the government has dragged its feet on tax reforms - i.e. implementation of the reformed GST.
Getting stakeholders on board and developing a consensus in a coalition government are the usual explanations for the delay.
Informed sources reveal that multilateral donors have now communicated deadlines by which reformed tax bills must be tabled in the provincial and federal legislatures.
Over the past few years, the FBR has experimented with various methods of increasing taxpayer penetration. Although some initiatives saw marginal success, no significant impact was witnessed.
Even though indirect tax collection has grown at an average rate of 17 percent over the past five years, the tax base remains abysmally small.
Tax authorities have used coercive measures, voluntary submission, and even requested the support of the armed forces in data collection, all to no avail.
Some policy experts suggest innovative new avenues to bring the masses into the tax net - the common man needs to be incentivized to ask for a receipt.
Typically, customers don ask for a paper record from retailers and wholesalers. This leaves the door open to double accounting, which may be used to understate business activity and thereby evade taxes, even if they were incorporated into the retail price.
A generous lottery scheme, which offers a chance to win large sums of money for both consumers and retailers, is likely to entice the average consumer to ask for a receipt.
Consumers are likely to vote with the feet towards businesses that offer them the chance to win. Business owners will be forced to offer parchis to their clients.
Such an idea may be easily dismissed by academic and tax authorities, citing concerns that the odds of winning would be too low for anyone to bother participating. Yet, the popularity of lottery schemes in the West, with similar odds of winning, is testament to the attraction of the proposition.
Even in Pakistan, while at HBL, Shaukat Tarin introduced a scheme called Crorepati Deposit Certificate in 1998 and deposits at the bank jumped 12.6 percent in just six months. Apparently, the scheme was so popular that it flushed competitor banks of their deposit bases.
Innovative measures must be implemented to improve the levels of documentation and to mobilize domestic revenue sources. Eventually, tax refund schemes may be employed to reward taxpayers; for now the goal is to bring them into the tax net.