Putting in place a taxation system that is both effective and acceptable to economic stakeholders at large is slowly proving to become the Achilles heel of the present government. Going from VAT, to delayed VAT and now reformed GST, the common denominator thus far, is its non-implementation.
It would be unfair to say that the folks down at the FBR House are not coming up with innovative ideas to coax the masses into the tax net. The most recent scheme is a proposed lucky draw mechanism. In a bid to habituate the citizenry to demand a receipt, the taxmen are throwing in a chance incentive to win a prize.
Statistics of non-compliance with the tax authorities have been a subject of much discussion in press and even in diplomatic circles - given Pakistans reliance on foreign flows. Significant portions of the economy remain undocumented and therefore out of the FBRs reach.
But even in sectors where consumers pay their dues to vendors, malpractices such as under-reporting often prevent funds from reaching the national exchequer.
"Many famous restaurants and general stores in posh localities under-report their tax collection by as much as two-thirds," one senior tax officer told BR Research.
With the aim to document the economy, partial redistribution back to the consumers is being envisaged at the FBR. Similar strategies have been employed with success in Turkey, where the tax authority returns a part of the sales tax via a claim-mechanism.
According to data released by the FBR, Pakistan collected nearly Rs700 billion (on average) as indirect taxes in the last five years; even if 1 percent of that money was redirected towards this scheme, the incentive would be big enough to encourage consumers to ask for a pakki receipt in hopes of winning prizes or cash rewards.
However, without proper research on the efficacy, such innovative strategies could end up costing more than the benefit to the system. With that in mind, the proposed scheme is expected to be initially implemented on a trial scale. If successful, it will be rolled out to the wider economy.
As a long-term objective, informed sources reveal that the data gathered by the scheme would eventually lead to plug inefficiencies in income tax collection as well. Its a double-edged scheme that will help tax authorities more effectively pinpoint under reporting on in taxable income.
Such a scheme and indeed tax collection in general can only be successful when implemented in a hassle free and transparent manner, something which both the government and the tax authorities have failed to deliver so far.
Educating people through public service campaigns on the benefits of documenting the economy might be a good starting point.
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