Taxation reforms found wanting

Saturdays press conference saw Finance Minister Hafeez Shaikh assert what he did last year: downplay the importance of budget as a merely one of the many yearly exercises; whereas, he added, the focus should be on other important policies that focus on long term economic management.
Shaikhs argument definitely makes sense, for perhaps nowhere in the world does the budget get such an aggrandized coverage as it gets, here in Pakistan. The real focus should be on long term policies, or the lack of it, where one particular government failure that stands out from the rest is the absence of sound fiscal policy.
This budget is guilty of the same charge, for it does not come along with any kind of aggressive plan to expand the tax net.
The FBR is sending out notices to 10 percent of the 0.7 million alleged tax evaders - a major campaign that is a part of FBRs plans to tap Rs50 billion of taxes by taking about 2.3 million tax evaders into account. Yet, this shouldn be construed as a sound fiscal plan.
Besides, such notices had also been issued in Shaukat Tarins times, when the FBR was supposedly in hot pursuit of the evaders. The point is that such campaigns typically fizzle out, when tax officers - who work for one of the ten corrupt government departments, according to the Transparency International Pakistan - start receiving courtesy phone calls, and fat pay checks in personal accounts.
Yet, while the importance of these campaigns cannot be ruled out completely, the idea is to get the requisite framework in place as well. One such element that needs to be resolved is the elimination of presumptive taxes.
First launched as a stop gap measure in the times of Nawaz Sharif government, PTR has turned the revenue department complacent over the years, as no successive government has taken an initiative to document and tax the economy accordingly.
Another structural shift that needs to be taken is the documentation of the economy via VAT-mode taxation - a measure on which nothing concrete has been done so afar, according to Shabbar Zaidi, a senior tax expert.
But in the post-NFC world, perhaps the biggest thing to keep a tap on is provincial budgets, since bringing the agriculture sector under taxation is the responsibility of the provinces. Whether the provinces will rise to the occasion, and whether the media will keep a sharper eye on provincial budgets remains to be seen.