A culture of tax evasion

This is apropos a Business Recorder news item titled “Now revenue leakages come under govt focus” carried by the newspaper yesterday.

According to the news item, Finance Minister Muhammad Aurangzeb has the government is making efforts to plug the revenue leakages, adding that the incumbent government is committed to boosting trade and investment, and plugging leakages in the revenue system.

He has also been quoted as saying that the government is taking all necessary steps to digitalise the revenue structure, bring transparency and client friendliness, and reduce leakages.

Be that as it may, ours is one of the countries with lowest tax-to-GDP ratios in the world. There exists an estimated tax gap in excess of 50 percent of current collections.

A large part of the tax gap stems from income tax collections. Successive governments, including the current one, have done little or nothing to do anything meaningful in this area. Ironically, however, the salaried class has been subjected to excessive taxation.

The taxation measures announced in the current year’s budget constitute a case in point. Although the country inherited the Government of India Act 1935 and adopted the Income Tax law of 1922, tax evasion seems to be rooted in a culture and history that long predates the Partition of sub-continent in 1947.

How ironic it is that paying taxes is still considered an affront to masculinity. The elite classes, rural and urban alike, are the most formidable impediment to the arrival of a fair, judicious and equitable taxation system in the country to replace the existing one in order to give a meaningful boost to revenue collection. The steps identified by the finance minister seem to be aimed at bringing about some cosmetic improvements in the system, but nothing of significance.

Mehrunnisa Bhoon (Islamabad)

Copyright Business Recorder, 2024