Broadening the tax base

EDITORIAL: It seems the time when the magic of data and technology would combine to expand the country’s tax base isn’t ready to come just yet. The plan that envisaged the National Database and Registration Authority (Nadra) scrutinising data of potential taxpayers provided by the Federal Board of Revenue (FBR) to upload on the latter’s website and encourage voluntary tax filing of tax returns and expand the net and increase revenue isn’t working.

That’s because Nadra’s not impressed with the quality of the data provided by the Board and wants it to take responsibility for any unpleasant surprises after it’s uploaded for everybody to see. And FBR is not quite willing to do that because it has no mechanism to check or verify the data and therefore doesn’t want any egg on its face if this exercise goes wrong.

Since the first sample, which featured data of 100 people after the government claimed to have collected relevant information of about 43 million individuals, was returned on account of deficiencies, the launch of the campaign to file returns this way was delayed from December 2021 to January 2022, and now it’s in proper limbo.

This is very unfortunate because the use of data analytics and artificial intelligence is most probably the only likely answer to our prayers for more tax filers. It’s also the most effective way of catching the big fish that’s been evading the tax net far too conveniently for far too long.

That’s why it’s very important to identify all the problems and sort them out at once. One that is readily evident, and shouldn’t have existed at all, is FBR’s inability to verify the data. It shows that the exercise took off even before it was thought through properly. It must be ensured, needless to say, that such needless irritants don’t slow things down again.

So far all FBR has had to say is that it has also finalised another comprehensive mass media outreach campaign to encourage voluntary filing of returns. But that’s just like saying that it has put more time and energy into a plan that will bring it back to square one. Encouraging voluntary filing, complete with dangling the carrot as well as swinging the stick, has failed too many times to be given any more time.

This failed exercise also reinforces the belief that even when there is a credible and actionable plan to deliver better tax returns, the will to get it done is always found wanting. FBR has been in crying need of reforms for the longest time; a fact that almost every administration has acknowledged and promised to address. Yet the ball never even got properly rolling. It’s also very unfortunate to see a lingering aversion to digitisation in the government machinery. It’s no surprise really that we are so far behind much of the world in this matter, even this late into the 21st century, because we choose to miss the bus every time we are near it.

Whichever way you see it, broadening the tax base ought to be the most pressing concern of the government at this time. Without it neither the pressure on reserves nor the addiction to borrowing will go away. And Pakistan has now become a good barometer of the pinching intensity of International Monetary Fund (IMF) structural adjustment programmes over the years. Therefore, if the future is to be any brighter than the past, and also present, then more tax revenue will have to fill national reserves. And since the use of data and science is clearly the way forward, it’s a shame that this system isn’t up and running already.

Copyright Business Recorder, 2022