‘Tax targets versus tax gap’

This is apropos a Business Recorder two-part op-ed ‘Tax targets versus tax gap’ carried by the newspaper on Friday and Saturday.

I think the writers, Huzaima Bukhari, Dr Ikramul Haq and Rauf Shakoori, seem to have hit the nail when they pointed out the woeful flaws in our overall approach to taxations.

According to them, for example, “The problem with our tax managers is that they always analyze the target assigned on the basis of existing taxpayers, who file returns and statements, but conveniently ignore the overwhelming majority having taxable incomes and/or supply taxable goods, but are either not registered with FBR or commit open defiance even after withholding of taxes at source.”

Broadening the tax net has been a pipe dream. Successive governments tried, albeit reluctantly, to bring more and more people into the tax net. But their efforts had been hamstrung by the challenges of political expediency and appeasement.

It is important to note that the International Monetary Fund (IMF) that approved a 9-month $3 billion Stand-By Arrangement (SBA) for the country and consequently released a $1.2 billion tranche immediately has asked the authorities to work on certain reform areas, including taxation.

Burdening those who have already been taxes religiously with higher tax slabs is no solution at all. In fact, the tax authorities are required to bring all those who have been successfully evading tax net into the tax net.

This will certainly require the government to demonstrate political will. The IMF SBA approval by its board has provided us with much-needed breathing space to put the country on a reform path.

The adversity has provided us with a golden opportunity. We must grab it by both hands; we must not allow it to be squandered away at any cost.

There must not be any doubt about the criticality of our identity as a sovereign nation, which must not be allowed to be sacrificed at the altar of fiscal profligacy.

Hamid Raza

Karachi

Copyright Business Recorder, 2023