"We have to change the mindset as the country can no longer be run according to outdated patterns. It is necessary to broaden the tax net," stated PM Imran Khan while addressing the award-distribution ceremony of the Gujranwala Chamber of Commerce this week. Earlier, he is reported to have categorically stated that there will be no compromise on the taxation regime rolled out by the government to broaden the tax net. So far no flexibility has been demonstrated by the government in this regard.
The Prime Minister has well hit the nail on the head. But going on a reform drive is easier said than done.
Years of condoning, abetment and misgovernance by country's successive leaderships to serve their self-interest have rendered our bureaucracy ineffective, institutions compromised and public distinctly divided into 'haves and have-nots' with 'haves' systematically trampling on the rights of the have-nots mercilessly.
The first year of the incumbent government has been consumed in the accountability of fellow politicians and tax evaders and the current fiscal year will be a year of tax collection of an unprecedented target of Rs 5.5 trillion. So far, the recovery out of the process of accountability and tax evasion has not been as per expectations while the tax collection target appears to be highly challenging considering how events are unfolding after the announcement of the budget 2019-20.
Our export industry is tuned to a mindset of scooping maximum from the government coffer in the shape of duty drawbacks, zero-rated tax regime and similar while exports remain stagnant. This sector has decided to adopt 'go-slow' policy in its response to withdrawal of incentives and concessions.
Local auto industry, also tuned to a mindset of incentives in duties and taxes, has decided to effect periodic suspensions of its production to ease out mounting inventories.
The traders and services sector, that previously managed to successfully pressurise governments to thwart efforts aimed at documenting economy, have once again restored to shutter down to remain isolated.
The real estate sector, where the big boys operate, has opted to quietly go into hibernation. Little do they know that nothing is going to work for the simple reason that the coffers are empty and the government's tax collection target of Rs 5.5 trillion is a 'do or die' for it. The PTI government appears to be in no mood to accept defeat; it is in fact working harder to overcome the taxation challenge.
But the big question is who will fight it out for the PTI leadership. A great number of advisors, ministers and special assistants assigned to deliver can do little on ground without the greater cooperation of bureaucracy which holds the key to implementation on ground. The key issue therefore is a non-Performing government machinery.
The state institutions responsible for turning around country's economy need to be drastically restructured and reformed with management changes up to three tiers to restore them to a level of desired competence.
Country's investors, industrialists, traders and exporters seem stuck in a traditional or 'medieval' mindset, showing little or no appetite for change. The only option left for the government is an out of box approach and policy shift to mobilize a fresh stream of investors, exporters and industrialists with focus on facilitating the entrepreneurs emerging from the growing and largely neglected middle class which has talent and motivation but no means to enter the market. They can bring about a meaningful change.
(The writer is the former President of Overseas Investors Chamber of Commerce and Industry)