EDITORIAL: With revenue-specific conditions of the IMF programme necessitating a progressive revision of the tax regime, and growing chatter about netting traditional tax evaders, it was only a matter of time before some, if not all, of them began blackmailing the government – their reflex action whenever any effort is made to make them contribute to the exchequer.
And, true to form, the All Pakistan Anjuman-e-Tajiran has warned FBR (Federal Board of Revenue) that any new fixed tax scheme without consultation with retailers and traders would be “outrightly rejected” and it would result in “countrywide agitation against the tax machinery”.
Indeed, they even went a step further and threatened that “tax machinery” by implying that it should not forget past protests outside FBR House, or shutter down strikes that paralysed the country. Clearly, they want to bully authorities to keep themselves nicely cocooned, as always, not realising that this time is very different.
The state seems to have finally realised that it can no longer squeeze the few existing honest taxpayers any further, at least not enough to meet IMF’s harsh demands. It has also understood, after the recent breakdown of the EFF (Extended Fund Facility), that falling short will roll back the bailout programme very quickly.
And without it there’s only the question of when, not if, sovereign default will become unavoidable. So there’s no question of politically connected big fish continuing with the old joyride and avoiding their fair share of taxes.
In fact, the Pakistani state’s inability, rather unwillingness, to take the bull by the horns so far even as the economy went into a revenue-deprived tailspin borders on the ridiculous. Even IFIs (international financial institutions) that we rely on to stay solvent have called for it, ad infinitum, with the government, regardless of the party in power, refusing to wake up and smell the coffee.
The IMF has repeatedly advised the country to tax the rich and provide relief to the poor, but to no avail. Now, the World Bank has also urged Pakistan to eliminate exemptions and tax incomes from agriculture, real estate and retail sectors to generate additional revenue of up to four percent of GDP – approximately Rs 4 trillion – in the immediate term.
So far the government’s only smart idea has been relying on indirect taxes, which impact the poor much more than the rich, to carry on with business as usual. But now that trick no longer works. Public fury after August’s inflated electricity bills showed that the people have run out of patience as well as money to keep up with this circus.
The only option is to tax the rich; not least since we find ourselves in this fiscal predicament precisely because they were never taxed before. And giving reluctant sectors a seat at the policy table as the All Pakistan Anjuman-e-Tajiran demands would require, in principle, consulting with everybody about how to tax them; including the helpless working classes that have always been arm-twisted into paying more than their share – that too to make up for non-payment from bigger, richer sectors that tend to have friends in high places.
The government must urgently work out tax structures not just for retailers, but also real estate and agri sectors, then go back to the Fund with enough in the tank to negotiate slightly looser fiscal and monetary policies for the remainder of the Stand-By Arrangement (SBA) and subsequent programmes which will certainly be needed.
Caretaker administrations are supposed to be free from political influences that dog professional politicians, at least in theory, so this might just be the best time to overhaul the tax structure and route long-overdue revenue streams to the national kitty.
Copyright Business Recorder, 2023