Protecting the Tax Evaders


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Prime Minister Nawaz Sharif on the opening of new year launched the Voluntary Tax Compliance Scheme allowing the tax evaders to legalize their black money by paying only 1% tax. The exemption from an investigation into the source of capital will also be available to the beneficiaries of this scheme. Tax evasion is no doubt a crime under the law of the country. To “steer the country out of crisis and put on the path of progress and prosperity” PML-N government is repeatedly introducing such schemes providing shelter to the criminals.

The fact of the matter is that the forces of loot and plunder are once again hand in hand with the corrupt, and both are flourishing rapidly. On the other hand, the life of common man is being made more difficult in the name of “reformation” by each passing day. Honest taxpayers and concerned citizens are aghast on this situation. The PML-N government had previously announced a tax amnesty scheme during 2013 providing the elite opportunity to whiten their black money at home and abroad. That amnesty scheme miserably failed as only Rs 2.5 billion were received. The earlier schemes also met the same fate. It seems the entire State apparatus has become subservient to those criminals hiding their income and wealth untaxed. It is a joke with the people paying their tax honestly.

It is tragic that in Pakistan where billions and billions of rupees are being generated by the businessmen on daily basis and their “hard work, honesty and luck” is playing a key role in their success are not ready to pay tax and tax-to-GDP ratio is pathetically as low as 9%, that too due to salaried persons. The rulers are extorting more and more taxes out of common man’s pockets by indirect taxation, ultimately spent on giving unnecessary perquisites to the ruling elite. The people of Pakistan are always advised to swallow bitter pills if the economy has to be fixed and a heavy financial burden is shouldered on the people mercilessly in the shape of “bitter pills”. More painful is the fact that instead of taxing undocumented economy the government is offering repeated amnesty to tax evaders. The mighty sections are enjoying State protection under these schemes and immunities. The government is fully depending on indirect taxation and International Monetary Fund (IMF) loans instead of expanding its tax base, and putting the country towards disaster.

Tax evasion is a crime as per law of the country. Amnesty schemes should not be used as a tool to raise revenue as it discourages the honest taxpayers and create distrust in State apparatus. It is a symbol of defeatism of the sitting government which instead of punishing tax evaders protects them. The highhandedness, abusive behavior, maladministration, inefficiency and corrupt tax practices of FBR’s officials needs to be curbed with iron hands. Insufficiency of tax revenues is one of the major problems in Pakistan. We cannot get out of current crisis unless we increase our tax revenue by devising a workable tax strategy. The introduction of direct taxes is a vital tool for revenue collection in Pakistan. As indirect taxes burdened on the common people are too high – It has created an incentive for the businessmen to avoid their tax liability. Higher indirect taxes have also already caused cost-push inflation that has led to an abnormal rise in inflation and has made the distribution of income more unequal.

In what is being called an attempt to bring people into the tax net, Prime Minister Nawaz Sharif has announced on Friday his second tax amnesty scheme that will allow tax evaders to legalize their black money by paying only 1% tax. The scheme has been designed for non-filers of income tax returns as well as those taxpayers who filed the returns by under-reporting their income to evade taxes, instead of taking the matter to the Parliament for asset seizure legislation to confiscate their all untaxed and undeclared assets. By introducing this scheme, the government will not be able to get any significant benefits. Rather than increasing indirect taxation and taxing the already taxed sectors the government should go ahead with the direct taxation strategy and FBR be advised to collect the taxes strictly according to law. There must be no political interference in the independent functioning of FBR, and it must be made accountable for any lapse in tax collection.

Shaukat Masood Zafar
Shaukat Masood Zafar
A well known freelance columnist writing for daily Pakistan Observer, and several other national and international websites and newspapers. Economy, Politics, and Agricultural & Rural Development are especially areas of his interest.


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