Economic Security & Tax Compliance

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Asad Tahir

Time has come to build a new narrative for economic security and the same must be promoted with full throttle. A progressive, transparent and accountable tax compliance system is the pressing need of the hour

All states on the map of the world endeavor hard to attach top priority to their territorial integrity, political sovereignty, economic security, social justice, defense against external threats, and internal instability. Every country designs its foreign policy keeping in view its geostrategic location and regional balance of power. Likewise, every nation state plans to maximize the greatest good of the largest number of people in the shortest possible time, by employing minimum resources. That’s how good governance is pressed into practice. It also puts in place a just, equitable and sustainable development goals with a view to ensure equality of opportunity to its citizens and thus unlock their human potential. All these efforts are, indeed, meant to attain self-reliance, economic empowerment and prosperity. Likewise, every country produces value added goods to compete in the global market and thus earn the much needed foreign exchange. This export led growth is pushed farther to maximize spending on the human development at home in order to ensure economic empowerment and internal security. A stronger economy contributes to a formidable defense of the territorial sovereignty of a country. Keeping the above dynamics in view, it is immensely important to make a dispassionate analysis of our country’s history, objective conditions and socio-economic Milieu. This goes beyond saying that Pakistan has been truly blessed with multiple bounties, varied mineral and natural resources. Its snow-covered mountain tops are one of the most beautiful places on the planet earth wherein the rain and sunshine play hide and seek. Its panoramic views and scenic beauty spread all over the region make it a paradise on earth. These feasts for eyes attract tourists both from within the country and abroad. During the entire year, Pakistan Northern Areas are one of the most favorite tourist hot spots. Furthermore, a rich variety of fresh and dry fruits, rare species of wildlife are birds add more colors to the mesmerizing landscape.
In plain lands, we have one of the most elaborate irrigation systems of the world, feeding Lacs of acres of fertile land to produce quality cash crops, throughout the year. Our rugged and rustic farmers work hard day in and day out to not only produce enough to feed around 65 percent of rural population but also supply raw materials to factories and sustain urban population. They earn their livelihood by sweat and blood. It is the inherent strength of our agricultural economy which has sustained worst crisis, governance failures and political ineptitude, minimizing the possibility of a bloody civil war. Putting our national history in perspective, we must remember that soon after independence, our economic wizards designed an elitist economy based on the fatal doctrine of functional inequality. The central precise was that by facilitating the rich, the country will hit the industrial boom and as a result, the money will flow downwards to the less privileged. But the rich and powerful only took care of their profits and cared fig for the wage earners. This only ensured the concentration of resources in few hands and left poor further marginalized.
Therefore, the decades of 1950s and 60s only saw the exponential growth of income limited to a few families. The elite capture of state resources was ultimately achieved and ensured. This was the beginning of an end of an economic philosophy which was later woefully regretted by Dr. Mehbood ul Haq who equated his misled mantra as one of the seven sins. Making virtue of the necessity and capitalizing on the widespread unrest among the marginalized millions across Pakistan, a new political dispensation made tall claims to endear the poor. Through land reforms and nationalization, efforts were made to break the jinx of elite capture. But in practical terms, the feudal, landed aristocracy and rich and powerful continued to rule in the corridors of power. These measures didn’t make much difference in the lives of common man in the street whose life remained a miserable course of painful events. Unfortunately, in 1980s and 1990, the elites came back with vengeance to multiply their fortunes through rapid industrialization. As a result, a new breed of industrialists turned politicians came to strengthen their stronghold in the political mainstream. This was the beginning of an end which is yet to arrive but this bloody nexus of the rich and powerful in the parliament has bled the country white. Only the elites have their fortunes multiplied and their piles of wealth are stashed here and overseas. But the country groans under the heavy weight of internal and external debts, ever on the rise with every passing day. This inequality has cost us high. Today, the luxury vehicles plying bumper to bumper on the highways, palatial palaces, frequent foreign tours and pompous lifestyle define the pelf and power enjoyed by the country’s elites. But their tax returns simply portray a dismal picture of their ‘humble means’, characterized by gross under declarations and criminally compromised books of accounts. That’s exactly why we have shamefully low tax to GDP ratio of barely under 10 percent whereas a country like Maldives has over 19 percent. This is where we stand today. In a country of over 220 Million, we have only 3 million filers of Income Tax Returns. Out of these, around 1.1 million file their returns below taxable limits and pay not a penny in tax. About 0.9 Million pay less than five thousand in taxes with their returns.
Only the salaried class and businessmen whose tax is deducted at source do significantly contribute to the national exchequer. As per safest estimates the retail sector in Pakistan has business turnover worth 18 to 20 trillion rupees. But only 3 to 4 trillion are in tax compliance mode. Others continue to remain out of the taxpayers’ club. On the one hand, we see car industry hitting boom, tractors supply is on the rise and the farmers are making good money but these positive indicators don’t match with the tax compliance in books. This sorry state of affairs can’t be tolerated any longer.

Time has come to build a new narrative for economic security and the same must be promoted with full throttle. A progressive, transparent and accountable tax compliance system is the pressing need of the hour. FBR has come a long way from its traditional approach to taxation. Automation of its processes and digitization of economic transactions figure large on its reform agenda which is coming thick and fast in shape of many interventions made both at policy and operations level. This technology driven approach to tax collection has started paying the dividends and is translating in numbers. FBR has already exceeded the staggering revenue targets of Rs. 4691 billion fixed for previous financial year. During the current financial year, the country’s premier revenue collection organization has collected Rs.235 billion in excess of its assigned target for first four months (July to October), 2021. This is truly very reassuring to know. But the crying need of the hour is operational and financial autonomy for FBR which promises to make it independent of the political control of its masters and sets it free to maximize revenue potential by employing the much needed resources where required. This is the only lasting solution for the economic woes we are suffering from since decades. Every individual earning taxable income must be made to pay his/her due share in a much simplified and reliable tax collection system which is transparent and efficient. Only then can our country make progress by leaps and bounds and spend the collected revenue on the greatest good of the largest number of people, across Pakistan. Time to act is now!

The writer is a civil servant by profession, a writer by choice and a motivational speaker by passion!