Several positives in the budget notwithstanding some of the measures contained in the ‘mini-budget’are not only painful but give a perception of the govt’s policy vision becoming blurred and incoherent. Some proposals were perplexing and counterproductive. The lifting of curbs on non-filers of tax returns allowing them to purchase vehicles and property exceeding Rs 4 million triggered widespread disagreement and debate. Imposed (to their credit) by the previous PML(N) govt led by PM Shahid Khaqan Abbasi during its last budget, it prompted car manufacturers and real estate dealers/developers to rise up in arms complaining that the decision brought about a sharp decline in vehicle sales between 20% to 50%while sales of property was also affected. The reality, well beyond the reach of even the upper middle class, car and property prices actually came down.
The Asad Umar decision runs contrary to the PTI govt’s stated aim of bringing more people into the tax net. By lifting the ban the PTI govt has given non-filers a carte blanche to make hay by bringing them at par with tax filers’ incentives. The Khaqan Abbasi initiative was one of PML (N)’s better policy actions, the first step towards further penalties/restrictions being imposed on non-filers e.g. renewal of NICs, passports, etc, etc to bring them into the tax net.Asad Umarcaved in to the many special interests groups protesting vociferously to have this ban removed, will the opposition take this appeasement as a precedent for the future?
At 12.5%, an appalling tax to GDP ratio, Pakistan has the lowest ratio of income tax payers to the total population lower than the average for the developing world and far behind neighbouring countries India, Sri Lanka and even Nepal. A 2017 World BankSouth Asia regional profile of business indicators show Pakistan ranked 172ndout of 190 countries. Only 1.4 million, less than 1% in a country of 220 million, file tax returns, the low tax collection giving woefully insufficient expenditures on health care (0.7% of GDP) and education (2% of GDP). This stifles the country’s growth potential.
Asad Umar makes even less sense claiming that the ban prevented overseas Pakistanis,being non-filers of tax returns, from investing and doing business in Pakistan.People in Gilgit-Baltistan (GB) and Azad Jammu and Kashmir (AJK) were treated as non-filers, yet a satisfactory solution was found. FBR agreed to treat their active tax payers as filers enabling them to get benefits in money transactions, registration of vehicles, sale and buying of properties as enjoyed by Pakistani tax payers (filers). The same can be done for overseas Pakistanis.One solution could have been to fix different tax rates, substantially more for filers and then for non-filers for the next five years, encouraging people to file returns to pay comparably less tax on passenger cars and commercial vehicles.
Reforms in the finance sector were not allowed to flourish by those with vested interest. Sheer patriotism led to late Moinuddin Khan sacrificing his upwardly mobile career.Having very lucrative terms as the head of Standard Chartered in Hong Kong,he resigned to take over as Chairman of a floundering Central Board of Revenue (CBR) on a salary less than 20% of what he was drawing abroad. While re-structuring was a totally new discipline to Moin known to be a strategic planner par excellence and logistical genius in banking circles, he did turn CBR around to an extent. Unfortunately for Pakistan, Mian Nawaz Sharif’s sincere intent ultimately came to grief at the altar of populism. Going after the major tax evaders, including some of Sharif’s fat cat friends in the Liberty Market, was Moin’s great mistake.Resigning from the CBR, he ultimately died heartbroken. I was privileged to work with this support technocrat uncovering tax dodgers in “Operation FOXHUNT”. Given the go-ahead by Sartaj Aziz as Finance Minister, it was scuttled by Ishaq Dar, who having agreed with the exercise as Federal Minister for Economic Affairs but terminated it when he became Finance Minister.
The stated goal of PTI is to strengthen democracy and national cohesion by closing the gap between rich and poor by uplifting the poor. Paying taxes helps the government financially to improve on social services and create jobs, but feeling included also people across the broad spectrum take ownership of the country by paying taxes. By being interested in policy making they will feel responsible for their country. “No taxation without representation” was the slogan of American settlers in the late 18th century protesting against paying taxes without representation in the British parliament in London. “No representation without taxation” is the slogan for Pakistan to tell non-filers that they have no political and other rights in this country if they do not contribute proportionately to the running of Pakistan. Rights always come with responsibilities and paying taxes is the major responsibility connected to citizen’s rights. Basically each and every citizen should declare his or her income, even small amounts. The act of filing means taking ownership of the state even if no tax or a small amount is paid. Anyone owning a car personally is a potential tax payer and should be a filer.
Simplifying taxation procedures will protect our industries. Our Agri-based economy is heavily reliant on the agriculture sector. Agro-based industries being less capital intensive creates employment opportunities in rural areas, raises income of farmers, provides a boost to the agricultural production and increases exports of agricultural goods.Our Agro-based industries include rice and wheat milling, sugar making, oil crushing, poultry, fish processing, dairy products and many others. Instead of providing protection to our industry e.g. bread, butter, cheese, milk, toffees, biscuits and even “lassi”, etc, we import these items that are produced domestically.Imported items line our store shelves, such imports destroy our local industries.
To stop prices soaring, luxury tax must be imposed in a way only the very rich can afford it. While we gullible stupid million or so filers must bear Atlas-like (with apologies to Ayn Rand and her book “Atlas Shrugged”)the burden of 200 million plus (with 30 million non-filers camouflaged among them) Asad Umar seems to believe what we filers really are, certified idiots!One will wait to see what Imran thinks?(the writer is a defence and security analyst).