In the swirling vortex of entropy that is the black economy, one wonders how the FBR arrived at the figure of 79 per cent for tax evasion. The World Bank, too, seems to have a methodology to calculate said evasion; it came up with a different but similar figure. The tax-to-GDP ratio is easier to calculate, since national income accounting (which, for the matheists reading this, calculates the denominator – that number underneath that line – of the above ratio) is undertaken with full force by a number of government departments. That, too, does not present a rosy picture. Only 9.1 per cent, one of the lowest in the region.
Yes, things are bad. But the bright side is that this represents a buffet table of possible improvements. The flip side – the reason why things are the way they are – is that the lobbyists are firmly entrenched to make sure nothing moves forward by way of actual reform. The concerned government departments are bottlenecks as well; as former minister Humayun Akhtar Khan noted in the recent pre-budget seminar organised by this newspaper, much is made of the establishment (and he would know a thing or two about that) but there also exists an establishment within every government department, one that resists any change. A lot of the actual (but covert) resistance to the imposition of the RGST is rumoured to have come from within the FBR itself, enough resistance to rival that put up to the reformed tax by the parties of the bazaar (the Leagues and the MQM.)
The way the theoretical construct called the “feudal” has been used ad nauseum to drive home agendas that were essentially anti-democratic, the whole brouhaha on taxing agriculture before anything else is part of the anti-tax arsenal. Agricultural income is not untaxed and the constitution prevents the federal government from taxing it any further; that is up to the provinces. There is a strong case for reforming the GST (our indirect tax gap is 36 per cent) so that it can also build up the database for cracking down on income tax (our direct tax gap is a whopping 143 per cent.) Confusing the RGST issue with other taxes is malicious. True, there is an agriculturalists’ lobby. But there are stronger lobbies representing the traders, middle-men and withholding agents.