Pakistan is rampant with tax evasion. With the help of the tax collecting authority, FBR employees, citizens in Pakistan have been living tax free for many decades. Currently FBR collects taxes from only 0.5% of registered tax payers of the total population. Ironically NADRA, which was created many decades after the FBR, has registered 5% of Pakistani’s so far for National Identification. The Government of Pakistan collects taxes indirectly by taxing luxury items like fuel, cigarettes, industries, etc. while compensating budget deficits with loans and grants from other nations and organizations.
During the past many years this tax free culture has helped not only the FBR employees become filthy rich, it has also helped the tax evading businesses and persons to become rich, which has resulted in the expansion of cities and businesses across Pakistan. But with this expansion also comes many problems that are associated with unplanned sudden expansions, like heavy traffic, pollution, water shortages, etc.
For example in Peshawar the 22 KM short commute from one end of the city to the other end would take 4 hours during office hours. But now when the Government of KPK wants to improve the city’s infrastructure they are finding it difficult to find free land to build new infrastructures as all available land is in possession by these tax evading citizens, who have developed their residence and businesses for many years and are not ready to vacate or sell their property at low rates.
This is where the decades of tax evasion can become useful to the current Government of KPK. Using the example of Shop owners of Badami Bagh in Lahore, whose property was bought by the Punjab Government for low rates for construction of the Metro Bus road. This was possible because these shop owners were avoiding taxes for decades by undervaluing their properties in official documents, when sold, to avoid high stamp duty and other taxes. Since the Government uses the property value on record to get the average property rate for the area, these shop owners had to sell their land at 1/4th of the actual value. And there were no protests, as any protest would be tantamount to an admission of tax evasion and could result in arrest and prosecution of the shop owner.
If such actions are taken by the Government of KPK to modernize the infrastructure of the main cities, it would not only help develop the cities, as the new infrastructure would improve the standard of living and economic activities in the city. It would also reduce tax evasion in KPK, as other citizens would want to avoid the situation of selling their expensive property at low rates to the Government and would therefore declare the full value of their property and pay the full amount of tax in the future.
SHAHRYAR KHAN BASEER
Peshawar
