- Taxes cannot be raised through sermons
Prime Minister Imran Khan spent a day in Karachi on Wednesday trying to persuade the business community to pay taxes. He talked about his Cabinet’s austerity measures and the campaign against corrupt politicians. Had sermons been the best way to collect taxes from reluctant businessmen, Maulana Tariq Jameel would have performed the task much better than Mr Khan.
While the PM takes pride in getting loans from a number of friendly countries, he forgets the flip side of the credit noted by the IMF. Seeking loans reduced the urgency to tackle the underlying problems while increasing the country’s debt obligations. Further, lack of confidence among the business community in government’s policies led to a slowdown in economic activity, thus accelerating inflation. This resulted in the deterioration of the large-scale manufacturing index, domestic cement dispatches and motor vehicle sales. In a situation where the wheels of industry have slowed down, it would be unrealistic to hope to raise Rs 5,500 billion in taxes.
Fiscal imbalances have continued to build to over seven per cent of GDP against the budgeted target of 5.1 per cent. It is futile to take credit for a marginal growth in exports which is not reflected in larger foreign exchange earnings. The IMF notes that there is a deterioration, largely driven by a significant revenue shortfall, equivalent to 1.4 per cent of GDP. What is more, the government has failed to realise the urgency to fully cooperate with FATF. The IMF has however warned that a potential blacklisting by the Financial Action Task Force could result in a freeze of capital inflows to Pakistan, jeopardising the financing assurances under the programme.
There is a dire need to make the artful dodgers in the business community and the big landlords pay their taxes. For this political exigencies should not be allowed to stand in the way. A most important task is to improve the working of the FBR. The present direct interaction between the taxpayer and the FBR officials has to be blocked. A mass transfer of FBR’s staff will not help, as the new appointees will learn the ropes within months with the result that a good part of taxes that should go to FBR, would line the taxmen’s pockets.