- Unlikely to be met
An extension of three days in the deadline for the PTI government’s much touted and heavily marketed amnesty scheme means the response has clearly been underwhelming. Two telethons and three televised appeals did not garner the support PM Khan and his Finance Team were hoping for. Perhaps it would’ve been better if the government had reached a decision on the scheme earlier as the idea was first floated when Asad Umar was finance minister. But who knew he was on his way out. Interestingly the extension announcement comes after the FBR had denied any such possibility and the IMF had expressed its displeasure over an extension as well. Figures that will be released later will provide an opportunity to assess to what extent the scheme helped in achieving the massive Rs5.55 trillion tax revenue target for this financial year.
At 11% Pakistan has one of the lowest tax-to-GDP ratios in the region owing to the rigidity of those outside the tax net to contribute their fair share. Unfortunately lawmakers also make all attempts to minimize their tax liability by hiding it behind ‘agricultural income’ as many come from feudal backgrounds owning large swathes of agricultural land. At the same time is difficult to pass legislation to eliminate this loophole due to political reasons. The middle class small-scale businessman sees this as an injustice thereby finding innovative ways to gain the same advantages. Some serious structural issues within the tax machinery contribute to the revenue shortfall as well. There are reports of rampant corruption in the FBR where those working in the field accept bribes that amount to much less than the receivable tax amount from businesses to let them off the hook. Several types of businesses in the tertiary sector run a cash-only model enabling them to keep income off the books, out of the taxman’s radar. A difficult self-assessment and declaration procedure coupled with a continuous increase in the tax liability of those already in the net, discourages people to become active taxpayers and pay up. The first quarter of this financial year will indicate whether or not the new tax regime has the capacity to meet the targets.
