The non- fil­ers club

Enterprise - - Letter - Bilqees Qay­oom, La­hore.

The buzz in the of­fices of the Fed­eral Board of Rev­enue is that an­other tax amnesty scheme is in the pipe­line – this time just for traders. This con­tin­ues the now reg­u­lar prac­tice of an­nounc­ing new tax amnesties af­ter the dead­line for sub­mis­sion of taxes. Each year, the prac­tice casts doubts over the gov­ern­ment’s threats of nab­bing non-tax fil­ers by offering new in­cen­tives to them. This year’s tax amnesty pol­icy is geared to­wards ap­peas­ing both the IMF and traders, but un­for­tu­nately gives the im­pres­sion of giv­ing a clean chit to those who sell smug­gled goods.

The sale of smug­gled goods mostly goes on with­out doc­u­men­ta­tion and it is clear that the gov­ern­ment has nei­ther the will nor the abil­ity to check the un­doc­u­mented econ­omy un­til those op­er­at­ing it give them­selves up on their own ac­cord. De­spite tak­ing on the key con­stituency of the PML-N this year by an­nounc­ing a with­hold­ing tax on the bank trans­ac­tions of non-fil­ers, there seems to have been lit­tle progress in terms of get­ting traders to file their tax re­turns. Un­der the pro­posed tax ex­emp­tion scheme, the gov­ern­ment has de­cided to ex­empt traders from tax au­dits for at least three years.

The pol­icy pro­poses not to au­dit the tax re­turns of traders who con­tinue to in­crease their tax re­turns by 25 per­cent each year. De facto, the pol­icy means traders will be al­lowed to de­clare hid­den as­sets and bank ac­counts over the course of three years, whiten­ing their black money with­out any penalty.

The gov­ern­ment be­lieves that its strat­egy of in­creas­ing the cost of do­ing un­doc­u­mented busi­ness will force traders to be­come fil­ers, and the tax ex­emp­tion pol­icy would be a good way of in­cen­tivis­ing them to join the fil­ers club. A new law is al­ready in the off­ing to con­trol be­nami bank ac­counts as the gov­ern­ment tries to use a car­rotand-stick strat­egy to force traders into fil­ing tax re­turns. Turnover tax will also be re­duced from one per­cent to 0.25 per cent. The trou­ble is that the tax amnesty scheme casts doubts on the ef­fec­tive­ness of the 0.3 per cent with­hold­ing tax on bank trans­ac­tions on reign­ing traders into the tax bracket.

The pol­icy of offering tax amnesties is one that has been tried, tested and failed. How the pro­posed ex­emp­tion is go­ing to do any bet­ter than ear­lier amnesties is any­one’s guess. The gov­ern­ment would be well-ad­vised to fo­cus on pe­nal­is­ing non-fil­ers than offering them in­cen­tives ev­ery year. This un­der­mines its own cred­i­bil­ity and se­ri­ous­ness in en­sur­ing that tax fil­ing con­tin­ues to in­crease.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.