Tax­ing prob­lems

The Pak Banker - - 4EDITORIAL - Ka­mal Sid­diqi

IN the first month of the new fis­cal year, our samdhi fi­nance min­is­ter levied new taxes us­ing ad­min­is­tra­tive mea­sures in a bid to shore up rev­enue col­lec­tion, af­ter tax col­lec­tors fell short of their July tar­get. The tar­get set was Rs157 bil­lion and rev­enue col­lected was Rs143 bil­lion. The samdhi had ear­lier promised that no such mea­sures would be used, but as is usual in such cir­cum­stances, a loop­hole was set aside for this pur­pose.

This is not sur­pris­ing, given the man­ner in which our tax col­lec­tion ma­chin­ery op­er­ates. In­stead of widen­ing the tax base and get­ting more peo­ple to pay di­rect tax, we are al­ways try­ing to pro­tect the rich and pow­er­ful with the re­sult that we rely heav­ily on in­di­rect taxes.

This is in­deed a dou­ble whammy for the poor salaried class, whether in the public or pri­vate sec­tor, whose tax is de­ducted at source and is then also sub­ject to a wave of in­di­rect taxes that the gov­ern­ment sees fit to raise time and again.

For ex­am­ple, af­ter the July short­fall, the gov­ern­ment will be im­pos­ing a 36.5% sales tax on elec­tric­ity gen­er­ated by die­selfired power plants and an in­crease in sales tax on al­most all petroleum prod­ucts. This in turn will re­sult in a higher power and elec­tric­ity tar­iff, which in turn will di­rectly im­pact all of us. There is no re­lief for some­one who al­ready pays di­rect taxes. But then this is a pow­er­less and silent ma­jor­ity that con­tin­ues to suf­fer.

In the bud­get, the gov­ern­ment im­posed Rs238 bil­lion in new taxes and set an am­bi­tious tar­get of Rs3,104 bil­lion for the fis­cal year end­ing June 30, 2016. Given the state of the econ­omy, these are un­re­al­is­tic fig­ures. Not be­cause of the ex­pec­ta­tions of the in­ter­na­tional fi­nan­cial in­sti­tu­tions, but be­cause of the re­luc­tance of the gov­ern­ment to clean up its tax col­lec­tion sys­tem.

Let us put this in some per­spec­tive. Till now one is talk­ing big num­bers and prob­lems that one can­not fully com­pre­hend. Now let me give you some ex­am­ples. Some of these ex­am­ples are now pro­vin­cial sub­jects, but the tax col­lec­tion ma­chin­ery op­er­ates like this - whether at the lo­cal, the pro­vin­cial or the na­tional fed­eral level.

For the past two weeks I have been try­ing to pay my mo­tor ve­hi­cle tax (MVT). This is col­lected by branches of the Na­tional Bank of Pak­istan but al­most all these branches say that their link is "down" and they can­not re­ceive pay­ments. The rea­son why this is so is be­cause af­ter a cou­ple of months pass, the same of­fi­cials will take pay­ments but with a penalty. That "penalty" will be di­vided into two - half will go to the ex­che­quer and the other half will go into the pocket of the per­son col­lect­ing the tax. A lesser penalty is im­posed if I pay a bribe. Look at the irony of this: to pay tax in Pak­istan, I have to bribe some­one.

It is another mat­ter al­to­gether, where my tax money goes. The MVT is not used for roads in Karachi. In­stead, I think most of the money goes into buy­ing mo­tor ve­hi­cles for gov­ern­ment min­is­ters and their lack­eys. Take for ex­am­ple the wed­ding our PM ar­ranged for his fam­ily mem­ber in the Holy Land. Guests were trans­ported and looked af­ter at public ex­pense.

In my fool­ish­ness I de­cided to go to the main MVT of­fice to pay my dues within due date. The clerk there pe­nalised me for be­ing over-smart. He levied a with­hold­ing tax at a far higher rate than the MVT it­self - a to­tally illegal act but one that will make me think twice for not pay­ing the "penal­ties" in fu­ture.

Clean­ing up our tax sys­tem is some­thing that should have been done long ago. The Ex­cise & Tax­a­tion depart­ment is not alone. Whether it is fed­eral tax, land rev­enue, prop­erty tax, oc­troi - any­thing, where there is a babu sit­ting on the other end with a pen and an of­fi­cial chal­lan book. For­get about good gov­er­nance if you can­not clean this area up.

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