The missing taxpayers

[RabzonKhan]

The article is quite informative, and useful.

That's exactly what I had in mind when I said:

Pakistan Revolution: Another lie busted! Drones still flying!

I love Pakistan, it’s my jaan…my pehchan. I also want to see an independent, strong and prosperous Pakistan, but I don’t think this is the way to go.

We can newer become independent, strong or prosperous, as long as our tax-to-GDP ratio is less than 10%.and only 2% of our country's 185 million people pay any income tax.

The real war should be against the tax evaders!

The missing taxpayers

Dawn
by Murtaza Haider
Mar 28 2011

They travel abroad regularly, live in palatial homes and drive luxury vehicles. They are 2.3-million strong – they are the affluent Pakistanis who are also distinguished because they do not pay any taxes. They don’t even have a tax number, which suggests that these 2.3 million affluent Pakistanis have never paid taxes in Pakistan.

This is about to change, if one were to believe Salman Siddiqui, Chairman of the Pakistan’s Federal Bureau of Revenue (FBR). The FBR has issued notices to the 700,000 wealthiest of the 2.3 million affluent Pakistanis to pony up withheld taxes. Mr. Siddiqui did not elaborate on the penalties for those who would continue to evade taxes.

Tax evasion in Pakistan leaves the State with no option but to borrow money from lenders, such as the IMF. Consider this: in a nation of 180 million, fewer than two million are registered tax payers. Furthermore, tax revenue accounts for roughly 10 per cent of Pakistan’s GDP, which is extremely low even for Pakistan. The average among western European states is around 30-plus per cent. In neighbouring India, tax revenue accounts for 18 per cent of the GDP, which makes me wonder whether Indians have a better sense of citizenship than Pakistanis.

In the words of the famous Canadian-born economist, John K. Galbraith, this leads to the classic case of “private opulence and public squalor” where the desire and demand for private goods is enhanced while spending on public utilities such as schools and parks decreases. In fact, Pakistan’s society and economy epitomises private opulence and public squalor where the fortunes of the rich and wealthy keep growing, while the State of Pakistan gets buried deeper in domestic and international debt.

The FBR has to squeeze hard these bloated tax-evading lemons. I would argue that even the sovereignty of Pakistan rests on the unpaid taxes of these 2.3 million affluent citizens. Consider the following numbers: if the very rich tax evaders are charged a nominal annual tax of $2,500, and the remaining 1.6 million not-so-wealthy evaders are charged $1,500 annually, this would generate an additional $4.2 billion in tax revenue.

Remember that the US is offering Pakistan annually $1.5 billion (in aid) through the Kerry Lugar Bill, in exchange for drone attacks on its own people. The $4.2 billion from the wealthiest tax-evaders could buy Pakistan its freedom from the United States.

And what of the tax penalty for avoiding taxes in the past? May I recommend a one-time penalty, $5,000 for the very rich and $2,500 for the second-tier rich, which would generate a one-time revenue of $7.5 billion. This is exactly the amount that the Kerry-Lugar Bill has promised for Pakistan over 5 years. Again the very rich, by paying their back taxes as one-time penalty, can off-set Pakistan’s dependence on American assistance.

The amounts I have suggested in taxes are not excessive by any account. It was only last month when we learnt that renowned Pakistani singer, Rahat Fateh Ali Khan was caught with undeclared $124,000 in cash at the New Delhi airport. Rahat Fateh Ali Khan reportedly has no tax history in Pakistan. Would people like him find a few thousand dollars in taxes, burdensome?

Asking the very rich in Pakistan (who make several trips abroad for which the airfare of a single trip alone is around $1,500) to dole out $2,500 (or $1,500) in taxes is certainly not excessive. If you consider the equity they hold in their palatial homes or the luxury vehicles they drive, the amount I have suggested in taxes would appear insignificant for the very rich.

I live in a middle-class neighbourhood in Toronto, Canada, where I pay over $5,500 in property tax alone. My total tax bill (income and other consumption taxes) is an order of magnitude higher than my property tax bill. In fact, in Canada income taxes are the largest single line item in a household’s budget, followed by shelter and transport costs.

Canadians pay taxes even when they disagree with how the government spends their tax dollars. Consider the current right-wing government of Prime Minister Stephen Harper that has followed a more fear-laden agenda and has shifted towards spending on building prisons and buying fighter jets from the United States. Most Canadians abhor such spending decisions because Canada has experienced a significant decline in violent crime rate over the past decade and hence, does not need new prisons. Furthermore, Canada does not face any security threats from other countries for which it may need new fighter jets. Building prisons and buying fighter jets seems a huge waste of tax-payers’ dollars. Yet, I and other Canadians do not even for a second think of withholding taxes on the pretext that our tax dollars may be wasted on futile projects.

The relationship between the State and the citizen is defined by the citizen’s willingness to pay taxes. Withholding taxes weakens the State. A weakened State has no alternative but to compromise. In Pakistan’s case, it is not the politicians alone who have pushed the State to beg from the IMF or the United States. Instead, it is the citizens of Pakistan who refuse to buy a stake in the country’s future by paying taxes, have forced the State to borrow from IMF and other lenders.

All Pakistanis, irrespective of their political or religious persuasions, hate their country’s dependence on handouts from the United States, the IMF, the World Bank and other similar institutions. The easiest and surest way to break free of this economic dependency is for Pakistanis to pay their taxes.

Murtaza Haider, Ph.D. is a professor of supply chain management at Ryerson University in Toronto.

 

[Wolfenstein]

Nice article. I'm rather surprised that Articles like this does not attract too much crowd but some undeserving articles gets all the attention.
Well Pakistan themselves have the solutions for their problems. Every one must pay Taxes & the law should penalise those who dont.
Even India should increase its share of Taxes from 18% to say atleast 30%.

 

[RabzonKhan]

Cameron calling

By Editorial
Published in The Express Tribune, April 7th, 2011.

One of the prime objectives of UK premier David Cameron on his brief but hectic trip to Islamabad appears to have been to ensure that the wounds caused by his barbed remarks in India in the summer of last year, when he suggested Pakistan was not doing enough to tackle terrorism, received some healing balm. Cameron as such made it a point to stress that the time had come to make a fresh start and assiduously steered clear of most controversial matters during his detailed dialogue with Prime Minister Yousaf Raza Gilani and a briefer meeting with President Asif Ali Zardari. The British prime minister, on his first visit to Pakisan, refused for instance to be drawn into the complexities of the India-Pakistan relationship, suggesting only that there may be advantage in moving beyond cricket diplomacy. It is possible that the Indo-Pakistan issue, as well as that of terrorism, may have been taken up during meetings between the military and intelligence heads of both countries.

Cameron, however, mixed a soft approach with some pointed comments. While, on the one hand, he made a promise to give aid worth £650 million for education in Pakistan, he also told university students that it was becoming harder and harder to justify such assistance to Pakistan when the country’s wealthiest citizens continued to escape taxation and there were concerns in the UK about the quality of governance. Almost identical remarks have been made by US and World Bank officials. This is obviously then an issue Pakistan needs to think very hard about. The message that it must do more to help itself is coming in from everywhere. David Cameron’s visit counts as a success; a mending of ties with London has taken place and an agreement reached to expand trade ties. But, at the same time, Islamabad also needs to take heed of the polite warnings issued — and remember that if it does not heed them a time may come when no one is willing to come to its aid and the pressure on it from various directions may increase substantially, putting it at risk of isolation from the global community.

 

[RabzonKhan]

Govt accepts advice to tax farm income

Dawn
By Khaleeq Kiani
April 08 2011

ISLAMABAD: The government concurred with leading economic advisers in the country on Thursday to tax supply chain of the agriculture sector and to ask the provinces to immediately send notices to landholders of more than 50 acres to file tax returns for additional revenue mobilisation.

This was the outcome of the first meeting of the Economic Advisory Council (EAC), headed by Dr Hafeez Pasha and comprising former finance minister Shaukat Tarin, former industries minister Jehangir Khan Tarin, former State Bank governor Salim Raza, Dr Ijaz Nabi, Nasim Beg, Farooq Rahmatullah, Ali Habib, Shahnaz Wazir Ali and others.

Finance Minister Dr Abdul Hafeez Shaikh presided over the meeting. It was also attended by State Bank Governor Shahid Kardar and Deputy Chairman of the Planning Commission, Dr Nadeemul Haq.

According to a statement issued by the finance ministry, the council discussed the idea of taxing all incomes irrespective of the source of origin, including agriculture and services sectors.

A participant told Dawn that almost all members were of the view that agriculture was a provincial subject and, therefore, all provincial finance ministers should be invited to the next EAC meeting. But before that, they suggested, notices should be issued to big landholders to file tax returns to show the government’s resolve for introducing an equitable tax system.

The meeting decided to hold consultations at the provincial level to also engage the chief ministers in the proposed plan because the provinces had a major role in public finances after the 18th Amendment and the 7th National Finance Commission.

At the same time, the participants were of the opinion that agricultural value chain like wholesalers and middlemen was very much in the federal domain and it should be taxed by the centre.

The meeting also noted that already there were provincial taxes on agricultural incomes and the government would have to tax this sector if it wanted to ward off other pressure groups which had created an impression that urban populations were being penalized through the reformed general sales tax without bringing rural incomes into the tax net.

The meeting was informed that all provincial governments had introduced the land revenue act in 2000 to tax agricultural income through verification of growers’ incomes, but had done nothing to collect such taxes.

Under the act, an income of Rs80,000 per crop has been exempted from the tax, while five per cent tax is applicable on an income of Rs100,000, 10 per cent on income up to Rs200,000 and 15 per cent on all agricultural incomes exceeding Rs200,000.

The EAC members warned the government that they would stay away from future consultations if their recommendations were not made part of the next budget because they were contributing their time and expertise in the larger economic interests of the country.

“We have come together to try to sort out economic difficulties and will defend the budget if our consensus recommendations are adopted,” one participant told the finance minister.

Dr Hafeez agreed to oblige.

There was a broad consensus among participants that the next budget should be “growth-oriented” and aim at increasing revenues, and not only concern itself about meeting the requirements of the International Monetary Fund.

A council member said the EAC had expressed concern over an ambitious revenue target of Rs1,604 billion recently set by the government. The council was of the opinion that the tax machinery would at best be able to collect Rs1,530 billion.

It advised the government to avoid imposing new taxes before June if there was a shortfall in revenue and instead focus on audit recoveries and other administrative measures.

The PC deputy chairman said the country needed to achieve a growth rate of at least eight per cent of GDP to provide jobs to the increasing number of young people joining the market.

 

[omer85]

hundreds of such articles which talk about this much people not paying tax can be found around. but has anybody wondered why people dont pay tax ? what makes them to cheat the state ? what motivates them in doing so ? and most of these affluent pakistani's who are not paying tax are an educated lot.

i am all for paying your due share in taxes and paying them honestly. however only when i would see the taxes being utilized properly along with all other affluents paying their tax.

why should a businessmen pay tax when he sees a landowner having acres of land, driving a prado with his sons/daughters studying abroad, not paying a single penny of tax.

why should i pay tax when i see zardari's, rehman malik's, qaim ali shah's and shareef's paying not more than few thousand in taxes when i can see that they are the richest around ?

why should i pay tax when i see my tax money being wasted on the security details of these currupt sell outs ?

why should i pay tax when i see the guardians of states buying all the new toys like f-16's, jf-17's and submarines with my tax money, and hundreds still dying every day due to bomb blasts ?

you see the state needs to show its citizens that the tax they pay is being properly utilized. untill than this tax to GDP ratio would remain same, or rather become even more worse!

 

[AZADPAKISTAN2009]

I agree - CATCH EM TAX EVADORS and take their farm lands

 

[RabzonKhan]

hundreds of such articles which talk about this much people not paying tax can be found around. but has anybody wondered why people dont pay tax ? what makes them to cheat the state ? what motivates them in doing so ? and most of these affluent pakistani's who are not paying tax are an educated lot.

i am all for paying your due share in taxes and paying them honestly. however only when i would see the taxes being utilized properly along with all other affluents paying their tax.

why should a businessmen pay tax when he sees a landowner having acres of land, driving a prado with his sons/daughters studying abroad, not paying a single penny of tax.

why should i pay tax when i see zardari's, rehman malik's, qaim ali shah's and shareef's paying not more than few thousand in taxes when i can see that they are the richest around ?

why should i pay tax when i see my tax money being wasted on the security details of these currupt sell outs ?

why should i pay tax when i see the guardians of states buying all the new toys like f-16's, jf-17's and submarines with my tax money, and hundreds still dying every day due to bomb blasts ?

you see the state needs to show its citizens that the tax they pay is being properly utilized. untill than this tax to GDP ratio would remain same, or rather become even more worse!

With all due respect, but I strongly disagree with your reasoning; please remember, two wrongs don't make a right.

People who don't pay taxes are criminals. As responsible citizens, it is our civic responsibility to pay taxes.

 

[RabzonKhan]

Finance minister dissatisfied with tax collection system

Daily Times
By Sajid Chaudhry
April 10 2011

ISLAMABAD: Federal Minister for Finance and Economic Affairs Dr Abdul Hafeez Shaikh Saturday expressed his dismay over the lacklustre approach adopted by the income tax (IT) authorities for not vigorously following the non-filers of IT returns.

It was informed to the minister that at present some 2.7 million persons are born with National Tax Numbers (NTNs), out of which, some 1.7 million have filed their IT returns and over 1 million, despite having NTN, have not bothered to file their IT returns.

The minister was shocked to know that there are 2.7 million National Tax Number (NTN) holders in the country and only 1.7 million are filing their IT returns and only few hundred thousand are actually paying tax, official sources informed here on Saturday.

This was informed to the minister while chairing the second meeting of Broadening Tax Base, at the Ministry of Finance, where Federal Board of Revenue (FBR) Chairman Salman Siddique, members and other officials of Inland Revenue attended the meeting. Official sources informed that FBR officials were unable to explain the reasons as to why they did not pursue the cases of NTN holders, who have not filed their IT returns nor paid their due tax.

The minister asked the FBR to devise a mechanism for minimising the gap between the number of NTN holders and the actual taxpayers.

He asked FBR to constitute a special team of selected officers and staff to process the devised mechanism and assured in this regard of full cooperation not only from his ministry, but by other governmental organisation, including the National Database and Registration Authority.

During the meeting it was observed that all NTN holders are not tax filers, and NTNs, were required for every citizen where financial transaction was done.

The minister also asked them to have a blue print of the success of this ongoing process of netting the tax evaders into the tax net, and submit a report on June 30.

It was informed to the minister that till date some 700,000 rich have been issued notices for not filing IT returns and it would take a month to receive their written replies. Afterwards the FBR would be able to proceed against them and adopt legal course of action allowed under the law to compel them to file their returns and pay their due tax.

The FBR officials were of the view that due to the shortage of manpower and officials, they are unable to vigorously follow the potential taxpayers in case no one submits its reply against the tax notices.

The minister directed the FBR chairman to hire the services of the private sector for vigorously pursuing the NTN holders not filing their returns and in hunt for new taxpayers.

The minister was also dissatisfied with the functioning of the Regional Tax Offices (PTOs) and directed the FBR to streamline the RTOs functioning in similar with the Large Taxpayers Units for broadening the tax base and tax facilitation.

 

[RabzonKhan]

The fiscal challenge

Dr Maleeha Lodhi
Tuesday, April 19, 2011

The writer is special adviser to the Jang Group/Geo and a former envoy to the US and the UK.

The government still lacks a credible action plan to control the nation’s budget deficit. It has balked from taking tough decisions that can confront the scale of the fiscal problem and resorted instead to temporary, stopgap measures that do little to address the underlying causes. Confusion reigns about which of last month’s tax measures have been reversed or modified and which have survived resistance from affected interests.

With significant reform stalled the disarray in public finances continues to pose a threat to the country’s financial stability. The situation may aggravate due to a confluence of two new factors. Together they indicate that in the absence of reform the fiscal deficit could grow even larger in the foreseeable future because these developments have underlying structural characteristics.

The Governor of the State Bank has sounded a timely warning about the first of these trends in remarks that merit more attention than they have received. The insights offered by Mr Shahid Kardar in a Reuters interview earlier this month signal new risks for the country’s already precarious fiscal position.

The erudite governor said he was worried by a ‘structural shift’ of incomes towards the non-tax paying or lightly taxed sectors from tax paying ones. This shift of incomes especially to the agriculture sector, he said, means that the tax to GDP ratio is “structurally destined to hover at lower levels”.

Pakistan has one of the lowest tax to GDP ratios in the world, which is the source of all its fiscal problems. Mr Kardar’s prognosis suggests that additional structural factors will fortify or fuel the fiscal deficit crisis unless decisive measures are taken. He reiterated the call to broaden the tax base and address this structural shift in the next budget.

What exactly is the central bank governor referring to and why is it important? He is pointing to the fact that while the agriculture and service sectors have for a number of reasons been doing better than other tax-paying sectors they still contribute little revenue to the exchequer.

At a time of severe economic hardship for much of urban Pakistan and for the industrial and manufacturing sector, the agricultural economy has – in spite of the 2010 floods – benefited from higher global commodity prices and domestic support prices which together have shifted the terms of trade in favour of the untaxed agriculture sector. Agriculture accounts for 22 percent of GDP but contributes little more than one percent of all revenue. The rise in international commodity prices and the government’s setting of procurement prices well above their import parity price in the past two years has led to an increase in farm incomes. But this has not been accompanied by any commensurate obligation to pay tax.

Similarly, a major part of the services sector, which now accounts for 52 percent of GDP, remains exempt from any General Sales Tax. In recent years this sector has been growing at a much faster rate than the manufacturing and even the agricultural sector. Moreover this sector has also significantly benefited from the increased spending resulting from higher agricultural incomes. But it has failed to appreciably contribute to government revenue.

A GST has formally been in place for twenty years but its fiscal impact has been greatly diluted by many exemptions. Add to this the rampant evasion of income tax by the services sector and its successful effort to thwart a value added tax and an even more dismal picture emerges. The net result is what Governor Kardar has drawn attention to – a structural shift within the economy with serious fiscal implications which warrant urgent tax reforms.

As Mr Kardar has alluded, if the two sectors that contribute 74 percent of GDP have seen incomes grow but remain largely outside the tax net, it is hard to see how the tax to GDP ratio can improve. Without fundamental reforms and a tax regime that is fair and equitable, based on the ability of different sections of society to bear the burden, the tax to GDP ratio cannot much exceed 10 percent. Additional revenue can still however be raised through better enforcement and removal of exemptions to the GST.

A key reason for poor tax compliance and a culture hostile to revenue collection is the lack of equity in the tax regime with the burden falling disproportionately on the same people. To inject equity into the system the agriculture and services sector must be brought fully into the tax net however politically tough that may be. Without this, the country’s structural fiscal problem and chronic revenue shortfall cannot be addressed.

The agricultural sector continues to benefit from state help without being asked to pay its due. When the official wheat procurement price was set higher than its international market price this amounted to giving a producer subsidy. Although this year support and international prices are roughly the same the government is still intervening to buy several million tons of wheat to ‘protect’ farmers not able to sell their produce at the procurement price.

This producer subsidy together with a large subsidy on inputs like urea, are politically difficult to withdraw in view of the clout of the farm lobby in the national and provincial assemblies. The cost of this subsidy is now huge – more than Rs45 billion a year.

The shift in incomes to the non-tax paying sectors has been accompanied by a second development which will also fuel the budget deficit and, unless corrective action is taken now, become an additional ‘structural’ cause of a deepening fiscal crisis. This relates to the balance of resource distribution that was tilted in favour of the provinces under the December 2009 National Finance Commission award.

The redistribution of resources under the NFC award represented a missed opportunity that can prove costly in the future. When the share of provincial governments in the divisible pool was being enhanced no effort was made to persuade the provinces to accept reciprocal commitments to: a) mobilise resources from taxes in their provincial or local jurisdictions and b) assume the responsibility to absorb personnel and fund operational and development activities devolved to them under the Eighteenth Constitutional Amendment.

The spectre that now looms is for provinces, unaccustomed to expenditure restraint, to become a source of chronic federal financial frailty. Under the existing arrangement the provincial governments have no incentive to save and more efficiently use the increased resources transferred to them. Hence, they are unlikely to generate the ‘surpluses’ that the federal government will need to keep the fiscal situation within manageable limits.

A reduced share in scarce resources has meant that without a sharp growth in revenues or a commitment by the provinces to spending curbs the federal government will continue to have to borrow to meet its current expenditures. This is becoming starkly evident in the persistent rise in the revenue deficit – now about to cross 2.5 percent of GDP. This means a federal government revenue shortfall of over Rs300 billion of its annual current and non-development expenditures.

The federal government has been additionally burdened with rising security related expenditures and a growing debt burden, whose servicing is now absorbing over 45 percent of its share of tax revenues. The situation has been worsened by its inability to downsize government in consonance with the Eighteenth Constitutional Amendment, cut back huge subsidies on energy, and stop the haemorrhaging of public sector enterprises by their restructuring and eventual privatisation.

Unless a bold and coherent policy plan is devised to deal with the structural sources of the runaway budget deficit the country’s economic future will be imperilled by an unsustainable and serious fiscal situation being compounded now by emerging trends and more enduring unresolved issues.

 

[RabzonKhan]

Tax evasion

Dawn
April 21 2011

PAKISTAN is a haven for those who do not want to pay their taxes. Nobody will ask any questions, let alone arrest and punish anyone for tax pilferage, even if the lifestyle being maintained is luxurious and well beyond one`s declared means. The number of people filing income tax returns has, therefore, dropped radically over the years. This year, for example, less than one per cent out of 180 million people filed their income tax returns. The non-filers comprised the country`s wealthy elite including politicians, generals, landlords, traders and others who have very intelligently kept their incomes out of the net. Little wonder then that the gap between the amount of tax owed and that of tax paid voluntarily and on time is expanding. Revenue generated through tax accounts for less than 10 per cent of the country`s GDP, one of the lowest in the world despite the heavy indirect taxation on the common people. This leaves economic survival heavily dependent on foreign aid and loans.

However, times seem to be changing now. International donors and lenders are refusing to help us unless we help ourselves. The international pressure on the government has forced it to at least think of ways to increase tax revenues to ward off a possible economic collapse. Last month, it announced it would partially withdraw tax exemptions to certain sectors. Now the Federal Board of Revenue plans to serve notices over the next couple of months to 50,000 tax evaders living a life of luxury. One hopes that the FBR will soon take steps to also bring into the tax net the rest of the 2.3 million people who have been identified as having “sufficient financial resources” but who do not file returns. If implemented honestly, it could prove to be the first such major attempt in recent years to broaden the extremely narrow tax base. The principles of fairness and equity demand that the drive does not leave out the powerful regardless of their political clout if the purpose of the exercise is to instil fear of the law in the hearts of tax evaders.

 

[VCheng]

The rot within governance structures runs deep and wide in Pakistan. The finance issues coming to a head within the coming fiscal year are only one manifestation of the consequences.

 

[RabzonKhan]

No representation without taxation

The Friday Times
Editorial
By Najam Sethi

Rich Pakistanis are notorious tax cheats and dodgers. Statistics tell a damning story. Only 3.2 million people (190 million population) are registered with the Federal Board of Revenue. But less than half of these file any income or wealth tax returns. Much the same is the case of over 60,000 companies registered with the Securities and Exchange Commission of Pakistan - only a third pay tax. Yet over 1.6 million frequent air travelers don't pay income tax; half a million have multiple bank accounts at home and abroad but no National Tax Number; over 60,000 bathe in residential luxury, over 20,000 have grand cars, but none pays any tax; over 70,000 pay huge utility bills and over 13,000 have expensive guns and rifles but they all dodge the tax collector; over 25,000 flourishing doctors, lawyers and professionals have no NTNs.

The FBR has over 23000 employees, 19 regional offices and 90 Income Tax Commissioners across the country but is unable to collect more than 10% of GDP in tax. This has relegated Pakistan's Tax/GDP ratio to the lowest rung of the ladder among the modern economies of the world, compelling every government to run up huge fiscal deficits and tote up debt.

The debate on the subject is now focused on another tax amnesty scheme that proposes a three-month period in which tax dodgers (those who don't pay any tax at all) can register their untaxed wealth by paying Rs 40,000.00 to Rs 60,000.00, no questions asked. Tax cheaters (those who pay some but not all due tax) can pay 1.5% of the value of their undeclared income and call it quits. The FBR expects to collect at least Rs 200 billion (10% of all tax revenue) from this scheme in the next three months. More significantly, the scheme will pave the way for a rationalization of the tax identification and collection machinery for the future.

This is a revolutionary proposal. In the past, there was a cost of at least 10% for converting "black money into white". But this was rendered ineffective after the freeing of capital markets and capital movements in the 1990s when rupees could be converted into dollars in the open market. (For a commission of about 1%, untaxed funds could be converted into dollars and remitted into Pakistan from outside Pakistan, with no questions asked about the source or nature of the foreign remittance.) The FBR has also added attractive whistle-blower inducements and stiff penalties for tax dodgers and cheaters.

But the amnesty scheme misses the wood for the trees. There are two gaping holes in the tax system and no one is keen on plugging them. The first is the reluctance to introduce a Value Added Tax on most retail goods and services, despite its application in developed countries as the most effective and efficient way to document the economy and harness financial resources at the same time. But political parties are afraid to incur the wrath of the traders and shopkeepers who oppose it vehemently. The Zardari government briefly toyed with it last year but hastily withdrew the proposal when its coalition partners threatened to walk out.

Politics is also responsible for the second gap in the economy. There is no tax on income from agricultural production (other small taxes on property exist). This accounts for the fact that there are hundreds of thousands of rich landlords with luxurious houses, big cars, guns, who have foreign holidays, educate their kids in expensive schools, etc., who are outside the tax net. It also provides an avenue for people to invest in land and show non-taxed agricultural income as a source of their wealth. The agrarian mode of production - predominantly sharecropping - ensures low productivity and lower returns on capital invested in land than in industry. A complex web of subsidies on raw materials supplements agricultural incomes. If parliament, which is run by landlords, could be persuaded to cut subsidies across the board and allow market forces to prevail, the mode of production would be compelled to become capitalist, yielding more efficiency and enabling agricultural incomes to be taxed properly. But this sort of reform is unlikely to take place until the demographic profile of the country (rural versus urban) changes and is reflected in the class composition of provincial and national parliaments.

The slogan of "no taxation without representation" was popularized by British colonists in 1760s America protesting the imposition of taxes on them by the British parliament without giving them the direct right to vote as Englishmen. What about the idea of "no representation without taxation"?

Pakistani landlords dominate Parliaments, they make laws and they disburse funds, often in their own self-interest. They control the lives of tens of millions of their serfs whose votes they need to get into parliament. They partake of the bounty of this country but give nothing in return. They don't pay income or wealth tax. This is neither fair nor sustainable.

 

[Bhai Zakir]

For the information of the pakistanis that's happen in India too.

Only 2.5% Indians pays tax

 

[AZADPAKISTAN2009]

The solution is very simple

Lower the Petrol Prices , energy alternatives and then add Government tax on Food and Property

a) You don`t pay property tax you lose home
b) You don`t pay food tax you don`t get food

In Pakistan , expense rises because of

Fuel
Cost of Transportation due to lack of Locomotives
Local sellers charging high premiums due to claims they pay fuel costs

So if you reduce fuel cost , and get locomotives , the costs for food item will fall after that you can add 1-2% tax on food value which will be unnoticable

Example:

Take Price of Box of cookies in Pakistan it may costs 100 rupees as example if you lower expense to transport it you may be able to buy the same good for 70 rupees and government can add sales tax on it for 3 rupees


Now imagine 180 Million Pakistanis get that 1 cookie box one time one meal

Tax Collected Automatically - 455,000,000


So I ask you is it better that box of cookie cost 100 rupee and no one paid tax
or box of cookie costs 70+3 rupees , and government collected

Tax Collected Automatically - 455,000,000 almost half a billion rupees



Same can be applied now to stuff that Pakistanis buy most

a) Tandori Roti
b) Shadi halls
c) Motor cycles
d) Food items
e) Travel expenses
f) Cimema Tickets


They key is

a) Take the Price down drastically for products
b) Redude your oil imports
c) Add Sales Tax 3% no one will recognize the price drop



The Sales Tax was proposed to Pakistan by IMF but since they did not first bothered to figure out a way to drop prices , people went to streets ... so you have to find a way to lower prices drastically in country first before any
taxes are introduced

 

[VCheng]

The solution is very simple

..................
The Sales Tax was proposed to Pakistan by IMF but since they did not first bothered to figure out a way to drop prices , people went to streets ... so you have to find a way to lower prices drastically in country first before any
taxes are introduced

The solution may appear simple, but it is not. A requirement of collecting sales tax effectively is near-complete documentation of all sales. How is that going to be achieved, given the size of the black economy?