Elephant in the room

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Elephant in the room

They own fabulously palatial homes, maintain a princely lifestyle and run large businesses. They are in charge of the public service system, but their extravagant way of living is in sharp contrast to their much poorer countrymen.
Yet, they unashamedly show dishonesty and shirk away from their public responsibility of paying due share of taxes. These are the parliamentarians and public servants of Pakistan.
According to the latest tax directory, only a handful of these public figures are among the highest tax paying citizens. A closer look at the tax declarations shows glaring discrepancies in the income and daily expenditures of these public officials. Further, some of these leaders even failed to file their tax returns.
Collection of tax revenues is not a new problem for Pakistan. Although the country’s tax to GDP ratio has increased to 10.5 percent from about 8.7 percent a decade ago, it is still one of the lowest in the world. This low ratio is mainly attributed to a narrow tax base as only 0.3 percent of the population pays income tax and files a tax return.
Weak tax administration, massive concessions and a large undocumented economy have hindered collection of tax to fuel economic development in Pakistan. While the government has made some praiseworthy progress, it still has to cover a long distance to broaden the country’s tax base and make the system fair. Unfortunately, as highlighted by the tax submissions, it is part of the problem in this case.
Before the government expects its citizens to comply with relevant tax laws, it needs to establish a moral authority to enforce the tax collection system. All lawmakers must lead from the front to pay taxes and be open about their sources of income.
In Pakistan’s case, the elites have been let off the hook and a high, unequal burden of indirect taxes has fallen on the lower strata of society. In recent years, the government has made efforts to bring sectors like real estate and equity markets under the tax net, but adequate imposition and collection of agricultural tax has not been reinforced in the country. Although Pakistan is largely an agrarian economy, the sector contributes less than 2 percent to the total tax revenues. Lack of political will to implement this tax can be understood as several members of provincial and federal governments are landowners or associated with the farm lobby.
Failing to broaden the tax base, the government has resorted to pushing the existing individual and corporate tax payers to the limit, and levying additional taxes on essential items. The dismal state of affairs is likely to continue until taxpayers gain full confidence in the tax collection system. The FBR, responsible for collecting taxes, has often been accused of high-handedness, maladministration and being politically influenced. Transparency in tax collection and subsequent expenditure on education, health and infrastructure will restore public trust in the government. This can only happen with a progressive and equitable taxation system that does not discriminate between parliamentarians and ordinary taxpayers.
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