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Documentation of national economy

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From Shamim Ahmed Rizvi,
Jun 05 - Jun 11, 2000

According to finance Minister the excercise was based on staration of resources

At long last, a beginning was made on Saturday last towards long overdue exercise of documentation of national economy when the present government launched a nation wide tax survey in 13 main cities of the country amid threats from some leaders of the business community to resist the official campaign to broaden the tax base and unearthing the tax-evaders.

the strike was observed by traders in different cities to protest against the government's measures to boost revenues. The survey teams did not force anybody to open their shutters and decided to wait till the traders return to their shops. "We are in no hurry let them keep their shops closed as long as they wish. The day they open their shops they will have to receive the survey form and fill it in the stipulated time" an official of the CBR commented.

The main features of the government's documentation drive and sales tax regime were finally announced by the Finance Minister at a press conference. The justification of such an exercise, according to the Finance Minister was based on starvation of resources. Debt servicing alone consumed more than 55 per cent of the budgetary expenditures. On the external front, the country had to face difficult conditions to secure foreign funding and the risk of constant default which could undermine national sovereignty. The Finance Minister also acknowledged that the government and its tax collecting machinery were also to be blamed for the present state of affairs. The tax regime was plagued by numerous afflictions including multiplicity of taxes, cumbersome assessment procedures, inefficiency in tax administration, inequality and tax exemptions widespread delays in resolution of disputes and outright corruption. These problems had led to a large growth in the underground economy, estimated somewhere between to about two-third of GDP. It was essential to straighten out these weaknesses along with measures against those who were deliberately evading taxes or taking undue advantage of some lacunae in laws.

The financial experts were of the opinion that Pakistan could not afford to delay the proposed reforms of the present regime aimed at reducing the country's crippling fiscal deficit in line with the advice of the International Monetary Fund (IMF). Currently an IMF mission is in Pakistan. The country is seeking a three-year 2.5 billion credit line from the fund for its poverty alleviation and economic growth programme. In order to win the confidence of visiting IMF mission, the government will have no other choice but to expand tax base to generate more revenue and stabilize national economy. It was the long-standing demand of the Britton Wood institution to extend GST to grass root levels but at present it is in our interest to generate revenue from our indigenous resources. Gone are the days when the country survived despite tax evasion, plundering of national wealth, embezzlement of funds. Now every person will have to pay his due share to put the economy on way to prosperity and development.

It is hard luck of the country that only 1.2 million people out of the total population of 140 million are paying taxes. The government is justified to bring three million traders in tax net and launching national tax survey to unearth untaxed assets. This would have long-term impacts on national economy, which would not only compensate previous governments' negligence on taxation issues but it will also explore new prospect of revenue generation. It would help government in generating more revenue on permanent basis by netting millions of people in tax circle. Similarly, tax survey would pave the way for documentation of national economy by forcing elite class to declore their assets and pay their due share in national development. The government drive would provide a sigh of relief to the existing taxpayers as they were compelled to bear overall burden of taxation.

The present regime deserves a pat for its commitment to promote tax culture in the country despite desperate bid by the vested interests in the business and trade sector to persist with immoral tendency of tax evasion. It's, however, a matter of satisfaction that the launching of the tax survey and documentation drive has proceeded peacefully and smoothly as the CBR officials, backed by army personnel, handed over thousands of prescribed forms in the shopping centres and posh centres and posh residential areas. The overall response of co-operation, enthusiasm and willingness in the chosen cities, as reported officially was encouraging, though some unscrupulous elements, deceiving the national exchequer to the tune of rupees three to six billion annually through tax evasion, did shamelessly incite fellow shopkeepers to shutdown for undermining the process, which is so fundamental to the economic revival. There exists a general recognition of the fact that the tax survey and documentation drive is vital for economic recovery, which, in turn, will free the nation from international monetary institutions' domination. It is , therefore, hoped that the resistance against the drive will die down with the passage of time paving way for a disciplined, civilised and nationalistic behaviour on the part of all concerned. As declared by Chief Executive Gen. Pervez Musharraf and other state functionaries however, no one should entertain any illusion about government's determination to enforce economy's documentation and expansion of the tax net. It is time for the business and trade community to accept the national realities and to refuse to blindly follow its leaders, who are, in fact, scared of the documentation and expansion of the tax net.