Efforts should be made for expanding tax base

June 02 - 08, 2003



The Federal Budget may reportedly focus a revenue target of Rs505-510 billion for the fiscal 2003-04. This assumption for revenue target is based on the discussions between the Central Board of Revenue and the IMF officials.

If the CBR goes on to the above target it would a 10 per cent increase in the current year's revenue target of Rs458 billion which is well within reach at the end of the current financial year next month.

It is however, generally felt that instead of focusing on the revenue target in terms of amount, it would be much meaningful target the untaxed areas to enlarge the tax base. The enhanced volume of amount in the revenue target gives a feeling among the existing tax payers that they would be forced to pay additional taxes or higher rates of the tax.

The business community in particular and the tax payers in general also observed in a critical way that the tax collected in Pakistan does not provide visible relief to the tax payers in their respective field.

Taxes paid on utilities are not reflected in the quality of the service provided by the utility companies. For example, electricity consumption has been subjected heavy taxes, but sees the quality of services; the consumers have to bear break downs and fluctuations in the scorching summer heat. How they could be a willing tax payers. This pattern of utilization of taxes is visible whether it is road tax or water tax at the provincial level. It is highly important to create a culture supported by the willing tax payers to provide services in the respect sector to the satisfaction of the tax payers.

Recently, the government has imposed withholding tax on telephone bills. This tax imposition has disturbed a large number of telephone consumers especially in the low income group, who do not claim for the refund. It is amazing that if a telephone subscriber fails to pay the monthly bill, the withholding tax is applied even on the previous month's amount including on the amount of withholding tax that becomes a compound tax. This levy should be removed at the earliest, said a telephone subscriber.



According to annual plan, the overall GDP growth rate for 2003-04 is targeted at 5.3 percent, budgetary deficit of 4 per cent of GDP and inflation 3.9 percent.

The monetary growth has been envisaged at 11.3 percent and foreign exchange reserves at $11.54 billion, workers remittances $3.36 billion and trade balance to reach at $1.25 billion.

The focus of the fiscal policy would be to reduce the fiscal deficit to below 4 per cent of GDP and enhance the development expenditure to 3.4 percent of GDP in 2003-04.

The plan based on growth in the agriculture sector by 4.2 percent, manufacturing sector by 7.8 percent, large scale manufacturing sector 8.8 per cent and small scale manufacturing sector 5.3 per cent next year.

The strong economic fundamentals as well as new venues including enhanced regional trade especially with India, Afghanistan and expansion in country's main economic contributor i.e. textile industry, the experts in the trade and industry are of the view that the economy has the potential to hit the targets set for the next financial year.

Majyd Aziz, a senior representative of the business community and the former chairman of Site Association of Industry feels that in fact the present or the projected figures of the revenue target does not translate the real strength of the national economy if the entire income generated from large segments of the economy were brought into tax net.

One of the reassuring factors is that our economy has arrived at a take-off point which is reflected into much more imports of machinery during the current year and the project figures of the forthcoming financial years.

He expressed the hope that the increased imports would help meeting the revenue target as well as overall economic reflected in the GDP growth target at 5.30 per cent. The current GDP estimates are now 4.9 per cent with an increase 0.4 per cent against the target of 4.5 per cent during the current year owing to better agriculture and large scale manufacturing performance.

For next year, the government has set the target of GDP growth of 5.3 per cent, the strong economic fundamentals would hopefully respond to achieve that target, Majyd said.

Currently, the most of the revenue collected from the existing tax payers while those out of the tax net enjoy the evaded booty.

The real irritant in the way of bringing the large size of the undocumented areas is the complexity of the tax regime and of courses the known characteristics of the tax collectors. The more simplification of the tax provisions, the more revenue collection would be the result. Apart from the simplification of the system, there is a need to bring a receipt culture in our society as cash purchase without receipt encourages the tax evaders to enjoy the pudding. For instance, as against the practice in the developed country, no body in our country bothers to ask for receipt from the bakery shot, meat, vegetable, or an array of small purchases. As soon as the small vendors and cottage industry is brought under tax net, the real size of the revenue collection would be much more and would go into government kitty instead of the pockets of the corrupt.