Rs.90 billion to be raised through on going tax surveys during the current financial year

Aug 07 - 13, 2000

Presiding over the meeting of the Ministry of Finance and CBR officials to review the progress on the ongoing tax survey in Islamabad last week, the Chief Executive Gen. Pervez Musharraf exhorted the participants that they must ensure an increase of Rs.100 billion in the revenues during the current fiscal year as targeted in the budget. He, however, assured that the ongoing tax survey for documentation of economy will continue as planned at all cost. The CBR will be provided full support in their task but they must come to the expectation this time, he added.

The Chief Executive declared that no compromise will be made on the issue of documentation of economy and the government will not be intimidated by threats by some leaders of traders community who had vested interest in avoiding the tax survey. Overwhelming majority of traders have accepted this — may be as a necessary evil — and were cooperating with the survey team. All should pay their taxes as per law of land and once this principal is enshrined in our society, the government can regain its economic sovereignty and can be in a position to reduce the burden of taxes and provide some relief to the poors and hard-pressed, the Chief Executive added.

The Central Board of Revenue(CBR) expects a collection of revenue of Rs.435.6 billion during 2000-2001 against the actual collection of Rs.345.31 billion during the last financial year — an addition of Rs.90 billion to be raised through on going tax surveys during the current financial year. They expect to increase revenue to Rs.550 billion in 2001-2002. The CBR officials assured the Chief Executive that these targets can be achieved provided the task of documentation of economy is carried out in all sectors of economy with full backing and support of Armed forces.

While the budget estimates for the current fiscal year are generally believed to be too optimistics, both the CBR and Minister for Finance Mr. Shaukat Aziz are sounding more than confident that will not only achieve but exceed the target fixed, Finance Minister told newsmen that the projected 24 per cent rise in tax revenue "was aggressive but not unrealistic" pointing out that without much effort this year there was a 17 per cent increase in revenues. If we don't plan aggressively we will never get out of this quagmire we are in, he added.

Expressing confidence that country is headed in the right direction Aziz said that "the entire government machinery will be dedicated to meeting the target set in the budget." He said that "the way to look at the targets is not to look at the year to year increase only but to see the tax collection percentage of GDP. In the developed countries its 30 to 40 per cent of GDP we only have 13 per cent. The developing countries average ranges between 18,20 or 22 per cent of GDP."

He underscored "in the year 1999-2000 which ended June 30 our collection of taxes went up by 17 per cent, so keeping that percentage in mind, 24 per cent increase in revenue with all the tax survey going on is not unreasonable". Aziz said "If we have fiscal autonomy and we reduce our deficit our reliance on foreign loans and domestic loans will reduce, pointing out that presently 55 per cent of our budget goes on debt servicing". Saying that "this is no way to live, no country can sustain itself like this, Aziz pointed out that "Every rupee people earn, 55 paisa goes to debt servicing. We have no fiscal space. We have to get out of this debt trap and this is where our salvation lies".

The tax survey, which involves going shop to shop, house to house and factory to factory to register all people who are capable of paying taxes. It is a nationwide effort covering 13 cities initially covering all major commercial and residential areas which are upscale. People will say it is aggressive, people will say it is unprecedented but the problems of Pakistan are unprecedented, Mr Shaukat Aziz added.

Looking from the other side we find that traders agitation against GST and tax survey has repeatedly paralyzed business activities in the country in response to call of strikes by their leaders during the last 2 months. Once the countrywide strike continued for over 4/5 days, the longest in the history of Pakistan. Gradually, however, the leaders — most of them having connection with political parties — are loosing their hold on the trading community who have started receiving survey forms. They however complain that government has not issued notifications to implement the various promises and assurances given to them for removing their fears and apprehensions.

It has been observed that there were many factors behind the current protest campaign. The traders had emerged as an effective pressure group in the wake of the PNA movement against Z.A Bhutto in 1977. They were later patronized by various governments for political ends which facilitated their access to bureaucratic and political circles. The emergence of Nawaz Sharif, who comes from a business-cum-industrial family, and the election of a significant number of trader-turned politicians as MNAs and MPAs is a testimony to the traders' political influence and clout which they had allegedly used for the promotion of their business interests by getting undue concessions

It is also said that such politicians corrupted the administration and bureaucracy by offering them bribe and costly gifts and looking after their other needs. They financed election campaigns of political parties who, in return, turned a blind eye to their illegal activities like hoarding, smuggling, profiteering and tax evasion. It was in this context that the traders launched a well organized agitation against the GST and tax survey drive. They want to conceal their actual earnings and business transactions to evade taxes. They have been evading taxes since long which has now become a culture among all traders, big or small. They do not want to come into the tax net.

It is said that it is easier for them to grease the palm of corrupt income tax and sales tax officials to evade tax than to document their business and pay legitimate taxes. The traders feel that with the documentation of economy they will have to pay many times more tax than what they have been paying in the past by bribing corrupt officials. They are opposing GST because they fear it would be used as incriminating evidence of their unreported earnings and the tax survey would expose the "wealth" they had concealed from the government to evade income tax and other levies.

Economic experts are of the view that policy-makers should ponder and come out with a comprehensive strategy to develop tax culture and to overcome such a situation in which pressure groups challenge the state machinery on the basis of their "exploitation" potential, besides suppressing the rights of the poor consumers.