Mother of all U-turns: Why is PTI protecting tax evaders instead of punishing them?

By Shakir Lakhani Published March 12, 2019

If the government really wishes to increase tax revenue, all it has to do is to give a deadline to these businesses. PHOTO:FILE

I suppose we should have expected it, being used to so many U-turns by now. Asad Umar reversed a good tax-collecting measure introduced by the previous government, a measure that would have brought many tax criminals into the net. Instead, bowing to pressure from the powerful auto industry, he has allowed non-filers to buy vehicles of all sizes. Non-filers, it should be noted, do not pay income tax nor do they file tax returns. By law, they should be punished, instead they are allowed to pay just 0.6% tax on the amount they spend to buy property or vehicles, or when they withdraw more than Rs. 50,000 from banks. The good minister should have increased the tax to at least one percent, to be levied on all transactions, as well as reducing the allowable limit of withdrawing money to Rs. 10,000. But it seems that tax evaders can get away with anything and everything in this Islamic republic.
According to another report, the PTI government is thinking of an amnesty scheme to let tax thieves enjoy the fruits of their illegal activities. Another amnesty scheme? Has Imran Khan already forgotten what he said about amnesty schemes less than a year ago? Will this be the mother of all U-turns? Amnesty schemes allow money launderers to whiten their ill-gotten wealth, at the same time making honest taxpayers wonder why they should pay up to thirty percent tax on their incomes, when looters take advantage of amnesties and pay only two percent.
A day after Finance Minister Asad Umar presented the recent mini-budget, a national newspaper carried this poignant news item “As revenue shortfalls bite, PM beseeches business leaders to pay taxes”. “Beseech”, meaning “beg”? Why does Imran Khan have to beg businessmen to pay what they have to pay, as per the laws of the country? In any event, businessmen alone cannot be blamed for the revenue shortfall faced by the nation. All governments (including the present one) are responsible for our predicament. The reasons why we are a poor country are many, first and foremost being the blanket financial immunity given to smugglers, agriculturists, unscrupulous importers, traders and others to loot the country.
Smuggling has flourished ever since the 1960s, when “bara” markets in Landi Kotal and other towns were allowed to sell smuggled goods like cloth and electronic items on which no duty or taxes had been paid. In Karkhano Bazaar of Hayatabad in Peshawer, you can see smuggled goods flagrantly displayed in thousands of shops. I once asked a shop owner there if he’d ever paid income tax or sales tax. I’ll never forget how he laughed when he said, “No tax collector dares come here, he knows he won’t go back alive”. All Imran has to do is to order a crackdown on this and the “bara” markets in all cities, and collect billions in sales and income tax every year. But I doubt if he has the wisdom to do so, considering that almost all smugglers belong to the province which his party has been governing for the past six years.
The same goes for our feudal lords (the agriculturists), who are exempted from paying income tax at all, despite getting virtually free water, besides having huge loans written off every couple of years. The biggest crooks among them are the sugar barons who are easily able to get elected to our assemblies and use their power to go on looting the nation. A tax of Rs.20 per kilo of sugar can yield more than a hundred billion rupees every year, as sugar production in the country varies between five million to seven million tons.
Unscrupulous importers (in connivance with Customs officials) deprive the government of billions every year. In a recent case, a container bearing goods described as “old and used auto parts” was examined and found to contain cellphones, tablets, satellite and dish receivers, CCTV cameras, copper refrigerators tubes, ball bearings, circuit breakers, finger print scanners, and dialysis machines. If the container had not been examined, the importer would have got away with Rs. 60 million. There are thousands of such cases every year, which are either undetected or deliberately allowed to be cleared by the corrupt Customs officials. Even when someone is caught, he is only made to pay the duty and a token fine. In such cases, the FIA should investigate all previous imports by the offender and make him pay duties and heavy penalties on those consignments as well.
Imran says he may create a new tax collecting authority in place of the FBR. But has he ever thought of investigating why the FBR is not able to deliver? Two cases come to mind. Many years ago, the Chairman FBR set up a team to monitor the sales of a famous market in Lahore. The shopkeepers became suspicious when they saw members of the team taking notes on the sales being made and estimating the stock of goods in the shops. Within a few minutes, the team was withdrawn, after the FBR chairman received calls from the ruling party MNAs. Another case is that of a restaurant in Karachi, whose owner contacted powerful people when the shop’s records were seized. Within a couple of hours, the tax authorities returned the computers and files. How can you expect the FBR to function in such circumstance? By all means, go ahead and create a new tax agency, but don’t expect it to succeed, unless it is headed by foreign specialists and managers. Why can’t we have this? We do have foreign coaches for our cricket teams, don’t we?
And what can the FBR do when the government itself does nothing to punish land grabbers and the mafia of builders? It’s the same old story, those who’re rich and powerful remain free, while the poor have their houses demolished without even adequate notice.
As for corruption, this government appears to be like a fish out of water. It is estimated that corruption in the country amounts to Rs. 12 billion per day. It’s been almost seven months since PTI came into power, yet they’ve done nothing to stop it (otherwise, there wouldn’t have been a revenue shortfall). They can take the first step to curb this menace by demonetizing 5,000 rupee notes, and all prize bonds (ranging from Rs. 1,000 to Rs. 40,000). This will make it very difficult for the corrupt to take bribes. Only those who have declared cash and prize bonds in their tax returns should be allowed to surrender the notes and bonds those who haven’t done so should be asked how they earned the amount.
Today, there are estimated to be five to six million businesses in the country but only a hundred thousand (or just two percent) are registered with the sales tax department. If the government really wishes to increase tax revenue, all it has to do is to give a deadline to all businesses (operating in offices and shops) to get registered with sales tax departments and pay tax. Again, this will require vision and determination, which unfortunately the finance minister does not appear to have.
It really isn’t difficult for the government to bridge the current deficit. Imran should really go after and punish those who are evading taxes, even if means punishing those who support his party. The choice is yours, PM Imran: take tough decisions, don’t surrender to the tax thieves, don’t give them amnesty, in fact punish them for their crimes and see how the revenue shoots up. Otherwise, you too will be remembered as just another mediocre leader who had the chance to change the face of the country but failed to do so. 

Shakir Lakhani

Engineer, former visiting lecturer at NED Engineering College, industrialist, associated with petroleum/chemical industries for many years. Loves writing, and (in the opinion of most of those who know him), mentally unbalanced. He tweets @shakirlakhani (