Tax amnesties are not the answer

Shakir Lakhani

If there is one thing the Pakistan Tehreek-i-Insaf government is known for, it is the many policy U-turns it has taken in its first eight months. There have, in fact, been so many U-turns that the ordinary people can no longer tell whether the government is going to follow a certain policy or end up changing it. They don’t trust anything the ministers say when they blame the previous government for their problems.
Prices going through the roof? Of course, Nawaz Sharif is responsible for that. Seeking a bail-out package from the International Monetroy Fund? Blame the previous government. Unemployment is on the rise? Who else but the PML-N government caused it? Stock market doing poorly? Supporters of Nawaz and Zardari are selling shares in a conspiracy to hurt the incumbents. Rupee losing ground to dollar by the day? The anti-PTI people are buying dollars.
Fortunately for the government, some of the PTI voters do see the PML-N hand in PTI’s failure to deliver on its manifesto promises.
One such person recently told me that bureaucrats were being paid by the PML-N and that they were not allowing the present government to function. Another said the judges who were throwing out cases against PML-N men were themselves corrupt. A Whattsapp message doing the rounds actually names honourable High Court judges and accuses them of being servile, lacking a conscience and being shameless. The irate author asks rhetorically whether the 220 million people of Pakistan are going to let them be or seize their destiny.
It is less than a year since Imran Khan and Asad Umar opposed a tax amnesty scheme proposed by the previous government tooth and nail. Both of them questioned the government’s motivation and insisted that such amnesty schemes benefit only the corrupt. They said proposing such schemes was an insult to the honest taxpayers. Why, they asked, should anybody pay up to 30 per cent tax on their incomes when they see tax-evaders being allowed to whiten their illegal incomes by paying only two per cent? Imran Khan even promised to scrap the amnesty scheme and go after those who had benefited from it. He may not have known at the time that one of the beneficiaries was going to be his sister. Needless to say, the prime minister and the finance minister have taken another U-turn.
The government is proposing an amnesty scheme of its own. The last amnesty scheme raised only Rs 97 billion in taxes. If the government expects to raise Rs 500 billion this time, chances are it will be disappointed.
And yet, raising tax revenues is not that difficult provided there is a will. All we have to do is to learn from the enemy. An Indian in UK once told me he bought a motorcycle for Rs 30,000. The very next day an official from the tax department visited him, asking him to prove that he had bought it with legally earned money. In Pakistan, a non-filer can buy a luxury vehicle worth Rs 100 million without the FBR even noticing it. In India, income tax inspectors have been known to go to wedding dinners, photographing the ladies and making estimates of the values of jewelry worn by them, to determine if they or their husbands earn enough to buy the jewelry. Indian tax officials in disguise routinely visit shops and restaurants and make arrests if receipts are not issued for any transactions. They have the authority to enter homes and inspect TV sets, air-conditioners and refrigerators. They can check if these have been declared in the owners’ tax returns. In Pakistan, on the other hand, smugglers have a free hand, knowing that they cannot be touched even though their activities have resulted in closure of thousands of factories. Agriculturists (who dominate our assemblies) pay virtually no income tax, they get water at nominal rates and every few years they get bank loans written off.
So, when small businessmen see this, they have a right to feel bitter and wonder why they ever registered with the income tax department, paid their taxes and were harassed every year by tax officials. Who can blame them?
The writer is an engineer, a former visiting lecturer at NED Engineering College, an industrialist, and has been associated with the petroleum, chemical industries for many years