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Matter of low tax returns

Matter of low tax returns

According to newspaper reports, at least 15,116 companies have paid no tax in financial year 2016-17 due to various valid or invalid reasons. A total of 1.2 million taxpayers are registered with the Federal Board of Revenue and regularly file their returns, among which 30,875 are from the corporate sector. The total number of companies registered with the Securities and Exchange Commission of Pakistan is 81,493, but 15,116 have failed to pay anything to the government.The problem starts with blind applications of laws which not only slows down the economic progress but also discourages the genuine taxpayers to file the returns. The profit and loss is the integral part of any business organization and a mechanism is required to deal with loss-making enterprises which need a fair chance to function without oppression and suppression. The situation on the ground is always different from the situation in theory. The problem of tax collection is chronic and could not be solved in one go. If there are loss-making organizations, there are others which make huge profits throughout the year but are not willing to pay anything to the nation.

In the prevailing situation, the government needs to make a three-pronged strategy to increase its revenue collections. First, it will have to slash tax rates and the number of taxes which are applied across the board without realizing that the effort will backfire at the end. When tax approach is unrealistic, a taxpayer will shy of giving anything to the government. Second, a systematic approach and procedure is required to increase the tax net as squeezing the genuine taxpayers will slow down economic activities in the country. Third, a fair coordination is necessary between government officials and the entrepreneurs which should not be exploited from any side. The blind application of laws not only slows down economic activities, but also curtails the volume of tax collections. Therefore, the marginal rate of tax needs to be slashed and efforts should be made to broaden the tax base. To increase the tax compliance, there is a need to launch capacity building programmes for tax officials and tax collection procedure also needs to be simplified. The tax filing system should be as simple as a utility bill payable to any designated bank.

It is unfortunate that despite having knowledge and vision, the policymakers have failed to devise a fair tax system which should push the economy forward instead of pulling it back.