Abdullah Sheraz - On the eve of New Year, Prime Minster Nawaz Sharif has wisely scotched all talk of another tax amnesty scheme for the traders. The black economy conundrum gets more and more convoluted in the country and the haze doesn't seem to lift over the years. Prime Minster Nawaz Sharif in his speech on 1st January reiterated his governmentcommitment to widen the tax net, but as we now know the PML-N government doesn't have a go to plan to bring five million traders under the tax net regime.
The government is fighting the problem under the influence of the art of fog clueless and directionless and even rudderless not knowing a bit where to start. The manifestation of black economy has myriad contours and innumerable strands. With the tax base remaining negligible, the war cannot be limited to finding the cash parked in the pockets of five million traders who never bothered to pay taxes, but requires an all-out declaration of war to unearth it and put deterrents in place to bring them in the tax net. By announcing second tax amnesty scheme within two and half years, the PML-N government wants to stave off criticism that it encourages tax evaders by coming up with quasi-amnesty schemes from time to time.There is no justification for latest amnesty scheme. Each past amnesty scheme had amounted to a gilt edged incentive to keep tax dues black, or unaccounted, and pay it, if circumstance so forces, in the next amnesty scheme. Nor have these schemes yielded large revenues. Under the current scheme all such traders who haven’t filed any tax returns in their lives till date will be able to turn their black money into white by paying just 1 percent tax on their income. The scheme will be for two years from 2016 to 2018. The government has introduced three tax slabs in the scheme. In the first slab, 0.2 percent tax will be applicable on sales up to Rs. 50 million. In the second slab, a fixed amount of Rs. 100,000 will be deducted as tax for sales between Rs. 50 million and 250 million with an additional 0.15% tax on the total sales. In the third and last slab, tax of Rs. 400,000 with an additional 0.1% tax will be deducted for sales above Rs. 250 million. The details indicates the government will not be able to reap maximum benefits, as it is offering incentives to the traders without proposing penalties on those who will opt to stay out of the tax net. Those who would who will opt to stay out of the tax net perhaps would wait for the next better tax amnesty scheme.
It seems the government has bowed its knees before the mighty traders, who perhaps finance its election campaign. In an unexpected move the government has proposed exemption from audit for all those who will avail themselves of the amnesty scheme. As a consolation prize for opting the scheme the government has decided not to includetheir names in computer balloting for the selection for audit.
It is evident from this more of a kind no tax payment scheme that such amnesty schemes demoralize the honest taxpayers and provide impetus to tax dodgers who lately have been growing at a faster pace. The size of the black economy in the country has swelled to over 60 per cent of the documented economy.The tax evaders hooked on ill-gotten wealth for the years know for certain that after every two or three years, there would be an amnesty scheme giving them a chance to get their income whitened.
The governments time to time reward non taxpayers on the contrary, no relief of any kind is provided to the honest taxpayers who are rather subjected to harsh taxation measures either it is Gas Infrastructure Development Cessor quoting Nawaz Sharif from one of his speech in 2011“If we come to power, we will cut corporate and sales tax to 10 per cent while import duties will be reduced to 5 to 10 per cent.” As the time passed all his promises vanished in thin air over the past two and half years.
The government from the failure of previous tax amnesty schemes should realize that amnesty schemes cannot be used as a measure to raise revenue. Practical and workable steps are need of the hour to deal with tax evasion. Plus the notorious statutory regulatory orders (SROs) culture also needs to be abolished. There was no economic justification for concessions because favors were mostly given to friends, political cronies and powerful elite. An honest and just taxation regime is need of the hour for sustainable economic performance.
The Writer is a freelancer based in Lahore