Dr Waqar Masud, the newly appointed Special Assistant to the Prime Minister (SAPM) on Revenue believes that he has “scope of 7.4m new potential filers.” Dr Waqar’s numbers of these potential filers come from the data that the Federal Board of Revenue (FBR) has gathered from various sources. It is excellent that the FBR officials have identified such a large number of potential tax evaders with multi-million dollar transactions. The revenue collection authority must handle the audits without wasting further time. All efforts must be made to bring these people into the tax net. Moreover, the FBR must punish those involved in tax evasion or any other unscrupulous practices.
However, identifying individuals with taxable income is one thing. Bringing them under the tax regime is a different ball game altogether. It is the latter exercise that the FBR often fails in completing. FBR’s major reasons for failure include the amnesties and immunities that the government offers to the evaders. Unfortunately, irrespective of whichever party rules and despite the firm resolve of the political leadership to widen the tax base, at the end of the day, they prefer the policy of appeasement.
Dr Waqar and other heads in the tax department and government must also recognise that the structure of taxation in the country is inherently regressive. It is this regressive framework that discourages people from becoming filers, though this is not an excuse. Therefore, the first task before the SAPM on revenue should be the rationalisation of the taxation structure. Also, the lack of human resources is another big challenge that the FBR faces. The special advisor must note this, as only recently, the FBR started disposing of 310,000 tax audit cases due to lack of enough human resource and capacity. If these issues are not addressed, then bringing the millions of potential individuals having taxable incomes into the net is not practical.