Tax obstruction and economic fluctuations in Pakistan

Muhammad Nadeem Bhatti

Taxation refers to compulsory or coercive money collection by a levying authority, usually a government. The term "taxation" applies to all types of involuntary levies, from income to capital gains to estate taxes. Though taxation can be a noun or verb, it is usually referred to as an act; the resulting revenue is usually called taxes.

In economics way, a leakage is a diversion of funds from some iterative process. For example, in the Keynesian depiction of the circular flow of income and expenditure, leakages are the non-consumption uses of income, including saving, taxes, and imports. In this model, leakages are equal in quantity to injections of spending from outside the flow at the equilibrium aggregate output. The model is best viewed as a circular flow between national income, output, consumption, and factor payments.

Savings, taxes, and imports are leaked out of the main flow, reducing the money available in the rest of the economy. Imported goods are one way this may happen, transferring money earned in the country to another one.

Leakage is a common problem involving TNCs (Transnational corporations). Large companies have factories or production facilities in less developed countries, these factories create wealth for the company which is then not transferred to the economy of the host country and instead to that of the corporation involved. The economic value of goods and/or profits lost here is leakage.

Pakistan is a country having the total population of tax payer more than 12 hundred thousand registered companies. The need of the hour is to bring maximum companies into the Tax registration to get rid of IMF because there is a big loss in economic stability due to worst kind of reduction of Pak rupee with compare to US dollars. It was a highest jump towards reduction of Pakistani currency to get devaluate. Passive policies could not stabilize the values of export and agriculture. Although Pakistan is known as Agricultural country and the 70 percent of total area of Pakistan is cultivated with different seasonal crops.

As an instrument of national policy, the individual income tax has played different roles in different countries at different times. In most countries it has been used to redirect economic decisions through preferential treatment of various activities. It can also act as a stabilizer against economic fluctuations because its effect on purchasing power varies inversely with changes in income and employment. Regarding income taxes on corporations, nearly all countries assess them, but the provisions and rates differ widely. Since industrialized countries generally have larger corporate sectors than less-developed countries, corporation income taxes in developed countries tend to be greater in relation to national income and total government revenue-except in major mineral-producing areas of less-developed countries.

Motivational activities have always played vital rule to convince a person to deposit a selective amount from his gross money towards government revenue collectors or collection centers. In this regard industrialist wants peaceful atmosphere, each and everything equalized and some better occasions to promote his product in the sense of export to enhance the GDP of existing country.

Moreover tax motivationalist always tries their best to show a horrible face of FBR and tax collection values and route. So they alarm them to must be given under hand something to them regarding this Act, they will handle all the hurdles coming toward him from tax department. Planning and development are necessity to enhance a good progress of an assignment. FBR has made the law article 38 with police and magisterial powers they can enter into a centre by hook or crook generating a worst pressure upon industrialist so he felt this ridiculous practice as his full insult upon this fist. Although the members do not corporate with them moreover these are the first face of tax payer person whom pays withholding sale tax and all more taxes to the Department. This worst impression does not leave a good impression upon tax payer so he decided that department is a cunning enemy which exploits the tax payer. If he make a comparison with other countries a tax payer given valuable respect in those societies.

But in Pakistan there are different kind of taxes and different kind of tax payer like steel mills which work twenty four hours. First official shift depends upon 9 to 5 which shows that they produce a certain level of steel. In this practice they have to face worst kind of load shedding but as soon the official time of department come over they start their mills by the power of heavy generators. For Department the only accountability to access their tax and working capacity is their billing meters. So they had to access their approximate 5 hour working capacity for the taxable goods to be paid as a tax. But the remaining hours which are the most running hours are automatically disguised by the department because the department time is 9 to 5.

Although this trick of crown the members of department has advised them strictly In this regard they don't forget to receive their monthly payments from these Steel mills.

Tax leakage refers to losses of revenue through the multitude of loopholes that riddle the financial system. For example, if a country hikes a particular tax, then people will scramble to shuffle round their assets and income in order to avoid it. Or they may simply move them offshore, meaning Government revenue will leak away. To enhance the better values to collection of taxes from industrialist to a common man there should must be given them privilege and industry of the month and year awards.

But FBR still does not understanding these facts of earth which can enhance their value too. People are crying to collect their VAT (value addition tax) but department does not take it seriously. So the capital of industrialist get shrink but he had to pay not less than previous tax returns. In this case if in other ways they have to face their name into scrutiny system. Perhaps there is another way, a door of corruption by the Assistant commissioners and tax auditors.

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