The government has indicated that the next financial year will see a clampdown on tax evaders. The decision to put those involved in tax crimes behind bars indicates that the government will adopt a harsher approach to meet revenue targets. The practice of imprisoning tax evaders is not an innovation; many countries put such persons in jail and this will discourage people to stay away from tax pilferage.
Certainly, it was the lack of such regulations in our tax system that more than half the population is composed of non-filers. Introducing such penalties will decrease the refusal rate to come into the tax net. Base broadening will allow the state to raise more revenue without raising tax rates and without harming the economy and national competitiveness. Such measures will certainly help the government in achieving the financial targets but in the medium and long term.
However, the statement of Finance Minister Shaukat Tarin that the people are not burdened with additional taxes in the upcoming budget does not amount to the provision of solace to the masses. Real relief will only be provided if the government readjusts the system and reforms taxing completely. Is readjustment the plan under consideration? Perhaps that is not the case, as the government intends to forgo the increase in taxes for one year only. Ordinary taxpayers will be better off in the true sense provided the government introduces a better tax regime.
The government must work on improving microeconomic indicators. It should focus on increasing people’s purchasing power and reducing prices through decreasing the sales tax as the tax net widens. Citizens’ enhanced purchasing power will encourage them to spend more, thus promoting economic growth as well. It is about time we give people the ability to save more by reducing indirect taxes. The government needs to shift from the regressive taxation system and introduce a progressive one so that the higher income earners start paying a higher proportion of their income as taxes.