The aim of the Federal Board of Revenue (FBR) to impose new taxes worth rupees 775 billion in the next fiscal year (FY) is once again avoiding the real issue. The statement of Chairman FBR Shabbar Zaidi in this regard tells us that the tax collection authorities are not addressing the loopholes in the tax regime. Instead, to comply with the guidance that FBR has received on the revenue target, the FBR is introducing more taxes. Adding more taxes for revenue increase will harm the particular sectors that the new taxes will be imposed on.

Moreover, Zaidi stating that someone in tax net does not mean that s/he is discharging her/his tax responsibility puts a question mark on the efficacy of not only the present revenue collection, but it also makes one suspect if the soon-to-be-introduced taxes will prove enough for the government to reach the intended targets in revenue collection.

It is true that the government has no other choice but to charge more taxes as the bailout packages of International Monetary Fund (IMF) always rely on two things: removal of subsidies and levying of new taxes. However, the IMF does not take factors like people’s capacity to pay the suggested taxes into consideration. There are examples of countries that complied with IMF’s conditions on the imposition of new taxes with disastrous effects on local industries and certain segments of the population.

The new taxes that will are to be imposed in the FY year should be levied in a way that does not harm people and industries as the government will be eliminating tax exemptions in FY 20. The overall plan will be shared with the public soon; it can be said that the upcoming budget will not be a people’s friendly one.

Coming back to the issue of revenue increase, saying that imposing new taxes might not increase revenues for the state. Because the main problem that virtually every person with a little knowledge of taxation knows is the collection mechanism. Every year FBR sets itself an ambitious target of revenue collection; every year, it fails to achieve it. Until and unless the government make the revenue collection system better, the gap between revenue collection vis-à-vis targets will remain significant.

Bringing people under tax net and putting a stop to tax evasion are the two most important steps that FBR needs to take even if it imposes new taxes. Under the current mechanism of revenue collection, the intended targets by introducing new taxes are difficult to achieve if FBR does not take the factors aforementioned into consideration.