Increasing the tax revenue network has been one of the government’s biggest priorities since coming into office. There have been several amnesty schemes, extension of tax filing deadlines and a number of other incentives. However, while the tax net has increased, the failure to meet goals of expanding the net has led to an increase in taxes instead.
This has been brought to light by the Islamabad Chamber of Commerce & Industry (ICCI), which has urged the government to improve the taxation system to increase the number of taxpayers instead of putting more burden on the existing taxpayers. The ICCI has suggested many recommendations, which include self-assessment programmes and mechanisms, in which people would be willing to pay taxes based on their own comfort level, and seminars to give orientation to taxpayers for filing tax returns, Weboc system and several other aspects.
While not all of these recommendations are feasible, it is true that the government has to figure out a way where taxpayers are incentivized rather than discouraged. This is unfair particularly to the business community, which brings in a large share of the revenue, and has performed very well in terms of payment of taxes. The business community is contributing significantly to the tax revenue generation—the Federal Board of Revenue (FBR) achieved a historic level of tax revenues of Rs4,732 billion in 2020-21, surpassing the revised target of Rs4,691 billion, which was 18% higher than last year. This performance should be rewarded, at the very least by getting on board and consulting more members of the business community, rather than being punished.
Even if mechanisms like self-assessment programmes sound a bit too far-fetched, the idea in its essence is a simple one—there is a need to bridge the gap of trust between the government and taxpayers. Considering how lengthy, tiresome and confusing the process is currently, this could be a way to encourage more people to come under the tax net. An additional layer of surveillance can be facilitated through plans to use NADRA’s database for identifying evaders and avoiders. The taxation system needs an update, and given how the business community seems to be performing exceptionally when it comes to the payment of taxes, now is the time.