Taxation has always been a vital part of any modern society. From time immemorial, we have seen governments taxing their citizens in order to finance their expenditure and for other constructive purposes. The tax structure of any country plays a pivotal role in the country’s economic development. Revenue collection is not the sole purpose of tax system but it is also a tool that is utilized to reinforce or eliminate activities and pursuits that are determined by the legal system.
It can be said that a flawed tax system of Pakistan is a primary reason for the persistent budget deficits that Pakistan has to face every year. Apart from the fact, the government is adopting a nonserious attitude in reducing the losses of the public sector enterprises such as PIA, Pakistan Railways, and Pakistan Steel Mills. Moreover, Pakistan is borrowing from international financial institutions is also a direct consequence of its failure to collect significant amounts of tax revenue. Hence, if Pakistan is able to increase its tax revenue significantly, she shall definitely be able to avoid borrowing from institutions such as World Bank and IMF that impose tough conditions.
In Pakistan, no one ever convicted or sent to prison on the matter of tax evasion. There is a direct need to impose strict legal implications upon those people who evade tax at a high level. The inland Revenue commissioner should be given legal power or Government can give instructions to the police to act on the advice of the commissioner.
It is commonly observed that in FBR every single and common letter or document needs the signature of the Commissioner, Additional commissioner, Deputy Commissioner and Assistant commissioner. This results in the wastage of much time and makes system and performance weak of FBR as well. Substantial rights and powers should be given at every level. However, the critical matter should be approved by more than two officers including the Commissioner.
Corruption is the reason due to which a hefty portion of our tax revenue is wasted away and is not spent on social development and national infrastructure projects. Some of those measures can be to make sure that no hurdle is put in the path of the greater tax collection in Pakistan:
I. Firstly, the customs department which is heavily involved in the under-invoicing and incorrect declarations should be revamped at war footings.
II. Besides this competent and dedicated personnel should be hired. Most importantly the hearing should be made solely on merit so that deserving and clean people could serve the country.
III. Furthermore, the people who make up the tax machinery should be held accountable and their performance should be monitored regularly. An intelligence division should be made within the Directorate Intelligence and Investigation, in order to keep a check on the employees.
IV. Moving on, any abuse of authority if observed should be punished suitably. In order to come with the proper environment in which everyone does his own work and do it properly, the senior management should set an example for the juniors.
V. Plus to generate honesty and reward hard work in the tax machinery, anyone who is doing good work should be given incentives plus anyone who uncovers any major tax evasion or a scam should be given 25% of the detected amount.
Hence, measures like these can lead to the creation of a controlled environment in the tax machinery of Pakistan that will ultimately lead to the increase in tax revenue being collected and a lot less money being wasted due to corruption.
Furthermore, in today’s environment, it is crucial for the FBR to conduct strong audits in order to ensure that the tax returns filed by the taxpayers on self-assessment basis are accurate and complete and these returns do not in any way understate the income of the taxpayer.
If the base of Taxation in Pakistan is not rectified and Individual’s with high incomes are not subjected to Taxation ( big fishes ) then it’s a threat to Pakistan’s economy. The economy runs on the taxation and for long-term survival involvement of FBR in Tax, corruption should have to be solved.