The outdated and repressive tax structures at federal and state level have led to further fiscal chaos and how this came about is discussed in On the way to flat, low, broad and predictable taxes"(PRIME Institute, Islamabad, published December 2020, available free of charge at: https://primeinstitute.org/towards-flat-low-rate-broad-and-predictable-taxes/). A webinar on this book took place on July 10, 2021, which was jointly organized by the publisher (PRIME Institute) and. was organized Pakistani Social Science Forum, which was launched in March 2021 by young Pakistani academics to promote and involve academics and researchers from various disciplines of Pakistani origin. The two hour session (originally scheduled for one hour) provided an interactive discussion between aspiring academics and Pakistani researchers who have done research in every area of taxation.
The main goal of Pakistani Social Science Forum includes highlighting interdisciplinary science in the social sciences (economics, political science, international relations, history, literature and law, etc.). The platform organizes 14-day research presentations and meets via Zoom. We invite renowned academics, practitioners and experts from various fields to briefly present and discuss a pre-published paper / book, followed by an interactive session with audiences from different backgrounds. It aims to learn and produce constructive and original research through joint reflection and discussion of ideas and solutions in order to develop a healthy academic environment in Pakistan. The aim is also to make scientific research in the social sciences accessible to a broad public in an easily understandable format.
One hour zoom session (actually more than an hour) was divided into three parts. For the first 25 minutes, the moderator (this author) shared the research book that it was co-authored with Huzaima Bukhari. In the second part (10-15 minutes) the team member Muhammad Nadeem becomes the server of Pakistani Social Sciences Forum, presented its review of the book. The last part of the session was an interactive question-and-answer session in which the participants actively participate and contribute to the discussion. The entire recording is available at: https://www.facebook.com/PKSSRN/ and https://www.youtube.com/channel/UC35BRwX6dJugzyV6X8qKkwA.
The Nook is unveiling a "pilot" of low and flat rate taxation of the retail sector with a potential of $ 5 billion, while the Federal Board of Revenue (FBR) will have total taxes of Rs. 4732 billion in Fiscal Years 2019-20 and 2019-20 Rs. 3998 billion or that includes the total sales tax collection of Rs. Rs. 2189 billion and Rs. 1596 billion (after withholding accumulated refunds of over 500 billion rupees as a legacy) or surprisingly, the Data Released by the Treasury Department in relation to Federal and Provincial Financial Operations for Fiscal Year 2019-20 still shows the collection of FBR in Rs. 3998 billion FBR representative on September 2, 2020 before the Standing Finance Committee of the National Assembly confessed that the actual obligation of income tax and sales tax refund as of June 30th, 2020 Rs. 710 billion (sales tax 142 billion rupees and income tax 568 billion rupees) and this remained unpaid and for fiscal year 2020-21 only, refunds of Rs. 251 billion were made were paid.
According to a report in the 2020-21 fiscal year, the FBR had "Rs. 251 billion in reimbursements, 85% more than last year. This includes Rs. 209 billion in sales tax refunds report further shows that: "FBR has successfully met its assigned revenue collection target of Rs 4691 billion for 2020-21." The third revised revenue target, as mentioned above report of Rs. 4691 billion are correct. The second revision was Rs. 4717 billion and FBR topped it by Rs. 14 billion.
According to finance minister, Shaukat Fayaz Ahmed Tarin, and the Prime Minister (Minister of State) Special Assistant for Finance and Revenue, Dr. Waqar Masood, "around 7.4 million potential tax evaders have been identified and are being prosecuted." The reality, as the above book shows, is that the income tax gap is $ 19 million and the sales tax gap is about $ 2.5 million. Currently, income taxpayers are on the list of active taxpayers (ATL) are 2,775,349 on June 28, 2021 and the majority have filed no or less than taxable returns. The fact is hidden in the Press release of the FBR.
Currently, the entire taxable population and even those with no income or income below the taxable limit, as mobile users, pay an upfront and adjustable income tax at source, but FBR, lenders / givers / media call the Pakistani population tax evaders. That is very unfortunate. If this had been the case, how did FBR levy so much withholding taxes (over 45% of the total collection at the import level alone), which, as stated in the webinar, is strongly inhibiting growth?
Pakistan needs to collect taxes where they are due and not upfront or from those who are not taxable. Unfortunately, the tax of 75 Paisa on cell phone calls of more than 5 minutes is inconsiderate towards the poor, impractical for operators and without consequences for FBR's efforts. The state must allow people to pay low taxes and have more capital accumulation that will accelerate high and sustainable growth of 7-9%. This is only possible through simple taxation, as outlined in the book. Relieving small and medium-sized enterprises (SMEs) as manufacturers up to a turnover of Rs. 250 million in the Finance Act, 2021 Finance Act 2021 should have also applied to retailers and others, without any discrimination. In order to collect Rs, low tax rates are required on a broad basis with simple compliance procedures. 8 trillion by 2023.
On our inquiry about sales tax, Dr. Ehtisham Ahmad, renowned economist with extensive experience in restructuring tax systems in various countries: “It can also create incentives for larger companies to pretend to be SMEs or to hide value chains through transactions with undetectable SMEs. Much depends on how the GST / VAT is applied. The Mexicans have solved the problem by effectively lowering the threshold for VAT registration to zero and introducing complete value chains without the possibility of manipulation by the SMEs or the larger companies that use the SMEs (important for example in the case of textiles) " . He also sent us:
“Michael Best's proposal to introduce a sales tax for bat nationals like Pakistan could increase revenues, but it is absurd. (Best was strongly urged by Ijaz Nabi to chair the EAC Income Subcommittee). While it could boost revenue in the short term, it would destroy the manufacturing base much more completely than the stupid capacity tax measures that are put in place from time to time to meet temporary revenue targets. The third best suggestion also requires a return to the tax auditor model (old excise tax method) as it requires a review of the quantities produced and is the opposite of the information-based management model that minimizes contact between the tax administration and taxpayers! ! This will likely take the country back to the Stone Age – maybe that's the secret agenda of foreigners like Michael Best !! "
This is the uninterrupted dirty story of our tax reforms and flawed tax policies to date under the PTI government – courtesy of the International Monetary Fund (IMF), Michael Best and Dr. Waqar Masood, fully revealed in the Finance Act 2021. According to the opposition (split and pulled on smugglers, especially Pakistan People Party and Pakistan Muslim League (Nawaz)) allegedly happened with fraudulent intent. That claim may be political, but the fact remains that they also miserably failed to put forward their agenda of accelerated, higher and sustainable growth of 7 to 9 percent or, following a debate, the one put forward by the Pakistan Institute of Development Economics (PIDE) to take over your website: https://pide.org.pk/Research/PIDE-Reform-Agenda-Report.pdf. (PIDE reform agenda for accelerated and sustainable growth). However, none of the members of the National Assembly mentioned it in the budget debate.
The PTI government has also approved the proposals of the Federation of Pakistan Chambers of Commerce & Industries (FPCCI) to adopt the model presented in Towards Flat, Low-rate, Broad and Predictable Taxes (PRIME Institute, December 2020, available free of charge at: https: // primeinstitute.org/towards-flat-low-rate-broad-and-predictable-taxes/), which could have promoted rapid, higher and sustainable and inclusive development for the benefit of all segments of society, resulting in new investments in all sectors, wealth and Self-employment would have resulted in -trust and thus total revenue at the federal level alone of Rs. 8 trillion in two years.
The conclusion is simple, as mentioned in: FBR: FATF challenges, Daily Times, March 14, 2021: It's shocking that only two political parties out of 27 parties registered with the FBR have filed income tax returns for the 2020 tax year and 127 with the Electoral Commission of Pakistan, despite Section 114 of the Income Tax Ordinance, 2001 making this mandatory. How can we expect the rule of law in Pakistan when 125 political parties are committing blatant violations of Article 5 (2) of the Constitution? They continue to beat FBR but fail to comply with the order that "Obedience to the Constitution and the law is the inviolable obligation of every citizen, wherever he may be, and of every other person in Pakistan for the time being.
The result of the above article was the withdrawal of the proposed exemption for political parties as it could have been a blatant violation of Article 17 (3) of the Constitution and the rule of law and further tarnish Pakistan's image if we have been graylisted since 2018 It is now up to the FBR to force all political parties to submit tax returns for the 2020 tax year and the last five years and must be checked and sanctioned after a proper hearing. After the FBR has levied taxes satisfactorily, albeit not in full, all parties need to reflect on internal reforms and compliance with all applicable laws, both verbally and in writing. The judiciary must also improve its functioning in the area of justice and enforce the fundamental rights of citizens, rother than preferring the rich, as explained in Regularization for the rich, demolition for the poor, Daily newspaper, January 13, 2019.
The PTI government must establish national consensus on issues of national interest and involve all political parties and jointly ensure that all institutions perform their functions efficiently within the limits provided for in the constitution. The opposition must show that it respects the mandate of the people and conforms to democratic norms. The PTI government must stop exploiting all less privileged and oppressed citizens from July 1, 2021, the oppressive taxes such as 75 Paisa for cell phone calls of more than 5 minutes and ten percent for mobile use from July 1, 2021 and high taxes are exposed to a lot of food and energy and everyday objects of citizens. The tax breaks for seniors, special people and researchers and teachers are to be restored – for details see in Budget 2021-22 and unpredictable taxation, Daily newspaper, June 13, 2021.
Even the FBR magic artists have failed to ensure that exporters of services taxed at 1% (a commendable change to equate it with goods exports) include the credit on their accounting records. The self-appointed experts who became part of committees to eliminate anomalies and technical problems (sectoral, etc.) have not even managed to close these obvious loopholes, suggesting a growth and investment friendly tax policy that helps create jobs from agriculture to high-tech knowledge-based initiatives instead of focusing on bricks and mortar. You need to be reminded of this Pair of the great poet and thinker Dr. Mohammad Iqbal:
Jahan-e-Taza Ki Afkar-e-Taza Se Hai Namood
Ke Sang-o-Khisht Se Hote Nahin Jahan Paida
New worlds draw their splendor from thoughts, completely fresh and new
A world was neither built nor grown out of stones and bricks.
Federal and provincial governments in Pakistan have shown a lukewarm stance in restructuring the country's tax system to achieve efficiency, equity and economic growth. Complex tax laws, complicated procedures, reliance on easy-to-collect indirect taxes, poor enforcement, inefficiency, incompetence and corruption are the main drivers of low tax collection.
Instead of broadening the tax base and simplifying laws, federal and provincial governments are offering amnesties, immunities, tax-free perks and perks to powerful sections of society. Ordinary businesses and citizens suffer from this political mindset. The research study discussed above advocates a radical reorganization and restructuring of the entire tax system and proposes broad, low, uniform and predictable taxes, individual ones national tax authority and national finance court.
Tax reforms implemented so far have been mostly patchwork and have proven to be in vain. Tax reform commissions and advisory committees set up to reform the system have proven unsuccessful in suggesting remedies to cure the incurable or otherwise curative symptoms rather than addressing the root causes.
The reforms, including the world Bank financed Six-year Tax Administration Reform (TARP) project failed to encourage people to volunteer tax compliance. The number of taxpayers has decreased since 2003 (with the exception of those submitting income below the taxable limit for the payment of negligible amounts for inclusion on the active taxpayer list to avoid higher withholding tax revenue). In 2020, the federal government made a $ 400 million loan for the Pakistani Increases Sales (PRR) Project. It should be noted that the total cost of Pakistan increases revenue (PRR) The project is valued at $ 1.6 billion, including $ 1.2 billion and IDA funding of $ 400 million. In line with the federal government, the government of Punjab also decided to borrow $ 304 million from the World Bank for tax reforms and was approved by the planning commission on September 16, 2020 Fail. The only viable option for meaningful change is to replace the existing tax system with a lower, uniform and predictable tax system that is simple, pragmatic, growth-oriented and broad. This is the time when the government and all political parties should give serious thought to creating a prosperous country and an egalitarian state – an economic powerhouse with 220 million people who care for their global affairs for a safer, more equitable and peaceful place for that of humanity as a whole, especially after the US and its allies withdrew completely from Afghanistan after suffering a humiliating defeat and leaving the region in turmoil.
Dr. Ikramul Haq, Advocate Supreme Court, specializes in constitutional, corporate, media, IT, intellectual property, arbitration and international tax law. He founded Huzaima & Ikram in 1996 and is currently its main shareholder and partner in Huzaima Ikram & Ijaz. He studied journalism, English literature and law. He is editor-in-chief of taxation. He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Guest Senior Fellow of the Pakistan Institute for Development Economics (PIDE).
He has authored many books with Huzaima Bukhari, including Tax Reforms in Pakistan: Historical and Critical Review, Towards Flat, Low Interest, Broad and Predictable Taxes (Revised and Expanded Edition, Pakistan: The Mystery of Taxation, Towards Flat, Low Rate, Wide and Predictable Taxes (revised / expanded edition of December 2020), Law and Practice of Income Tax, Law, Practice of Sales Tax, Law and Practice of Company Law, Law and Practice of Federal Excise Tax, Law & Practice of Sales Tax Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Guide to Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
The most recent publication, co-authored with Abdul Rauf Shakoori and Huzaima Bukhari, is Pakistan Tackling FATF: Challenges & Solutions
available at: https://www.amazon.com/dp/B08RXH8W46He is the author of Comment on the double taxation treaties signed by Pakistan, Pakistan: from hash to heroin, its continuation Pakistan: From Drug Trap to Debt Trap and Practical Guide to Income Tax. He is a regular columnist for many Pakistani newspapers and international magazines, and has authored over 2500 articles on a variety of topics of public interest, which are published in various journals, magazines and newspapers both domestically and abroad.