The Federal Board of Revenue’s blocking of the SIMs of all those who have not filed income tax returns may not yield as great results as expected, not, that is, if it is the only step it intends to take. The FBR has been the target of much ire recently, especially with the latest tax collection figures showing a Rs 34 billion shortfall, with an actual tax collection of Rs 7.38 trillion against a target of Rs 7.414 trillion. In Riyadh, while addressing the World Economic Forum, Prime Minister Shehbaz Sharif held up his government’s wholesale suspensions and transfers at the FBR as the centrepiece of its reform. He told the same meeting that there were huge revenue leakages which had to be plugged, and because of which Pakistan could quadruple its revenues. The ‘Mr Nice Guy’ approach does not seem to have worked. A scheme to bring retailers into the tax net seems to have fallen flat, as only 75 retailers have voluntarily registered under its scheme, which will presumably be followed by the compulsory registration of all those operating a business in six cities.
It seems that there is a strong incentive for most retailers to stay out of the tax net. One factor encouraging this is that the cost of paying bribes to a corrupt tax machinery is apparently lower than paying taxes honestly. Another is the problem that the money raised is embezzled by rulers, not spent on public welfare. With revenue destined to go in debt servicing, there is really little incentive to pay. The belief that the tax reforms are merely window-dressing for the sake of the IMF, which Pakistan wants to grant another package, in negotiations scheduled to take place in Islamabad this month.
Even without the assistance of complaisant taxmen, the SIM blockage can be overcome by those evaders bent on staying out of the tax net. If the FBR thinks that this measure is enough, it has better think again. However, if this is the first step of several, then it has a prospect of working. It is perhaps paradoxical that the first (and so far only) ex-President of a chamber of commerce and industry to become PM should act against retailers, but they should be glad that they have had such a good run. It is time for it to come to an end.
