The focus of the IMF review team currently in Islamabad has been on the Federal Board of Revenue and its Tajir Dost Scheme. This is the centre of the FBR’s efforts, and involves an explanation of why the FBR has fallen short by Rs 604 billion in its collection target for the first eight months of the fiscal year. The retailers re to be obliged to pay both the general sales tax on their actual sales, as well as income tax on the income revealed by those sales. The sales are to be verified electronically, the review team is also to examine the tax penalty structure to design a general not avoidance rule/. These measures are to generate Rs 250 billion in additional revenue.
There is the vexed question of political backing. The avoidance of sales tax and income tax is high on the list of demands of retailers from the government. It has been an important part of the chambers of commerce and industry to lobby the government against taxation. The general reason given has been the inefficiency and corruption of the taxation machinery. That is true, but has been addressed. However, one means by which the FBR has met targets has been to squeeze the salaried class a little harder. It has also relied on withholding tax on a wide range of items, from electricity bills to mobile telephone cards. Apart from retailers, another group which has avoided taxation quite successfully has been agriculturists. They are exceedingly well represented in all political parties. However, traders have tended to favour the PML(N), seeing party President Nawaz Sharif as one of their own. His brother, the current Prime Minister, actually got his first political experience when he was elected President of the Lahore Chamber of Commerce and Industry.
The government wants to remain on the current IMF programme, and the IMF wants to make sure that its loan is serviced. However, both must understand that it is really a question of fairness. There must be no ‘sacred cows’, else other classes will try to get into their ranks, or demand privileges for themselves. Taxation especially must be seen as inevitable, not as something that can be evaded by an individual or group, if strong enough.
