The Federal Board of Revenue (FBR), established in 1924, seems stuck in a bygone era, failing to collect its fair share. With the salaried class bearing the brunt (paying 243% more than exporters in the first half of this financial year!), it’s clear the burden is grossly skewed.
This is not just an opinion; the World Bank ranks Pakistan abysmally low in tax payments across Asia Pacific. Heavy reliance on indirect taxes (70%) compared to direct taxes (30%) highlights a flawed system riddled with loopholes. Exploiting these complexities, many escape their fiscal duty, leading to a debt crisis of trillions of rupees.
The urgency is undeniable. Military and political leaders, finally acknowledging the gravity of the situation, have joined hands to expand the tax net. Curbing corruption, collecting tax from retailers, and leveraging technology through data automation and mobile apps are all commendable steps. However, are they enough?
The recent SIFC committee’s ambitious target of increasing the tax-to-GDP ratio to 18% by 2029, from the current dismal 8.5%, sounds promising. But achieving this through automated identification of lakhs of new taxpayers raises concerns. Will it target the right audience? Will it address systemic imbalances like the disproportionate burden on the salaried class?
While increased tax collection can undoubtedly boost the national exchequer, the devil lies in the details. Blanket measures without addressing existing inequalities could further burden the honest taxpayer and fuel resentment. Instead, we need a multi-pronged approach, such as addressing loopholes and widening net. The FBR needs to simplify the tax system, plug leaks, and target tax evasion aggressively. Also, there is need to Identify and integrate a fair share of informal businesses and high-net-worth individuals into the formal tax system.
Tax reform is a delicate dance. While generating revenue is crucial, it cannot come at the cost of further burdening the already squeezed middle class. We must ensure a just and equitable system that encourages compliance and fuels sustainable economic growth.
