According to experts, general sales tax, central excise duty and customs duty contribute 16 percent of the total indirect taxes paid by 10 percent population from the lowest stratum of society. On one pretext or the other, the government aggressively adds further taxes in every annual budget to enhance its revenues, but indirect taxes mostly affect the low-income households. The upper income groups who pay hefty amounts as direct and indirect taxes are also denied dignity and respect in the officialdom which they deserve as taxpayers. The result is discouragement of the potential taxpayers who want to become filers, but safety concerns push them away from coming into the tax realm. The successive governments over the years concentrated only on enhancement of tax rates and enforcement of further taxes, mostly indirect taxes which not only affected the quality of life of common man but also severely damaged the working of small and medium level organizations. Surcharge on various utility services also adds to the burden on the industry and households.
The government are often prodded by donor agencies to generate more revenues to pay back the loans. As a result, the people are made to pay twice the taxes on electricity bills than the actual units they consume. The government must come up with a plan to increase direct taxes and minimize the ratio of indirect taxes which accounts for 76 percent of the total government receipts. There is also need to understand the reasons which resist the potential taxpayers to come into the tax net. Pakistan has the lowest tax-to-GDP ratio and the government should have to take steps to remove hurdles which are the cause of tax evasion. Those who pay heavy taxes deserve dignity and respect and it will encourage the others to pay taxes. The black sheep in the tax machinery needs to be identified to create a fair coordination between tax authorities and taxpayers. There is great trust deficit between the two side and it should be removed.
The policymakers have to adopt a three-pronged strategy. It should increase direct taxes by enhancing the tax net and not tax ratio, visit and revisit causes which bar the potential taxpayers to come into the tax net and persuade the affluent segment of society, which avails every facility in this country, to pay tax. The government should involve trade bodies, trade associations and chambers of commerce to initiate an effective tax enhancement campaign. Without the cooperation of the trade organizations, every law, strategy or step will end in fiasco. Unfortunately, the government takes makeshift or adhoc measures to generate a specific amount of money for a specific purpose. But it ultimately adds to the economic woes of the country. The government should devise and implement a comprehensive tax policy under a phased programme and avoid to generate money on adhoc basis.
