The government is increasingly becoming panicky on tax collections and is making desperate efforts to enhance tax net. As it is struggling to implement new tax regime, it is simultaneously bagging applause from financial experts and criticism from potential taxpayers. The issue of withholding tax on bank transactions is still awaiting resolution, but the matters of sales tax also need immediate attention. When the government is looking for foreign loans to maintain financial matters, it will be unable to direct and regulate independent economic policies within its jurisdictions and will have to listen to the advice of the lending agencies. According to newspaper reports, the International Monetary Fund has advised the government to strengthen capital gains tax regime and adopt a common rate schedule for all financial assets.The government has also been told to improve system of general sales tax collection on goods and services with a single statutory rate under one collection agent and withdraw exemptions for real estate transactions.The donor agency also wants the government to adopt progressive approach with lower tax rates. It says that fairness is essential to introduce tax policy reforms and increase revenue collection. Direct taxes should be designed and implemented in a way to increase efficiency and equality.
The fund wants implementation of an integrated general sales tax collection system with a single statutory rate under one collection agent. The enforcement of the federal and provincial taxes should be based on valorem rates to increase the revenue yield and that a sense of social justice is a key to boosting tax morale and tax buoyancy.There is a need to strengthen capital gains tax regime by enforcing a common rate for all financial assets and develop a strong relationship between tax-to-GDP ratio and business climate. A fight against tax evasion should start from high-wealth individuals and corporate entities by controlling illegal transactions, which are used as a tool for tax avoidance and evasion.
As a matter of fact, more are the tough laws, more will be corruption. Therefore, there is a need to introduce institutional reforms to reduce corruption and create an environment conducive for business activities in country. A number of tax regimes have confused the law-abiding taxpayers while potential taxpayers are reluctant to register their names with the tax authorities. The government must ensure implementation of a tax system and a mechanism to ensure collection of taxes in fair manners. It must be noted that undue pressure on business community will not only have adverse effects on the economy, but it will also lead to capital flight from the country.
