ISLAMABAD: The tax incentive package announced by Prime Minister Nawaz Sharif is a good step in the right direction but it requires in-depth analysis whether it will provide any benefit to kick-start economic activities or will prove to be another eye wash for sharing benefits to just few business cronies of the incumbent regime.
If one analyzed historical prospective of giving tax incentives by allowing money whitening schemes or amnesty schemes in last two decades, none of them had been able to lure investors in a big way.
What was the missing link in it? The answer is crystal clear that the government requires a policy of carrot and stick to get attention of potential tax evaders. If government’s policy is only relying upon carrot then it will not deliver positive results while if it only relies on stick then it will again prove wrong.
It is yet to see how much the government shows its ability to attract investment through this scheme where source of income will not be questioned.
By excluding certain sectors such as sugar, cement, textile and others which have already touched a saturation point is also welcoming this step as it shows the intent of the government to attract investment in those areas where the country possessed a pressing requirement such as energy and water sectors at the moment.
The PML (N) government wishes to divert investment towards productive industrial sector of the economy. They argue that tax exemptions were enjoying by the stock market and if they provided same incentives to industrial sector then there should be no criticism over it.
According to the government arguments, there is no other solution to kick-start economic activities so this package will play a pivotal role for achieving the desired results.
By providing incentives to non-filers for coming into tax net, the government will have to make its enforcement an effective tool to penalize those who will not avail even these tax incentives.
The withdrawal of access to bank accounts for NTN holders and income tax filers is a welcome step because it aimed at broadening of tax base without compromising its documentation exercise.
The element of harassment to existing taxpayers on the part of FBR is a known phenomenon and by providing access to bank accounts there is a growing fear that chances of exploitation of this provision would be multiplied manifolds.
Now FBR will be going to withdraw this provision of law on access to bank accounts by next week by issuing a formal notification on this subject. So far draft notification has been released by FBR for seeking suggestions from the stakeholders in seven days.
