The government, in order to fulfil budget 2014 promise, notified a 20-member Tax Commission on September 25, 2014. The Commission has been asked to review and rationalise direct and indirect taxes, customs tariff, structure of Federal Board of Revenue (FBR), evaluate possibility of creation of border security force and ponder on any other issue it deems fit. For this huge agenda, the Commission is required to complete the task within 120 days. This shows how naïve our Finance Minister and his team at FBR are. They think reforms are one-time exercise whereas it is a continuous process. Like civilisations, tax systems evolve over the period of time. In todays world tax reforms mean good tax administration, which we totally lack. The exercise relating to tax reforms cannot be a time-bound affair and does not mean merely making changes in tax codes or administration. Reforms can be successful only if simultaneous analysis is made of the whole system, that is, tax structure, tax administration, state of economy, taxpayers attitude, revenue needs of the country and so many other allied aspects. Successful reforms in Indonesia, Jamaica, and Malawi were carried out in three to four years time and these involved substantial preparation and transition arrangements including extensive consultations with all parties affected by tax reform. In Pakistan, the six-year-long (2006-2012) World Bank-funded Tax Administration Reform Programme (TARP) failed to achieve anything meaningful, rather it has multiplied the problems of tax machinery as well as taxpayers. Tax reform programmes and strategy involve continuity in key decision-makers and major educational campaigns concurrent with the introduction of tax reform proposals to familiarise taxpayers with the new requirements. The Royal Commission on Taxation in Canada (the Carter Commission) and the Musgrave Commission in Columbia are said to have done the finest work in applied public finance because of their comprehensive analysis, rational approach and recommendations which could not have been possible, if a short time frame had been prescribed, as our Finance Minister has done. Pakistan needs a new tax agency at national level, capable of generating sufficient resources for the government and helping the country in paying off its ever increasing debt burden. Taxation, a potent instrument to shape and influence the socio-economic policies of a country, has not received due attention in Pakistan. A rational tax policy penalises those who hold assets idly or indulge in luxury consumption. In social democracy, the most important objective of taxation is to provide economic justice, which relates to distribution of tax burden and benefits of public expenditure. Taxation of the rich for the benefit of the poor is at the core of social democracy. It encompasses, besides redistribution of wealth, such questions as treatment of weaker sections of society eg women and children, minorities, the disabled and unemployed. All these elements are missing in our polity and tax policy.
Posted on: Fri, 17 Oct 2014 05:15:19 +0000
Trending Topics
Recently Viewed Topics
© 2015