FBR’s Tax Reforms: Better Late Than NeverMuhammad Shahid
The debates are rife, protests frequent and targets, ever ambitious. That is how I sum up the state of affairs as far as the Federal Board of Revenue’s (FBR) efforts to widen the tax net go. The current government in its resolve to drive Pakistan towards economic viability and develop domestic revenue resources has set a target of Rs. 5.5 trillion for the FBR in the current fiscal year. This will not be an easy task. Especially when from the appointment of the new FBR Chairman, to the introduction of tax collection framework for retailers or the launch of technology-enabled solutions for the convenience of taxpayers, everything has been met with skepticism and resistance by the public and business communities alike.
The FBR has become more aggressive about identifying non-filers. Non-filers, people not declaring assets, businesses not paying sales taxes – there are multiple categories of violators that exist within our economy and the FBR is out to get them. In the last few months, the government’s position and resolve is clear – it remains undeterred and no amount of public protests and controversies spun by media have slowed down its efforts to going after culprits and document an otherwise opaque economy. Kudos to the government and the tax machinery for taking brave and ambitious steps in moving in this direction.
The local wires and cables industry is highly fragmented with the hundreds of entities that are relatively small size manufacturers. Most of them operate in the unorganized sector. Poor law enforcement has resulted in a steady growth of the unorganized sector in our sector. Pakistan Cables is the only wire and cable manufacturer listed on the PSX and our business approach upholds the ethos of transparency and good corporate governance. Our fundamental belief is to conduct business with integrity. Today, we are outnumbered by competitors who maintain low overhead costs and sell at a cheaper price by conveniently avoiding paying taxes and duties and operating under the radar. Even larger entities operate with a mixed approach, choosing not to comprehensively declare their business levels and thereby reduce costs. Thus, from the perspective of Pakistan Cables the FBR’s initiative is a welcome effort as it paves way for a level playing field for businesses that operate by the book.
Making its mark by contributing towards the national exchequer through imports of raw material and paying all applicable taxes, Pakistan Cables stands tall and side by side a number of the major manufacturing concerns of Pakistan. For over six decades, we have worked closely with allies in the business community as well as the government to ensure that the industry evolves as a whole, its interests are well preserved and it continues to contribute towards the economy by creating employment, trade and growth opportunities for its stakeholders.
What I particularly find alarming is the defiance shown by a particular population segment that refuses to follow the law and pay taxes in the first place. As citizens of Pakistan, some of us choose to live under the misconception that rules are to be broken at home and followed overseas only. I have personally observed numerous times, fellow Pakistanis being law-abiding citizens of a foreign land. However, as soon as they reach Pakistan they freely break all the rules – smoking cigarettes at the luggage conveyer belts at the airport, breaking traffic lights and blatantly ignoring basic rules that they follow abroad. Choosing to be a non-filer and conveniently dodging taxes is parallel to this approach. Hence, a change in our own attitudes is much needed. As citizens of Pakistan, each one of us should take ownership of their responsibilities towards the state and share it equally. We are quick to criticize our governments and decision makers and yet are highly hypocritical – because when it comes to paying taxes we are suddenly no where to be found and yet magically expect the country to flourish. The fact that Pakistan is amongst the countries with the lowest tax-to-GDP ratio in the region speaks volumes of the kind of service we have done for our homeland.
In my July blog, I indicated that the road ahead for Pakistan’s economy will continue to remain tough as austerity measures drive the economy in the medium term for a better future in the long term. Enhancing the tax net is a linchpin for any economy. Hence, the sooner everyone (i.e. business owners and consumers) accept it and participate with an entrepreneurial zeal, the sooner we can plug the tax-revenue gap, foster fair competition among local industries and hopefully restore the confidence of the masses within the government’s measures to restore the economy.