IPR suggests criminalising non-filing of tax returns

LAHORE: The Institute for Policy Reforms (IPR) in its budget 2016-17 proposals released on Wednesday advised the government to declare non-filing of tax returns a crime and to increase the penalty for tax evasion.

The proposal stated that financial constraints restricted the government from providing public service and infrastructure, and it was now time to take action. Government has met fiscal challenges successfully. However, government has yet to introduce structural reforms to stimulate economic activity and investment. It has not addressed the issues of political economy, governance improvement, and productivity enhancement. The external sector remains vulnerable with falling exports and high foreign debt, the IPR said.

The IPR recommended that though Pakistan’s EFF arrangement with IMF would end soon, the economy should not lose the stability gained in the recent years. At the same time, there should be no new taxes, except to reduce tax expenditure (exemptions) from direct and indirect taxes. Revenue increase should come from broad basing collection.

The IPR made specific recommendations for increasing tax collection, centring on broadening of tax base and on strengthening compliance. Tax rate was already high in Pakistan. The issue was to make people pay. It was important for the government to highlight major delinquent cases.

The policy institute in its proposal said where necessary, immovable property transactions should require a tax ID. The FBR could integrate its database with other organisations to identify non-filers. Equally, it was necessary to enforce ‘Benami’ accounts restriction on banks, it said.

The IPR report also recommended structural changes in the FBR. There was need to simplify procedures, rationalise systems, and remove distortions.

Federal government should impress on the provincial governments to increase revenue from agriculture and urban property taxes. The government should address the issue of unpaid circular debt. It was critical to check revenue leaked from DISCOs. Likewise, PSEs pre-empted considerable resources. Improvement in their performance was necessary.

Rather than spread thin limited resources, Planning Commission should prioritise three or four sectors for funding so that projects do not have a throw forward of more than three years (other than for operational reasons). Reduction in the number of PSDP projects would help with timely completion of priority projects while staying within MoF’s envelope.

The report emphasises that budget preparation should not be an exercise to balance receipt with expenses. It should support the country’s development strategy. The budget should meet larger objectives of the economy such as to build competitiveness and alleviate poverty.