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Opinion

April 19, 2018

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Beyond the politics of disruption

The tax amnesty scheme announced by the government and the budget that the PML-N administration plans to present before the completion of its tenure have been hotly debated.

Major opposition parties have outright rejected the tax amnesty scheme. Meanwhile, there is also a perception that the government, which has only two months until its tenure ends, shouldn’t present the budget for the next year and ought to leave the task to the new government. Imran Khan, as usual, has threatened not to allow the government present the budget.

Opposition parties in a democratic dispensation have the right and responsibility to subject government policies to an incisive scrutiny and challenge them on a rational basis. Unfortunately, opposition in Pakistan translates into destabilising and rejecting any policy that it tries to implement. This is exactly what has transpired in the stance adopted by opposition parties on both issues.

The tax amnesty is not something that is out of the ordinary. It denotes a form of legal forgiveness from certain infractions. A tax amnesty, therefore, constitutes a form of waiver or reduction. At times, it also includes the removal of penalties in back taxes to encourage defaulting taxpayers to pay what they owe within a specified window. It must enjoy the legislative backing to be effective. A deadline for compliance is fixed and penalties are prescribed for those who remain non-compliant even after the amnesty programme.

The objective of a tax amnesty is to either pardon or negotiate the tax liabilities of individuals and corporate taxpayers in accordance with statutory requirements. It also seeks to regularise the tax affairs of people who have failed to meet their tax obligations; improve the tax compliance culture; and widen the tax net.

This policy initiative has been tried across the world and has produced varying results. People across the globe tend to evade taxes and, in certain cases, park their illegal money in foreign countries. So, the governments in these countries often resort to special measures to bring back as much money as possible to supplement revenue-collection measures introduced domestically.

Countries in Asia – Indonesia, Malaysia and India – have also successfully implemented amnesty schemes. Through a similar scheme in 2016, Indonesia netted $330 billion when 745,000 taxpayers came forward to declare their assets. India also collected $10 billion in 2016 through a similar arrangement. Other countries – including Australia, Germany, Italy, South Africa, Chile and the UK – have also taken advantage of this option at different times.

The main advantage of this policy initiative is that it increases tax revenue at a very low administrative cost; boosts trust in the taxpaying public; and strengthens the drive for voluntary tax compliance. The scheme announced by the government of Pakistan has some positive dimensions. It reflects its good intentions with regard to bringing back black money and enhancing the tax base. Regardless of how many people avail this opportunity, the country will, in any case, get something out of the money that is lying outside.

The measures that are being taken to bring more people within the tax net are conceptually beyond reproach. Development and welfare projects need revenue that is at the disposal of the government, which comes through taxes. Efforts to convert the ID cards into tax numbers and reduce tax slabs are positive initiatives that will help broaden the tax base as well as provide relief to the salaried and lower-income groups.

In addition, whatever amount is repatriated will increase foreign exchange reserves and correct the trade imbalance. It is unfortunate that only 0.7 million people in a country of 210 million pay their income taxes. Bringing more people within the domain of direct taxes will enable the government to reduce its reliance on indirect taxes, which are ultimately a burden on the people.

As is evident, the scheme has its merits. There is no rationale for its outright rejection by the opposition – except, of course, that it comes across as opposition for the sake of opposition. It is pertinent to mention that the PPP had also announced an amnesty scheme in 2008. Similarly, many people, including Imran Khan, had also benefitted from an amnesty scheme implemented during Musharraf’s era.

The argument that the outgoing government doesn’t have the right to present the budget for next year and shouldn’t even attempt to do so, is also flawed and irrational. The opposition fails to realise that the current budget will only run up to June 30. If no budget is passed before this date, it would create a financial crisis in the country.

The interim government wouldn’t, in any case, have the mandate to present a budget for the future government. This is because it cannot, as per the Supreme Court’s decision, take major policy decisions – except for ensuring that elections are held and the transfer of power happens smoothly. If the budget is not passed before an interim government is installed, then how would it incur expenditure that has not been authorised by the proper forum, ie parliament?

Another issue that the opposition has neglected is that the future government – if it is formed by any party other than the PML-N – would have the authority to make changes in the budget as per its own manifesto. Instead of creating hurdles for the incumbent government to present the budget, opposition parties should make sure that the budget is presented and approved before the PML-N government’s tenure ends so as to accord legitimacy to the expenditure required to conduct elections and run the day-to-day affairs of the government. They need to strengthen democracy in the country and refrain from indulging in disruptive politics. Political vendetta must come to an end.

The PTI is strongly advised to abandon its culture of creating chaos and anarchy in the country and develop a credible political manifesto and creed to win the polls. The country needs democracy to continue as it is only through democracy that it can move forward. The people must be allowed to give their verdict on who should rule the country on their behalf.

The writer is a freelance contributor. Email: [email protected]

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