A goldmine of revenue guarded by graft

LAHORE: One of the major problems in Pakistan is we are not generating enough revenues to run even the day to day affairs of the country.

This handicap is compounded by misuse of limited resources at our disposal. We let most of the people evade taxes. That is one aspect of corruption.

The other problem is the misappropriation of the funds we generate through taxes. We see electronic gadgets (air conditioners, lights, heaters) operating without need in government offices.

People indulged in this luxury at offices are extremely careful at their homes as they have to pay utility bills. They are least concerned about saving the public money. Landline use is still the preferred mode of communication in government offices. Most of the calls are personal, having no connection with official duty. Perhaps the PTCL earns more revenue from the government connections than from all other consumers.

The misuse of transport provided by the state for official work is visible when we see government cars picking and dropping children of officers from schools or other educational institutions. Families of government servants can be seen using official vehicles to go shopping or for functions. When it comes to purchases the officials have invented ways to comply with PEPRA rules and still make hefty commissions. Even after that the bills of the supplies are passed at a rent. There is no estimate of the losses caused by these malpractices and we are not talking about general corruption rampant all around.

You have to bear illegal expenses for getting a power, gas or water connection. You have to part with a petty bribe to the helper of any government department to have an audience with an officer. Resolution of your problem would usually be subjected to further gratification at officers’ level. The businessmen have to pay 5-10 percent rent to get their genuine refunds expedited. Nothing moves in a police station without rent ranging from a few cups of tea to cash depending upon the nature of the case. The pickets established by police help them increase their incomes particularly at night. These pickets are otherwise harmless as recently a car loaded with explosives cruised through a major picket at the entrance of Lahore to plant and explode explosives near the residence of a religious detainee.

Taxation is hostage to vested interests that are keener on enlarging their pie in the loot than facilitating taxpayers for genuine increase in revenues and broadening of tax base.

Look at rampant under-invoicing in imports that goes on despite availability of information about the real value of a product in real time. The Institute of Chartered Accountants of Pakistan has pointed out products are being imported in the country at as low as 10 percent of the original value.

He said when genuine stakeholders put pressure on the customs department through the media about under invoicing the valuation department increases the import tariff price of that item by 10 to 15 percent. This is only an eye wash as the 15 percent increase in the ITP of an item being imported at 10 percent value means that the actual increase is only 1.5 percent and the importer would still be evading duty on 88.5 percent of the actual price. The ITP of each product should be fixed by gathering latest price information from the net and even finding out the ITPs fixed for similar items by more advanced countries.

Some importers lament that increase in ITP leads to an increase in smuggling of that item. The solution lies in curbing smuggling and raiding shops selling smuggled items. Smuggling and under-invoicing are similar evils. In one instance no duty is paid at all while in the other only 10-15 percent of the actual duty is paid.

Sales tax registered persons or enterprises are required to file monthly sales tax returns. Some individuals that have no transactions of sale taxable items do not file the sales tax return although law requires them to file monthly returns. Sales Tax Department instead of issuing them notice on the first month’s default to file sales tax return sends notice after 6-12 defaults with a specified monthly penalty for each month's default. This allows even those having no sales tax liabilities to ‘negotiate’ with the relevant staff.

Both sales tax and income tax departments have absolved themselves of their responsibilities by collecting bulk of their taxes in withholding mode. Technology is available around the globe to collect these taxes and to generate automated notices to the noncompliant parties.

Faisalabad that is the hub of textile activities is mainly documented. Yarn merchants and weavers have been dodging the tax collectors for many decades.

This is not possible without the connivance of collectors concerned. Why have the relevant tax officials not been made accountable for not mining these goldmines of taxation?