Thursday October 06, 2022

Fighting tax evasion

January 09, 2022

LAHORE: The realisation that the government is sitting on huge data that reveals non-tax paying high income groups is not new. It only required nerves of steel to apprehend them. Does this regime have the muscle to do that?

The finance minister has warned tax evaders to come forward and pay their due taxes otherwise the state would snatch taxes from them. He said the government aims to take the tax to GDP ratio to 11.5 percent.

This target could be achieved by acting on only 20 percent of the available data and spare the remaining 80 percent.

The data mine is huge and if proper action is taken, it could take the tax to GDP ratio to 20 percent.

Every monetary deal (worth noting) of a computerized national identity card holder is recorded in the database of National Automation Data Regulatory Authority (NADRA). If a person buys a vehicle the NADRA system records it under his/her CNIC. Similarly, the purchase/sale of real estate, agriculture land is documented.

The record of all foreign trips is recorded in each CNIC. Hotel stays and the bills paid are available in the CNIC data of NADRA. The club membership and the amount spent in a year can be retrieved from the NADRA database. Even the school or education fees above a threshold are available in this data.

The recording of this data started in 2000 during the General Prevez Musharraf regime. Even the dictator could not benefit from this data because many evaders were highly influential members of the society. Sporadic action was taken against low-end evaders like small traders or political opponents.

Every government that assumed power after that threatened to bring the evaders in the tax net through this data.

In fact, the manual tax survey conducted during the Musharraf era revealed that many families living in posh and most expensive localities of all big cities paid no tax at all despite a lavish lifestyle and fleet of expensive cars. Even then they were not apprehended by any government.

This regime also knew about the data goldmine but never acted. There was no need to issue warnings to those evading taxes. Evading tax is illegal and the culprits should be booked without any warning.

You do not ask a thief to return the stolen goods otherwise action would be taken against him. If you know the culprit, you must act swiftly.

This government announced a few amnesty schemes in the last three years to bring tax evaders into the tax net, but the response had been lukewarm. It was announced at the start of all amnesty schemes that the government is in possession of data and would take strict actions if the holders of black money failed to whiten their wealth through an amnesty scheme by paying nominal tax.

No action was taken after the amnesty schemes expired. Apprehending the tax thieves is not a big job particularly when authenticated NADRA data is available. It only requires strong political will. It required fair and transparent operation.

Tax evaders are on both sides of the political divide. Just as the charity starts from home the accountability should also start from home.

The government should first nab the tax evaders in its ranks to show the others that it means business.

It would be a folly to start with a political opponent when the same type of evasion is in their own ranks. It would be termed as political victimization. The operation should be apolitical and fair. When people from the government side are apprehended it will give the impression of impartial accountability.

The FBR had earlier issued thousands of notices to the tax evaders from the data in its possession, but it did not increase the tax compliance.

The news of notices issued was flashed in the media but the media was not brief about the outcome of those notices.

It seems that either the notices were wrongly issued, or the alleged tax evaders ‘settled’ the matter with the FBR.

Let us hope that the finance minister is serious and sincere this time and available data would not be compromised. We must see actions taken against all and sundry fairly and transparently without any exceptions.