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PM Khan Cautions Tax Evaders: No Reprieve After June 30, But Plan B Should Be in the Works

Some experts say taking head-on the tax-evading culture issue may not yield quick results as needed, therefore the government ought to consider alternate resolutions including thinking out-of-the-box– all concurrently.

PKONWEB Report — Prime Minister Imran Khan has hinted at a crackdown against tax evaders after June 30 (financial year end), saying those who fail to take advantage of the government’s latest tax amnesty scheme would be dealt with according to the law.

“All state institutions are in sync when it comes to taking action against tax evaders,” the prime minister told a meeting on Tuesday, adding “Those who fail to benefit from the amnesty scheme will not be spared.”

Titled ‘The Assets Declaration and Amnesty Scheme 2019’, the initiative– one of several launched earlier with mixed returns– introduced through a presidential ordinance by the PTI-government provides non-filers of tax returns an opportunity to whiten their undeclared assets at home and abroad and get into the tax net in the run-up into entering the $60bn 40-month IMF program.

Related Article: Pushing the Edges: FBR Drive Yields Incremental Successes

Earlier, in one of its reports, the World Bank said additional revenue can be achieved through compliance, not raising taxes, a view generally voiced by independent observers in the country. The State’s gap between actual and potential tax recovery is only 50pct, says the WB.

The lending institution also pointed out that tax exemptions in place in various sectors is 2 per cent of the GDP while tax efforts are less (1.7% of the GDP) than the exemptions, and are required to fill the gap.

Meanwhile, the IMF has demanded that Pakistan broaden its tax base because of the less tax-to-GDP ratio and disproportionate local spendings.

During the meeting todat, the prime minister asked his economic team to devise a mechanism to bring more people into the tax net. Whether that means increasing tax net or optimizing recovery or both is a task the economic team has been told to look at.

The prime minister also questioned the logic of taxing the already taxed middle class. “Why should only the working class pay taxes?”

The premier last week pointed out only 1 percent of the 220m population are taxpayers and carrying the burden of rest 99 percent.

A report said last week that the FBR’s latest drive over 9 months yielded not so encouraging level of recoveries from the non-tax payers (chart below).

The World Bank believes the FBR methodology to assess tax liabilities for some sectors is leading to huge tax losses.

According to sources cited by The Express Tribune, FBR’s Chairman Shabbar Zaidi briefed the premier about the progress made so far in broadening the tax net and how far the tax amnesty scheme contributed towards that end.

Various proposals that could create a revenue cushion of about Rs1.45 trillion in the next fiscal year, taking the year’s revenue target to Rs5.55 trillion from a dismal Rs4.2 trillion were also discussed.

Some experts say taking head-on the tax-evading culture issue may not yield quick results as needed, therefore the government ought to consider alternate resolutions including thinking out-of-the-box– all concurrently.

The experts hinted at the huge informal economy, polarity, and the hybrid war (financial) as few of the reasons to be prudent about.

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