“The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation” — Vladimir Ilyich Lenin
Just when the nation had, after two decades of intense litigation, settled to a certain degree some fundamental concepts of income taxation as propounded under the Income Tax Ordinance, 1979, it was flung into the abyss and replaced by an entirely new form of income tax law, the Income Tax Ordinance, 2001, made effective from 2003. Since then, income taxation in Pakistan has been taking bizarre twists and turns, rendering essential principles of tax jurisprudence insane.
With fresh rounds of court cases running into thousands in number, Pakistanis are still grappling with issues related to interpretations of such universally understood concepts as ‘income’, ‘capital gain’, ‘capital value tax’ and even what is meant by ‘tax’, ‘fee’, ‘surcharge’ and ‘super tax’ under the dictates of the 1973 Constitution. In more precise terms, while the legislator is blatantly enacting laws in utter violation of the Constitution, the courts are also backing and endorsing its wrongdoings for whatever reasons known best to them.
Consequently, many important avenues are severely and negatively affected, including the collection of revenue lost to massive evasion; increases in the cost of doing business forcing closures and downsizing; economic growth that can only be seen on paper, even though a huge part of the population is struggling to make ends meet; stakeholders’ shattered confidence in the government; fiscal policies that remain forever erratic and lopsided; a poor investment climate; and bureaucratic hurdles depriving people of their rightful claims or officials’ unnecessary interventions in their normal state of affairs.
Overall, the general atmosphere is becoming increasingly oppressive for those who are not in the government. It appears the country came into existence for the benefit of a handful who are holding 250 million people in a perpetual state of slavery, where they are silenced through their emissaries or prevented from seeking their rights. The only viable solution many adopt is staying invisible and out of reach of tax authorities, notwithstanding financial losses.
There is a consensus that the world has undergone a rapid shrinking process, not in terms of physicality but on account of digital advancements that have blurred territorial boundaries by closing distances between the denizens of this planet. Communication obstacles have now been overcome by instant connections, and what used to take hours and days is now just seconds away. The impact of this phenomenon has had the most profound effect on trade activities, whereby a knowledge-based, digitised economy has taken over in-person availability to a substantial extent.
Countries like Pakistan, with amazing resources, have had tremendous opportunities over the years to evolve into prosperous economies, whereas resource-strapped ones like the United Arab Emirates (UAE), where oil was discovered as late as 1958, have grown into a formidable commercial hub within the last three decades.
Amid this situation, saying that people are irresponsible because they do not fulfil their tax obligations diligently is like adding insult to injury
While the former was, and still is, squeezing its citizens dry with excessive bombardment of both direct and indirect taxes, the latter did not impose any until the introduction of value added tax at the rate of five per cent in 2018. Even without subjecting its people to horrendous taxes, the UAE has the capacity to extend heavy loans to our country, which is now deeply embedded in international and local debts.
The prevalent income tax law that claims to impose progressive rates of tax is now more of a conglomeration of personal, indirect, turnover, expenditure, transactional, flat and advance taxes. It is difficult for the common man to discern which is which, especially when there is an absence of a proper awareness campaign by the tax collection authority, although there is an entire department of education headed by a Grade 21 officer in the Federal Board of Revenue. Amid this situation, saying that people are irresponsible because they do not fulfil their tax obligations diligently is like adding insult to injury.
Students of tax law question the justification of taking personal taxes from those whose total income for the year falls below the minimum threshold of Rs 600,000. They ask why the money taken from them on certain transactions in the name of withholding tax can be refunded only if they submit their return online.
The next question automatically arises as to how this would be possible when there is hardly any computer literacy among the masses. Time and again, this issue has been raised, but to no effect.
Besides, taxes taken in advance have multiple implications, whereby these can be either adjusted against actual liability, have a minimum effect, or be full and final, but how would the people know?
There is a huge difference between writing a law and making it explicit. With convoluted drafting and that too in a foreign language, at times disregarding counter-provisions, it is no surprise that one is compelled to challenge them in courts.
Self-styled ‘intellectual’ bigwigs, sitting in important positions, are merely playing with the destiny of this nation. They lack both sincerity and compassion. As a result, there is a constant tug of war between the governed and the governing, characterised by a discord between public aspirations and what the government delivers.
Unless and until revenue laws and procedures are brought into the fold of equity, certainty, convenience and economy, there is no chance of growth in its true sense.