NEW YORK: Pakistan plans to use its national identity database to build profiles of potential taxpayers in a renewed bid to broaden its tax base, Prime Minister Shahid Khaqan Abbasi has said.
In an interview with Bloomberg, a New York-based international news agency, he said the plan seeks to plug leakages, encourage correct property valuation, lower individual tax rates and offer an amnesty programme.
The Bloomberg report pointed out that less than one per cent of Pakistan’s population of 210 million pays taxes.
Lenders including the International Monetary Fund (IMF) have repeatedly shown concern over Pakistan’s tax-to-GDP ratio of about 12 per cent, which is among the lowest globally, the report said. In the past, attempts to force people to pay taxes have been met with resistance and strikes by businesses, while various amnesty plans announced, including one eight months ago, failed to boost revenues. Now Abbasi wants officials to build taxpayer profiles through the National Database and Registration Authority (NADRA), the report added.
“We are fixing the problem with a multi-pronged strategy,” PM Abbasi was quoted as saying. “You can make money but you cannot hide expenditures. Your telephone bills, utility bills, foreign travels, credit cards spending tell us the whole story.”
The Bloomberg report said that Pakistan’s current account deficit widened about 60 per cent to $7.4 billion in the six months to December and foreign exchange reserves are deteriorating, prompting the finance ministry to raise $2.5 billion from global bonds and sukuk last November. A month later, it noted the government allowed the devaluation of the rupee.
The last tax amnesty plan resulted in just 0.3 per cent of 3 million traders registering with the tax authority before it was withdrawn in April, Bloomberg said.
This time, the programme will encourage Pakistanis to account for their wealth with a fee of 3 per cent, down from 10 per cent previously, Abbasi said. In another step, the government will streamline property valuation to discourage investment in the sector for the purpose of tax evasion.
Abbasi, who became the premier in August after the Supreme Court (SC) disqualified his predecessor Nawaz Sharif, will have about five months to implement his initiatives before he hands over power to a caretaker prime minister in June, the report said.
In December, the State Bank of Pakistan (SBP) allowed the rupee to fall by about 5 per cent against the dollar after the IMF and investors said it was overvalued, the report pointed out. Abbasi said he didn’t see any need for a further devaluation before the elections.
Faced with such macroeconomic challenges, the proposed amnesty plan will be little more than a pre-election slogan, according to Islamabad Sustainable Development Policy Institute Deputy Executive Director Vaqar Ahmed.
“The government basically gives blanket amnesties and its goal is raising the number of taxpayers, whereas the target has to be the tax-to-GDP ratio,” Ahmed told Bloomberg. “That’s why they fail.”
“Five years ago, GDP growth was less than 3 per cent. It’s now around 5 per cent and in the financial year starting July we will achieve 6 per cent plus growth rate,” PM Abbasi said. The government has done well despite political difficulties and instability, he concluded.
