Punitive tax plan

THE government is desperate to increase its abysmally low tax collection to meet the stringent revenue conditions of the new $7bn funding programme approved by the IMF recently. In order to meet the tax target, the FBR has worked out a new compliance and enforcement plan, which primarily relies on punitive actions against tax evaders and cheaters. The authorities hope that it will compel existing taxpayers to stop underreporting their taxable incomes and incentivise non-filers to become taxpayers in order to avoid restrictions on their use of cash for travel, and the purchase of property, cars and financial instruments. The political and financial leadership appears to be enthusiastic about the new strategy, owing to its promise of achieving the desired results in the near term by narrowing the tax gap of Rs7.1tr — representing tax evasion and corruption — without the need to pursue tedious reforms. On the basis of this plan, Finance Minister Muhammad Aurangzeb announced on Sunday the government’s “war on cash” as part of the strategy to tap into over the Rs9.3tr in circulation and maximise revenue potential.