‘Govt not raising taxes amid fears of backlash from affluent’

LAHORE: The increase in import duties and intact petrol and diesel prices again prove that the government lacks the will to generate revenues from tax evaders and under-fillers, and has failed to improve the efficiencies of the public sector enterprises.
Senior economist Naveed Anwar Khan said, “Finance Minister Ishaq Dar boasts that the government does not take dictation from the International Monitory Fund (IMF). Yet it was on the IMF dictate that he was forced to announce enhancement in import and excise duties.”
Despite that the revenues could have been increased by other measures, the government avoided to do so, Khan lamented, citing it would have annoyed some influential.
He said Dar’s assertion that the increase would have no impact on the common man was far from reality. One percent increase in import duty has an impact of at least 1.35 percent on the cost, as almost all imports are subject to 16 percent sales tax and 3-6 percent advance withholding tax. He said as far as higher increase in import duties on luxury items was concerned, most of these imports should not even be allowed. He said that these luxury items were consumed by the rich that constitute only two percent of the population and account for almost 35 percent of the import bill.
Khan said the country needs more revenues and fewer expenses. More than Rs40 billion could be saved simply by faithfully following the merit order in power production. He said the National Transmission and Distribution Company (NTDC), was bound by law to only order power supplies from companies that produce energy at the lowest rates. The public sector generation companies produce the most expensive power using furnace oil. Unfortunately, he added the NTDC never fails to place power purchase orders with the most expensive power producers.
“This persistence with the most expensive power producers gives credence to the rumours that the inefficiencies in these companies are falsely documented to mint money which is distributed across the chain in the power management,” Khan said, adding there was otherwise no logic to stick to buying energy from the public sector. He said merit based power purchase would save Rs80 billion per year.
Citing smuggling as another drain on the economy, Khan said the government circles concede that Rs260 billion in revenue was lost annually due to smuggling.
“Some serious efforts can save at least 1/3rd of this amount per year. The rest could be gradually saved by plugging smuggler routes along the borders,” he said, adding this would again mean nabbing some influential people.
Economist Faisal Qamar said that taxpaying companies and individuals were like a hen laying eggs made of gold. He said by increasing the tax burden on the compliant sectors, the government was slaughtering the hen to take out whatever it can in one go and forget about collecting future taxes. He said untaxed sectors should be brought in the tax net.
“Some quarters wonder as to what will happen when the government misses the revenue target for next quarter,” Qamar said, adding the new taxes would cover the deficiencies of the last two quarters till June.
Calling the finance minister a competent accounts expert, the economist said Dar has not passed on the benefit of low petroleum prices to the consumers for the last two months. This will cover some of the deficiencies in collection of taxes, he added.
Qamar said the weakness in revenue collection would remain in the system until the government musters courage to bring full transparency and accountability. The economy in the 21st century could not be run on inefficient institutions and rampant corruption. He said the state run institutions have to be strengthened and modernised with the help of technology. Higher transparency could be achieved through e-government.
The economist said the civil society should play a greater role in opposing and defying measures taken on whims by one person.
The parliament, he added should assert its role by opposing all taxes levied without its approval.
He asked the civil society to proactively ensure the accountability of government actions on a day-to-day basis.