Taiwan's way

It is heartening to see so many people writing about numerous solutions to Pakistan’s social and economic problems during the Covid-19 crisis. The government is announcing packages for different businesses. However, I am concerned about how we intend to recover all the bailouts without incurring further debt or increase in taxes. It was shocking to see retailers claiming a cumulative loss of Rs900bn over the last 45 days of the lockdown and expecting government help. I would love to know how much taxes were paid by these businesses over the last couple of years. This seems to be the same cohort of traders that were opposed to collecting CNICs for purchases over Rs50,000. The FBR recently floated an 'Online Integration of Business' document for comments from stakeholders. It seems to form the basis of an online invoice system to be deployed at various retailers around the country. However, I can’t help but wonder how the FBR would ensure that businesses will actually use the system and issue invoices for all sales.

The same problem was faced by Taiwan and they implemented a system in 1950 called the 'Uniform Invoice Lottery'. The system would assign a specific number to each receipt and be automatically enrolled in a state-run prize system. Every two months, a draw would be conducted and prizes of the equivalent of Rs1,000 to Rs1,000,000 (and more) would be announced. This encouraged shoppers to ask for a receipt, save it and then check it regularly. It allowed the tax authorities to cross-verify amounts on receipts and taxes filed by the trader – preventing fraud. In case of non-issuance of receipt, shopkeepers could be reported and a team from the tax authority could conduct an audit and issue fines etc. This system caused taxes to go up by 75 percent in the first year.

Hasan Raza

Karachi