The adoption of Finance Bill 2016 on June 22, 2016 by the National Assembly, with a number of amendments proposed, once again proved non-existence of culture of meaningful debate on tax measures. The elected representatives debated the Finance Bill 2016 for less than 100 hours in 15 days. They were more interested in enhancing their salaries, perks and perquisites and safeguarding untaxed, undeclared assets of the rich and mighty; none proposed asset-seizure legislation in the wake of Panama Papers.

The Senate, in its 139 recommendations, also did not suggest a law to tax undisclosed assets/incomes lying abroad and at home. The government, having unchallenged majority in the National Assembly, rejected all the proposals of Opposition members. The government was adamant to pass the Finance Bill 2016 as it wanted. The Parliament just acted as a rubber stamp and endorsed what was prepared by bureaucrats sitting in the Ministry of Finance and Federal Board of Revenue (FBR).

The president gave assent to the Finance Act, 2016, as approved by National Assembly, on June 24, 2016 and FBR in a Press release gave the intimation to the nation that the following provisions of the Sales Tax Act, 1990 and the Federal Excise Act, 2005 would become applicable from June 25, 2016:

Sugar was exempt from sales tax whereas it was chargeable to federal excise duty (FED) @ 8 per cent. Through the Finance Act, 2016, exemption of sales tax from sugar has been withdrawn. Moreover, FED on sugar has also been abolished. Now sugar is chargeable to sales tax at the reduced rate of 8 per cent.

Pesticides and their active ingredients were chargeable to sales tax @ 7 per cent. Through the Finance Act, 2016, pesticides and their active ingredients have been granted exemption from sales tax.

Tractors for agriculture use were chargeable to sales tax @ 10 per cent. Through the Finance Act, 2016 the rate of sales tax on agriculture tractors has been reduced to 5 per cent.

Urea fertilizer was chargeable to sales tax at the standard rate of 17 per cent. Through Finance Act, 2016 urea fertilizer will now be chargeable to sales tax @ 5 per cent.

The rate of sales tax on Category "B" and Category "C" of mobile phones has been increased from Rs500 and Rs1000 to Rs1000 and Rs1500 respectively.

Aerated waters and beverages were charged to FED @ 10.5 per cent. Through Finance Act, 2016 the rate of FED on aerated waters and beverages has been increased to 11.5 per cent.

Cement was chargeable to FED @ 5 per cent. Through Finance Act, 2016 cement is now chargeable to FED @ Rs1 per kg.

All the concerned taxpayers are therefore requested to charge and pay sales tax at the new rates given above with effect from June 25, 2016.

Amendment in the First Schedule to the Customs Act, 1969 (IV of 1969) also came effective from June 25, 2016.

Since political parties do not have any expert committees on finance and also do not believe in participation of experts in budget-making, financial managers and tax collectors get approved what they want. The persistent failure to tap the real tax potential and overcome fiscal deficit is a natural outcome of this apathy of elected members.

The tax policies of politicians, prepared largely by bureaucrats, are narrowly-based, emphasising collection at source, without bringing the mighty sections of society within the tax net or collecting what is actually due from them. They are interested only in number games and are bent upon levying and collecting more and more indirect taxes, even under the garb of direct taxes.

The present tax policies are detrimental for economy, social justice, business and industry. Those who possess more economic power (income and wealth) should contribute more to the public exchequer and vice versa but system should be flat, simple and certain as suggested by us in a recent study, ‘Towards Flat, Low-rate, Broad & Predictable Taxes’, published by Prime Institute, a public policy think tank.

The common man is presently subjected to exorbitant sales tax and FED -- in many cases tax incidence is as high as 35 per cent to 40 per cent on finished imported goods after applicable customs duty, sales tax, federal excise, mandatory value addition and income tax -- as these are ultimately passed on to them as end consumers.

However, the mighty sections of society such as politicians-cum-businessmen, landed aristocrats, generals, judges and bureaucrats are not paying due taxes and are amassing more and more wealth. It is tragic that in a country where billions of rupees are concentrated in a few hands, tax-to-GDP ratio is pathetically low [just over 10 per cent in just ended fiscal year 2015-16]. Yet the government is least bothered to crack down on undocumented economy and benami (name-lender) transactions. The mighty sections of society are engaged in these transactions and the government has no inclination to tax them.

Unfair taxation resulting into inequitable distribution of resources is the root cause of our multiple socio-economic ills. State policies induce massive tax evasion -- section 111(4) of the Income Tax Ordinance, 2001 is a permanent tool for whitening of untaxed money. The FBR has failed to tap real tax potential that is nearly Rs8.5 trillion. By collecting about Rs3 trillion this year, it is claiming to have achieved wonders and created a new record! They will get rewards and bonuses for under performance as is the case every year!

Pakistan has about two million individuals having taxable income of Rs1.5 million -- total income tax collection from them, according to prevalent tax rates, should be about Rs2500 billion. If super-rich about 0.2 per cent of population are taxed properly, tax collection from them would be around Rs500 billion. If we add income tax from corporate bodies, non-individual taxpayers (AOPs) and individuals having taxable income up to Rs1,500,000, the gross figure would be nearly Rs4500 billion.

The FBR collected around Rs1033.7 billion as income tax in fiscal year 2014-15 and projection for 2015-16 is Rs1307 billion. Due to weak enforcement and rampant corruption, the collection of sales tax in 2014-15 was Rs1088 billion, customs duties Rs306 billion and FED was Rs162 billion. For 2015-16, the estimates of collection under these heads are: Sales tax Rs1230.3 billion, Customs Rs348.5 billion and FED Rs200.9 billion. There is a tax gap of nearly 70 per cent as per own admission of the FBR. The actual tax collection under these heads should not be less than Rs4000 billion.

In these columns, for the last many years, we have been suggesting measures for fundamental reforms in the tax system for accelerated growth of economy. We need at least 8 per cent growth rate to provide 1.5 to 2.5 million jobs every year. Collection of Rs8500 billion (Rs4500 billion direct taxes and Rs4000 billion indirect taxes) would change the entire fiscal scenario. We would have enough money for development and extending universal entitlement to the entire population.

The government would be in a position to retire debts to achieve the cherished goal of self-reliant nation. However, this dream for Pakistan can only be realised if a fair tax system is introduced. Tax policy must encourage growth and prosperity for all.