Printed in the NATION on 28 June 2000
BY
Viqar A. Khan, FCA
PHILOSOPHY OF TAX
Give and take is the essence of a harmonious relationship among human beings in a civilised society. There is a limit to which a person can give without getting anything in return. Tax in its current form was imposed when we were the subjects of our colonial masters. Collection of tax by foreign masters is by its nature unacceptable to a human mind. After monumental sacrifices we achieved independence fifty years ago with the hope that justice and fair play shall be the order of the day. In the entire period since independence it has been anything but justice and fair play.
State wealth has been looted in an extremely callous manner without regard to the consequences as to the effect it may have on our very existence. We have been burdened with so much loan, the utilisation of which is highly questionable, that our independence has been mortgaged to the forces of imperialism. Now we expect the tax payer to pay for the misdeeds of the public functionaries. Is this fair? In human dealings wherever we tend to drift from the path of justice and fair play the instinct of self preservation is activated. In such a situation it is very difficult to penetrate the defences that have been erected. It is naive to think that over a protracted period of time, the subjects of a state can be coerced into paying tax, which to their minds is not being utilised the way it is intended to be.
Pakistani tax payer is unwilling because he gets an extremely poor service from the state. He has to provide for eventualities for which he gets no help from the state. Such a provision may partly be genuine savings, but mostly it is theft of tax. Due to the human instinct of self preservation, blatant evasion of taxes has become socially acceptable. In the current maze of things the tax payer and the tax collector with the notorious participation of the tax lawyer have colluded to deprive the state. The system has been beaten hands down. With the result that the tax payer and the tax collector being the principal beneficiaries have thrived while the state hangs on the precipice of bankruptcy. This is what we have achieved!
UTILISATION OF TAX PAYERS’ MONEY
How can you expect an assessee to pay tax fairly when he sees that his contribution is being used to pay for the luxury of the bureaucrats and politicians ? You can lead the horse to water but you cannot make him drink. If you have an unwilling assessee there is no way that you would be able to take fair tax from him. An assessee has to be convinced that payments being made by him are being justly spent.
The utilisation of tax payers' money has to be in consonance with the rhetoric of the government that it is poor. You cannot expect the assessee to pay for the misplaced luxury of the public functionaries. Tax payer can only be convinced with deeds and not mere words.
Viewing the current state of mind of the tax payer, the tax collector and the dubious role of the tax lawyer it shall be wishful thinking on part of the policy maker to think he can penetrate the web spun by the trio with brute force. Judicious and fair tax with minimum interaction with the tax collector should not be a bad beginning. It should be the endeavor of the policy maker to try to win the mind of the tax payer. Loopholes should be plugged with a lot of application of mind and not push and shove policy. Tax payers’ money should be judiciously spent. Justice should not only be done but also be seen to be done. These principles should be the corner stone of our policy makers.
TAX WITH HONOUR
The government should collect tax honourably. Advocacy of third degree methods at the first sign of resistance is a reflection of the lazy minds of policy makers who do not want to exert themselves. Besides such actions are demeaning to human dignity. Unless we begin a culture of respecting our own people we as a nation will not be able to win the respect of others. Our current attitude is a reflection of our colonial legacy which we should avoid.
As always, the Finance Minister during his presentation of the Budget for the fiscal year 1998-99, has appealed to the conscience of the general public and has promised resort to administrative measures to curb the menace of smuggling. Pakistanis went to the Middle East and became known as Rafiques. They went to England and became known as Pakis. Both thoroughly derogatory terms. This is a mirror of our character and moral values as evaluated by other cultures. Staying within the realms of reality and our most recent encounter with the promise by the leaders of the trading community to generate Rs. 2 billion from fixed sales tax, the success of the appeal by the worthy Finance Minister is all to apparent. Resort to administrative measures would only strengthen the hands of the buearucracy in which the trading community will be harassed, the tax collector would gain financially and the ‘State’ as always would lose.
Honour & dignity of the tax payer means that a tax payer after payment of fair tax is regarded with respect by the tax collector as opposed to his disdainful attitude today. An environment is created in which the tax payer after payment of fair tax considers himself a free man as opposed to hiding his identity and endeavouring to become invisible for fear of enhanced future taxation which he does today.
Taking the tax payer into confidence
If not the most, it certainly is a very important facet in fiscal legislation to take the tax payer into confidence prior to enacting new tax levies. Our policy makers should realize that it has been fifty years since we have obtained independence and the bureaucrats should not be under the mis-conception that they have stepped into the shoes of our colonial masters. Thrusting of adhoc levies to meet short term financial constraints without giving a long term view by the political office bearers on the strength of a heavy mandate can bounce right back. Enacting ‘supposedly brilliant’ tax laws with the object of extracting tax without consulting the person from whom such revenue is to be generated is an exercise in futility. It erodes confidence of the businessman, creates resistance in his mind to such levy and spoils the whole atmosphere in which an economy is supposed to prosper.