Pakistanis are a generous nation as far as charities are concerned, and according to a recent study, the people contributes more than one percent of GDP (Gross Domestic Product) in charities.
People give donations both in cash and kind, or by volunteering for needy causes. A report by the Stanford Social Innovation Review has declared Pakistan as one of the most charitable nations in the world, but when it comes to paying government taxes, the same strata of the society turns deaf ears to the issue.
Most of us prefer donations, especially to needy individuals because we lack trust on philanthropic organisations just like we don’t have confidence in government spending.
Here questions arise that why people evade taxes and prefer giving money in charity? What are the reasons apart from missing the sense of responsibility?
No doubt, major portion of the population evades taxes, especially wealthy people for one reason or the other. The primary reason for the people to elude taxes is the absence of trust on the government because no productive efforts were seen on the part of the rulers.
There is a dearth of transparency and accountability within the system that makes public think whether their money is actually being used for their benefit or is gone into satisfying someone else’s vested interests.
Another factor, which is badly hurting broadening the tax net, is the cumbersome and lengthy process. The revenue collection arm of the government should devise a simple procedure, if it really wants to generate more tax revenue.
There is a culture of rampant tax evasion in Pakistan and the successive governments had announced crackdown against tax evaders, but to no avail, as tax reforms fizzle out because of a lack of political will to compel the rich and powerful pay taxes.
Tax reforms have become a gigantic task, owing to non-serious attitude of big businesses and large land owners. There should be a carrot and stick approach for all citizens, regardless of their influence, while at the same time; the authorities concerned should make tax payment procedure easier so that more and more people fulfill their responsibility.
Several individuals and big businesses also want to remain out of the tax net because of their fear of being documented, when the government is bent upon taxing the already taxed individuals and businesses. They also don’t want to show their assets made beyond means or that of black money.
Utilising its half-yearly fiscal monitor the International Monetary Fund (IMF) has said that forcing the top one percent earners to pay more income tax would reduce inequality. “Stop taxing the needy, start taxing the greedy.”
According to the International Growth Center (IGC), tax revenues enable governments build infrastructure, deliver public services, and enforce law and order – essential ingredients for economic growth. However, developing countries face barriers to effective taxation and collect much less tax revenue on an average as a share of GDP. Low-income countries must overcome gaps in tax reporting, monitoring, and administration that often result in weak enforcement and widespread tax evasion.
Low motivation among tax collectors contributes to low tax collection and reduced funding for public services, which in turn undermines tax morale.
When the governments fail to deliver adequate public services, the citizens see no reciprocal benefits to paying taxes. This creates a vicious cycle that inhibits economic growth.
Mostly, fear of misuse, wastefulness, and the lack of impact, play an important role in discouraging people from paying taxes, and for that the government should take confidence building measures to improve their image.
Now is the time the tax revenue authorities should stop their rhetoric and initiate serious efforts to clear the mess.