Pakistan Muslim League-Nawaz (PML-N) has said instead of levying Reformed General Sales Tax (RGST) to get $1.5 billion tranche of IMF emergency loan and budgetary support, the government should plug huge annual revenue leakage of Rs 2300 billion in the country.
Talking to Business Recorder here on Wednesday, PML-N spokesman Siddiqul Farooq said that PML-N financial team headed by senator Ishaque Dar has clearly told the government that imposition of new taxes on the masses is not the solution to reduce the alarming budget deficit.
He said according to conservative estimates the country is suffering huge revenue losses as under (a) Tax evasion Rs 650 billion to 700 billion, (b) FBR corruption Rs 600 billion (c) government corruption Rs 300 billion, (d) theft of imported furnace oil Rs 450 billion, (e) Electricity and Gas theft/line losses Rs 200 billion, corruption in Pakistan - Afghanistan land trade Rs 150 billion.
Farooq said Pakistan is the only country in the world, which is loosing nearly 25 percent of GDP of Rs 12,000 billion every year through corruption, theft, mismanagement, bad governance, negligence and non-accountability of the ruling elite. He said that the Pakistan Peoples Party (PPP) has done nothing to arrest the revenue losses rather corruption and theft has increased manifold unabated during the past three years.
He said people are unable to comprehend, as to why Sui Northern Gas Pipeline Ltd. Chairman, A. Rashid Loan has been given service extension for ninth record time by the Federal government whereas SNGPL line losses have risen from 5 percent to 25 percent.
Economists say that undoubtedly there is a considerable informal economy, revenue leakage and black money in Pakistan but few in-depth studies have been undertaken to quantify its magnitude and extent. A sound development strategy seeks to reduce the size of the informal economy and bring into the open resources that lie in the form of black money.
Apart from such mechanisms, as foreign exchange and tax amnesties; and exercises such as demonetisations, taxation has been used as a tool to tap the resources inherent in these areas. Our politicians, policy-makers and tax managers during the last many years have miserably failed to tap such untaxed resources despite borrowing $100 million for Tax Administration Reforms Programme (TARP).
They argue that those at the helm of affairs in the Federal Board of Revenue (FBR), making tall claims of achieving extraordinary results and getting cash rewards should be held accountable. The actual potential of the country's revenue collection is Rs 4000 billion, but they hardly collect even one third of it.
A survey, carried out by a reputed Lahore-based academic institution a few years back, as a part of tax reformation drive, concluded that mainly because of rampant corruption, in combination with a host of other factors, the country suffers a loss of 64 percent in income tax, 48 percent in customs and 45 percent in sales tax. Translated into hard cash, it means that for each hundred rupees of genuine income tax payments of a typical Pakistani business, the government collects only Rs 36. The rest of the money is shared among the three parties - assessor (taxman), the assessee (taxpayer) and the middleman (tax practitioner).
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