No boost to the economy
THE cabinet’s approval of an amnesty scheme offering millions of tax dodgers a ‘last’ chance to legalise hidden assets and income and to register themselves as taxpayers by paying the paltry amount of Rs100 to whiten their black money has spawned a new controversy. The scheme will have a life of three months and take effect after it gets legal cover from parliament. The approval of the amnesty scheme — comprising the Tax Registration and Enforcement Scheme and Tax Investment Scheme — in spite of widespread opposition shows the authorities’ desperation to increase the number of active taxpayers and generate additional revenues to raise the abysmally low tax-to-GDP ratio of less than 10 per cent, equivalent only to that of some extremely poor African nations. The success of the scheme is also expected to enable the government to win back the confidence of the IMF, upon whose approval of Islamabad’s policies hinges the flow of billions of dollars in multilateral and bilateral loans and grants. Islamabad had to terminate the IMF loan facility in 2010 because of its failure to implement tax reforms due to political problems.
That the amnesty for tax dodgers has drawn flak from all quarters indicates the low level of trust in such measures. Its opponents have been pleading with the government to launch a crackdown against the 3.8 million tax dodgers it has identified and to shame them publicly rather than offer them yet another opportunity to launder their illegal money at the expense of honest taxpayers. Their criticism has a valid point: such schemes haven’t delivered in the past and will not work in future years. The government promises it is a one-off opportunity for tax thieves and plans to take stern action against those who do not avail themselves of it. Why not take action now? Only a few tax evaders are likely to sign up for the amnesty and millions will line up for yet another scheme some years down the road. The authorities’ obsession with the scheme appears to justify the perception that the amnesty aims at benefiting some powerful and wealthy people rather than helping the economy.