THIS is with reference to the report “Govt declares ‘war on cash’ to rein in tax evasion’ (Sept 30), which quoted the finance minister as putting on the table the government’s intention to move against tax evaders and to target cash-based trans-actions in order to enhance tax revenues. As pointed out by the editorial ‘Punitive tax plan’ (Oct 1), successive governments over the years have tried to achieve the same objective with a similar approach without much success.

To accomplish this, the government needs to address the root causes of tax evasion in the country. The foremost cause is the taxpayers’ lack of trust in the tax authorities as well as the fear of undue harassment. The government needs to bridge the trust deficit through efficient processes.

The second factor is the excessive rates of taxation that force the current and potential taxpayers to evade taxes. Pers-onal and corporate income tax rates are among the highest in the world, and there are no social benefits or facilities provided by the government in return.

The third aspect is the unjust as well as inequitable burden of taxes that has left the existing taxpayers disillusioned with the state machinery. Income from varying sources is taxed differently. In some cases, it is not taxed at all.

The government needs to realise that high tax rates do not necessarily lead to higher tax revenues as these adversely affect the business climate. This has been proven by the huge shortfall in tax revenues.

The solution lies in having realistic tax rates coupled with simple, hassle-free and transparent processes that build the taxpayers’ confidence and motivate them to pay the taxes voluntarily. The distribution of taxes also needs to be fair and equitable so that all segments of society bear the heavy tax burden equally.

Aamir Malik
Karachi

Published in Dawn, October 4th, 2024