THIS is with reference to the letter ‘Punitive tax plan is bound to fail’ (Oct 4). There is a lot of focus, and rightly so, on increasing tax revenues, and there is every reason to think logically and innovatively on the matter.

Currently, the people in Pakistan are mainly giving two types of taxes; with-holding tax (WHT)on earnings, and general sales tax (GST) on anything they purchase. Roughly, all individuals earning any amount pay at least 25 per cent of their income against WHT and GST. Those who are filers, have the WHT adjusted against their total tax liability while filing income/wealth tax returns. The GST remains unadjusted across the board.

The government must introduce a new tax system, making it compulsory for all adults to file returns regardless of income status. The CNIC number should be effectively treated as one’s national tax number (NTN). The WHT should be adjusted/refunded on an yearly basis.

The GST rate should be made uniform across the country, and 15pc of the total GST, calculated as per the income and expenses declared in the annual tax return, should be kept aside as an investment pool to be managed by the government. This should be applicable across all categories of taxpayers; from the salaried individuals to business tycoons.

The government would invest the available funds in profitable ventures to earn profits that would be shared between the individuals and the government, but not on an annual basis. Once the individual reaches the age of superannuation, the government should give him/her 60pc of the saved amount as well as the profit earned on the investment.

This would be like the gratuity payment one gets at the time of retirement. The remaining 40pc would be kept with the government which would use it to give a calculated amount to the individual every month. This would be like the pension one gets post-retirement.

The incentives built within the proposed tax system would encourage people to volunteer themselves as filers, as they would see tangible benefits. The govern- ment will benefit with a huge revenue at its disposal within a formal economy.

Muhammad Abdus Samad
Islamabad

Published in Dawn, October 8th, 2024