Pakistan: Same flawed methods: Business package

STAYING true to past form, the PML-N has dipped into its old bag of economic tricks and unveiled its latest incentives for taxpayers and investors. The thinking is the same as before: tax dodgers and people who have earned millions in the black, grey or undocumented economy do not want to enter the formal economy; in order to encourage them to submit to documentation and participation in the formal economy, a no-questions-asked policy about the provenance of the investment or tax payments needs to be implemented; and this, somehow, will help address Pakistan’s investment and taxpaying problems. At least this time, the PML-N has tweaked the investment part of the programme: no questions will be asked if an investment of over a certain stipulated limit creates jobs in sectors that are not already mature and saturated. The simple question then: how much of an impact will these measures have? On the investment climate, at the margins perhaps there may be some positive effect, but surely no more. The reasons for that are straightforward, and by now long-standing: where energy is scarce, where the currency is always on a downslope and where monetary policy is tight, where existing businesses are struggling to stay afloat, how are new investors to be convinced to invest in new projects? In addition, the PML-N government seems afflicted by the same drift and indecision of previous dispensations, dashing hopes that governance or security would quickly improve. In that climate of fear and uncertainty, no meaningful economic turnaround can be engineered, and certainly not if tried- and-failed methods are attempted once again. On the taxation front, the government appears to have virtually surrendered to special interests. After caving in to traders earlier, now the government has further diluted the senior tax authorities’ powers to access banking details. Whether the proposition itself was a good one to begin with is a separate question; what matters now is that the government has backtracked on the centrepiece of its anyway paltry tax-system reforms. This in addition to the usual promises to extend the no-audit promises to various tiers and categories of taxpayers. Why not, instead, unveil reforms to make the audit process more transparent and fair to lower the possibility of abuse and extortion? Perhaps the most telltale sign of the government’s wrong approach to taxation is the introduction of special VIP privileges for top-tier taxpayers. Paying taxes is a duty and the more the income, the greater that duty. Taxation should never be about giving the already privileged even more privileges.