Filer or Non-Filer?

In the past, we have seen ‘National Savings’ advertisement, with the claim, “the money which we save is beneficial for the country”. It can now be said that the tax paid is used for corruption. In recent times, a new terminology has come to the fore - filer and non-filer. Filer is a taxpayer who is registered with the Federal Board of Revenue (FBR). The rest of the nation is a tax defaulter in spite of paying taxes, although there is nothing on which tax is not paid directly or indirectly - from match boxes to plane tickets. The poor non-filer doesn’t even know if he is in the tax net or not. According to one estimate, the common man is being called a non-filer or tax defaulter even though he pays indirect taxes of 17% on total income which includes General Sales Tax (GST), Central Excise Duty (CED) and custom duty. Surprisingly, more of this contribution is made by the poor class; the rich only pay 10% of their income through indirect tax.

Two types of taxes are levied -  direct tax and indirect tax. Direct taxes are collected on income or profits of the person or corporation earned in a year while indirect taxes are imposed on every individual irrespective of their income or profits. In Pakistan, tax revenue collected through indirect tax is 75% while that collected from direct taxes is only 25%. The rate of indirect taxation is 60% while that of direct taxation is 40%. This creates a huge economic anomaly.  If indirect taxes increase, it means the poor are forced to pay more tax than therich class.

The common man rightly asks as to where does the tax go which he has paid over the past years? The poor people have no interest in who is in jail, who is incarcerated and who has escaped? Would the person whose children are starving be worried about their two-time meals or billions and trillions of dollars of corruption? Tax evasion does occur, but it is not done by the poor people. It is done by the big businessmen, entrepreneurs, industrialists, chaudhries, vaderas, etc. Inflation does not matter to them. Their children drink mineral water, attend the best schools and go abroad for holidays and higher education. They consider this country only a real estate of their ancestors.

People are afraid of paying taxes because it has never been used for their welfare. It is important that the black sheep in the FBR be held accountable for harming the organization and the nation. They should be immediately expelled. The government should do whatever it takes to prevent tax evasion and make accountability very rigid. If this does not happen, tax evasion will continue unabated and those who are wise, smart, and clever will continue to reap the benefits of tax refunds.

Economies generally keep indirect taxes at a low level while direct taxes are high so that the rich people pay more taxes and there is less burden on the poor. Pakistan follows a regressive tax system. The government needs to bring in a tax system that ensures impartiality. It should reduce the wealth gap between the rich and poor. Though the overall number of direct taxpayers is on the low side, people still find out ways to evade tax payment. Even then, the billions of rupees that are collected from thepoor through indirect taxes need to be spent on health, education and the security of underprivileged citizen.