The new law
The government’s relaxation has now lapsed and the condition to submit a copy of the NIC on every purchase above Rs50,000 is now effective from February 1. Shoppers will now have to submit a copy of the NIC on every purchase with shopkeepers, while women can submit the NIC of their father or husband which will be verified with NADRA.
The government has vowed that it will not step back from the documentation of the economy and this condition to show the NIC card will be imposed effectively on traders. This has perturbed non-tax payers who were enjoying a tax-free living as they fear a clampdown. Majority of the people in the country are tax evaders and are unable to receive any public benefit due to this pervasive system.
Traders Reaction
The business community opposed the move last year and held massive protests and strikes against the condition of the submission of the identity card. The government was compelled to negotiate with the traders as business activity was halted causing huge losses to the economy. It is estimated that the economy suffered a loss of Rs20-25 billion due as the traders refused to budge on their demand. The government eventually deferred the implementation till the end of January.
IMF Demands
Tax evasion is pervasive in Pakistan due to a weak collective system. The IMF has expressed immense concerns on the absence of a tax culture. Only 1.8 million people regularly pay taxes which the IMF states is bleeding the economy. The financial institution has said the tax system in Pakistan is not proportional as the elite class are beyond the tax net. It has called for broadening the tax net to raise further revenue for its ailing economy.
FBR’s Plans
The incumbent government is facing immense economic challenges and is taking concrete steps. Prime Minister Imran Khan brought it noted chartered accountant Shabbar Zaidi to head the Federal Board of Revenue (FBR) with the aim to revamp the tax authority and increase tax collection. This could be possible with the documentation of business transactions. The government consequently imposed a condition that the NIC should be submitted for every purchase and transactions above Rs50,000 which created immense concerns and reservations among the business community.
SBP’s Stance
The State Bank of Pakistan (SBP) has called on the need for more understanding and awareness among the business community on the condition to submit a NIC. The central bank has said the condition does not apply on unregistered buyers and households. The traders also have to note their NIC numbers and not provided a copy of the identity card.
On the other hand, the FBR has claimed that submitting the NIC is mandatory on every purchase above Rs50,000. The authority claims the purpose of this condition is to maintain a record of business transactions and impose a strong sales tax system. The FBR hopes this will increase the tax net and bring new people to the fold.
The solution
It is the fundamental duty of every law abiding citizen to pay their taxes. This is the main source of revenue for the government which is used for public expenditures and development projects. The provision of civic amenities such as gas, water, and electricity and even social services such as public transport, health, and education is also dependent on tax revenues. There is no nation which can progress without its citizens paying taxes. It is in fact the hallmark of developed and prosperous society.
The main purpose of tax reforms is not impose any further burden on an increasingly indebted common man but rather bring tax evaders to the tax net. This requires strict and effective policies so that people who avoid paying taxes can fulfill their national responsibility. The public need to realise that pay taxes is a national obligation to reduce foreign debts and move the economy forward. The government will have to earn the public’s trust which requires that tax system should be simple and transparent.
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