VTCS will encourage tax evasion, corruption: PEW

ISLAMABAD: Pakistan Economy Watch (PEW) has strongly opposed the Voluntary Tax Compliance Scheme (VTCS) and said that it will encourage the tax evaders and corrupt elements.

PEW President Dr Murtaza Mughal said on Sunday that VTCS proves the failure of authorities concerned to collect taxes and broaden tax net. He said that the amnesty scheme indicates that the government has no intention to bring its favourite sectors in the tax net, introduce proper asset-seizure laws to confiscate untaxed assets and bring back looted money from abroad.

He warned that move to purify ill-gotten money amounts to encouraging corrupt elements, while billions of illicit wealth would be detrimental for the society. The amnesty for tax evaders has been announced to fill the budgetary gap but the funds raised through this scheme will be insufficient, he added.

Dr Murtaza Mughal said that such measures work in the short run but it is not a permanent solution to a budget gap; authorities should concentrate on permanently broadening the tax base and eliminate unjust exemptions. Such schemes always raise danger of overlooking structural gaps and reforms, he said, adding that Pakistan needs an improved tax model that can generate satisfactory resources for the government without hampering economic growth.

He said that the current tax model has failed to transfer resources to public use in an efficient manner, ensuring social justice for weaker sections of the society. He said overtaxing some sectors while supporting favourite sectors is putting the economic and revenue system down. FBR’s emphasis on meeting revenue targets without considering its impact on the economy is a self-defeating mechanical exercise, he maintained.

The PEW president said that concentration on industrial expansion could provide much-needed funds without hurting the honest taxpayers, which is yet to be realised by the authorities. He said that amnesty schemes, support provided to parallel economy, exemptions, helping speculative business, ignoring tactics by multinational companies and oversized state machinery are some issued that can bring the country down.

Reliance on foreign experts, lack of interaction with the taxpayers, facilitating monopolies and increasing tax burden on poor are also contributing to the situation, said Dr Mughal.


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