Tax Evasion: Is It Fair?

Tax plays an important role in the revenue generation of the Government. We can’t deny the fact that it is the most important source of government revenue. Revenues generated by the collection of taxes are then reallocated for federal government’s and provincial government’s expenditures by the Federal Government. Tax evasion is one of the complexities of our economic system.

Tax revenue in a country serves as the lifeblood for the government, but tax evasion is affecting the economy to a great extent. Since 1947, in Pakistan, the practice of tax evasion has been a common phenomenon in the tax system. Our Government is continuously experiencing a reduction in tax revenue. Due to tax evasion, Pakistan remains under a lot of stress as it results in less revenue.

Tax Evasion is one of the complexities of our economic system

According to the media reports, more than 250 restaurants in the capital have announced that they would close their businesses from April 23. They are alleging the FBR that it has harassed and humiliated us. However, negotiations between State Minister Hammad Azhar and IRA’s executive body resulted to call off the strike.

Most of the restaurants are charging a sales tax of up to 17 percent from the customers but are not transferring it to the tax department. So, how can they justify it?

The Islamabad-based restaurants are charging a sales tax of up to 17 percent from the customers but the bitter reality is that they are not transferring it to the tax department. FBR has announced that it will take action against those restaurants are not paying the tax to the department.

According to the Federal Board of Revenue (FBR) officials, the owner of Monal was showing less than Rs5 million sales for a month, however, its estimated sales for one day was approximately Rs1 million.

RIMS have also declared that some restaurants were not showing sales for several days. On another side, a majority of restaurants kept their system offline for the entire day and used to upload a few invoices at midnight.

Tax evasion could diminish the state earnings

Well, the matter of fact is that Tax evasion is an illegal act or we can say that it is a fraud. Tax evasion could diminish the state earnings, in return, the Government will spend less and will borrow more money. The state has to do more struggle to combat the evasion.

Tax evasion is bringing large shortfall in revenue that in a result compels the Government to seek loans. We are appreciating this action taken by FBR.