Narrowing the Tax Net

CONTRIBUTED BY: DR.NASIR JAVED

Yes. I mean ‘Narrowing the tax net’… not broadening.

A teacher asked his class, what is a ‘Net’… The best answer was, ‘A large number of holes, tied together with many ropes’. In fact it’s the size of ‘holes’ that determines the efficacy of the net. If one wants to catch more fish, the holes are made smaller (narrow) and not wider. Making holes smaller, means putting some more ropes. In terms of Tax –Net, it means more data, data analytics and data integration.

There has been a plethora of discussion on bringing more taxpayers into the FBR net and on documentation of the economy. Both these objectives are inter-related and require robust data.

By tax, I mean all kinds of ‘public dues’… from water rate, to property tax, to provincial duties to all FBR dues. We should target that everyone pays all such dues, user charges, and taxes. Who is a taxpayer? In general, taxes are either:

1. Individuals (person-based) or

2. Businesses (property based)

Almost all businesses (manufacturing, services, utilities etc) are ‘located somewhere’ in the country. So essentially all tax liabilities can be linked to either a Person or a Property.

Now that we have documented almost all ‘persons’, under CNIC and NADRA databases, what is needed is to ‘create a similar database of all properties in the country. This requires a ‘central property registry’. That means a comprehensive database of all properties in the country, just like NADRA has a registry of persons.

And it’s a fairly simple process. The Bureau of Statistics Pakistan has a comprehensive coding system for population census that includes a Province code, a district Code, a tehsil Code and a Mauza code for rural areas and a block code for urban areas. Based on this coding system we can develop a computerized Map based code for ALL property units in the country…. Including all land parcels and all buildings, houses, flats, shops, industries etc. This code would be something like this: