Pakistan vows to act tough on tax evaders

Islamabad / Bloomberg

Pakistan is vowing to get tough on tax evaders who have so far shunned an amnesty program set to finally expire on April 30 after four deadline extensions.
Less than 0.3 percent of Pakistan’s 3 million goods traders have participated in the programme, well below the 17 percent forecast by the government when it began in January. It has generated only 750 million rupees ($7.2 million) in back taxes, said Haroon Akhtar Khan, special assistant on revenue to Prime Minister Nawaz Sharif.
“We have to change taxpayers’ mindsets, establish a fear factor like the IRS has in the U.S.,” Khan said earlier this month in Islamabad, referring to the Internal Revenue Service. “Otherwise I don’t think we will be able to increase numbers exponentially.”
Sharif has struggled to meet revenue targets under the terms of an International Monetary Fund loan he took in 2013 to strengthen Pakistan’s finances. The push to get more cash from small business owners risks sparking a backlash among his supporters, intensifying pressure on Sharif as lawmakers call for an investigation into whether his family used offshore companies to evade taxes.

Less than 1 percent of Pakistan’s population pays taxes, and previous amnesty programs dating back to 1958 have failed to significantly widen the base. The trading community, a target this time around, contributes about 19 percent of GDP but less than 1 percent of taxes, according to Pakistan’s Finance Ministry.