APROPOS your editorial of Aug 5, as well as of July 28. People do business through their personal and business bank accounts only where it is inevitable for them. They exchange money in cash via hand-to-hand, `hundi` and `hawala`, maintain duplicate accounts so as to show the lowest possible turnover not only to evade income tax but also to avoid registration of sales tax.
This is because the FBR has tacitly allowed parallel regimes to work wherein those who tend to abide by the law facenumerous difficulties and threats. For them the tax officials are a dreadful lot, whereas for those who follow the conventional regime the same dreadful people become docile and friendly and their services are available at doorsteps.
The result is that almost the entire business community is now working in the latter regime. They pay no or nominal tax.
They pay much more to tax officials.
As the new tax on bank transactions still allows the conventional system to work, in a competitive market, it is not going to make any positive difference except a little more revenue on bank transactions to be offset by increased transactions outside the banks. In the competitive market two regimes do not work. The one more economical to the business will worl< and that is the existing one based on falsehood and corruption.
The business community is honest in its dealings and enjoys a high level of credibility in its working environment. The ones who lose credibility, destroy their business and they vanish in due course (exceptions are however there). They are honest in paying for their utilities and those who manipulate in these areas are abhorred by others. Why aren`t they so in paying taxes? As stated above, it is because they have been pushed into this situation by tax laws monstrous for the law-abiding and docile for violators.
The solution is implementing the value-added tax (VAT) in the true sense and without exceptions or loopholes.
This tax is equitable and will be acceptable to all provided the people are properly educated before it is introduced. It will rid the nation of menaces like fake products, smuggling and corruption.
