Traders and taxes

“Be honest with yourself, if or when you fail, the change of direction will not kill you. Change before you have to”-Jack Welch (CEO of General Electric 1981-2001) ‘Ruin comes when the trader, whose heart is lifted up by wealth, becomes ruler’-Plato in Republic

Many are sceptical that since Nawaz Sharif is going to become Prime Minister for the third time and his brother is to once again rule the Punjab, there would be remote chances of enforcing tax laws (specifically direct taxes) and collect sales tax from the traders at retail stage – Pakistan Muslim League (Nawaz) has a proven track record of appeasing traders and passing laws to protect tax avoiders. The political opponents allege that tax compliance does not suit the huge business empire of Nawaz and his family. One hopes this time Nawaz Sharif will prove them wrong by declaring his and family assets owned at home and abroad and tax paid thereon, collecting taxes from the rich landlords in his party and traders that finance and support PML (N). Business and industry, at the moment in crisis due to policies of the past government, is jubilant over the win of PML (N). Economic revival and well being of the masses should be the top priority of the new government.

Throughout Pakistan’s years of existence, in addition to many other segments of society, one that has created much hassle for the tax departments (both federal and provincial), has been that comprising traders and small businessmen. Even though their collective contribution towards tax revenue is very small but their role in keeping revenue authorities at bay is so substantial that they, as a lobby, successfully influence any form of legislation which to them, creates ‘hardships’ by imposing some form of tax.

The legislative history of income tax law is fraught with provisions that were amended and/or re-amended on account of the bazaar’s shutter-down threats or violent demonstrations by traders, causing legislators to get cold feet and succumbing to their demands. It has also been observed that traders are generally quick to avail any type of amnesty schemes to whiten their ill-gotten or undeclared incomes. Thus, whether it is the Self-Assessment Schemes of the 1970s, Special National Fund Bonds or Simplified Self-Assessment Scheme of the 1980s, Foreign Currency Accounts or Foreign Exchange Bearer Certificates of the 1990s, various other millennium immunity schemes or the infamous section 111(4) of the present Income Tax Ordinance, 2001, at the forefront are all those who normally defy tax laws, and are therefore quick to grab an opportunity to purge their finances.

The question that emanates from this state of affairs is that why traders are shy of declaring their true incomes and paying their due share of taxes? There cannot be any one definitive answer because the matter goes down to innumerable factors which, simultaneously emerge from their worldly and religious morals. The concept of making more money is not unique to traders alone. Anyone who understands the significance of wealth, dreams of expanding his fortunes beyond its current position. There is nothing wrong in this aspiration!

The problem is triggered when this desire becomes an obsession surpassing all limits of social and moral obligations. So, whether such acts as adulterating eatables, incorrect measurements, selling defective or substandard products, misrepresenting, providing unprofessional services, defrauding customers, refusing to honour guarantees; or other duties as abiding by governmental laws regarding trade or payment of taxes; nothing is considered immoral or violating set standards. All is fair, as long as one is able to stuff one’s pockets with paper money and then have the audacity to squander it in ostentatious display of wealth and power. Such behaviour is visible in the length and breadth of our entire society. Apart from an ignorable number, the majority of tradesmen – from a petty fruit/vegetable vendor to owner of large departmental stores – leave no stone unturned to swindle an unassuming customer as well as the concerned government agents with whose connivance, they easily manage to evade their national duties.

All said and done, one cannot deny the feelings of guilt lurking in the sub-conscious of anyone who has wilfully committed a crime. No matter how many justifications one comes up with in defence of one’s wrongdoings, this remorse continues to torture one’s conscience and any misfortune that occurs in life, is attributed to these deeds as retribution of one’s mistakes even though this is not openly admitted lest everyone else becomes aware of them. However, within one’s mind a battle continuously goes on regarding deeds and their consequences.

On such occasions, religion plays a vital role in easing out these feelings of shame and misery. Undoubtedly, it has been observed that those who regularly participate in religious congregations in large numbers are members from the trading class. Thus, meticulous observation of prayer timings, regular fasting, frequently visiting Saudi Arabia for Umrah and Hajj [pilgrimage], spending heavy amounts of money in procuring sacrificial animals for Eid-ul-Azha [Feast of the Sacrifice], joining the tableeghi ijtemah [annual congregations of Tableeghi Jamaat] etc, are their hallmarks. All religious rituals must be performed at any cost. There is no excuse for escaping from these obligations because the maulvi [in charge of mosque] has sermonised that all sins would be forgiven if duties in the way of Allah are duly performed. On his behest, the same people who have no qualms in evading minor taxes, dole out generously in the name of donations to madrassahs [religious schools] or construction of mosques in the hope that these contributions would ensure an easy passage towards their ultimate and eternal abode – Jannah [paradise].

This state of affairs clearly points to a grim reality of Pakistan – that in educating the masses, clergy has overtaken the government. Thus, civic sense, national duty, sincerity, social responsibilities, honesty, tolerance, contentment, ability to distinguish right from wrong and to work for the honour of one’s country, that should have been an integral part of the primary school curriculum has now been replaced with an ‘all-for-one’ approach that is extensively preached by an entire generation of selfish ‘moralists’ who view the world as a temporary place, where defying its rules is no great sin. To compensate for their negligence in partaking in the affairs of the State, they happily indulge in religious ceremonies which consume a good chunk of their mostly ill-gotten wealth.

In order to overcome this ghastly situation there is a need for an immensely strong government that can enforce the law with an iron hand. Such an act requires a high level of will-power as well as sincere intentions. There is an urgent need for the government to take over minute details pertaining to educating the masses, through the same clergy whose words are cherished by them. The only distinguishing feature would be to install in their place properly trained recruited employees on government expense. This expense would only be a needle in the haystack compared to the heavy returns in the form of ensuring faithfulness to the country, obedience to law, observation of rules, proper payment of taxes and most important, fulfilling duties as citizens. Once, allegiance of the people of this country is fully secured there is no reason, why we, as one united nation cannot achieve what other countries have done so, in very short periods of time.

(The writers, tax lawyers, are Adjunct Faculty at the Lahore University of management Sciences (LUMS)