Sitting on refunds | Pakistan Today

Sitting on refunds

  • The autodealers’ demands show industry collapsing

That the government has long used delays in paying industry tax refunds to artificially (and deceptively) beef up tax collection figures was acknowledged by the International Monetary Fund, which has been irritated enough by the practice to make the payment of refunds to industry a condition of its current Extended Fund Facility. The government finds itself unwilling, and perhaps unable, to pay the refunds, because of the need to reach this year’s IMF-set revenue target of Rs5.5 trillion.

It is a warning sign that FBR sources have said that the target could not be met because of the current economic climate. Another sign, if any was needed, that the economic climate was deteriorating came from the Auto Dealers Federation of Lahore, which threatened to go on strike if the federal and provincial governments did not fulfil their demands. The auto industry has collapsed because of the prices being jacked up because of the recent massive rupee depreciation, the complete ban on imported vehicle sales and the unhelpful attitude of taxation officials. Naturally, the collapse of car sales means that showrooms are adversely affected.

While it is true that the government has not deliberately caused the massive rupee devaluation, which must be laid at the door of the IMF, but its election on an anti-corruption platform should not mean that taxation officials have gained thereby the right to extract backhanders or to mistreat taxpayers. The auto dealers seem to be facing the resulting problem: even as their incomes fall because of plummeting sales, tax collectors become even more grasping. Having given up on the annual target, they are now bent on making something for themselves, The government must take account of how it can get the deal with the IMF revised, because it seems that apart from taking a slash-and-burn approach to economic planning, the IMF seems to have maintained its penchant for putting figures in its conditionalities, which can only serve to make its other figures balance, but which are unachievable; when they are not achieved, they will lay the blame on the concerned body of the home government, not on the flaws of their own planning. Meanwhile, there will have been much needless economic suffering. Pakistan and its fledgling industry is living through just such an experience.