Budget 2020

Tax reforms for economic revival

Huzaima Bukhari & Dr. Ikramul Haq

The biggest challenge faced by the present federal and provincial governments is how to strike a balance between revenue mobilisation and revival of economy in the aftermath of Covid-19 pandemic, lockout and demand contraction. We alone are not victim of these as it is a global phenomenon of massive economic meltdown in every sphere. It has not only badly affected our domestic demand/supply chain, but also exports, as well as inflow of foreign remittances. Budget 2020, expected to be announced on June 12, 2020, is in the making amid very difficult times. All the businesses and entire nation, especially the weaker segments of society, are facing the extreme hardships—a struggle to survive. The traditional approach adopted for decades in Pakistan for budget making that is balancing the books, levying more taxes, containing fiscal deficit and other number games will have to be given up in totality under the prevalent exceptional circumstances in the federal and provincial budgets to take effect from July 1, 2020.

Like other nations, we will have to strive hard in coming days to ensure survival and revival of businesses adversely affected by Covid-19 pandemic that employ millions having no other source of income. Overwhelming majority of businesses in the wake of lockdown necessitated due to Covid-19 epidemic is on the verge of closure. These were already suffering due to sluggish economic activities, high utility bills and markup rate prior to Covid-10 outbreak due to wrong policies of the governments—federal as well as provincial.

Big to small and medium enterprises (SMEs) are demanding a comprehensive bailout, including tax reliefs. They are complaining of facing difficulties in securing loan facility announced by State Bank of Pakistan (SBP) to pay salaries/wages. Those on rent are demanding remission/deferment to pay the same. Their demand is of interest-free loans and/or grant to employees to avoid lay-offs as even after partial opening of businesses for the last few days, they argue, earnings are insufficient to meet payroll and other overheads. They will require many more months to recoup losses and achieve break-even position. Amid this bleak scenario, they claim, markup would be an additional burden that they would not be able to bear. There is unanimous demand from all businesses of massive tax reduction, deferment of old and forthcoming bank and official liabilities, tax amnesty, and zero taxation for employees earning up to Rs. 100,000 per month, waiver of advance income tax and withdrawal of 66 withholding tax provisions contained in the Income Tax Ordinance, 2001 and payments under Sales Tax Act, 1990 and all provincial laws relating to sales tax on services even when the same are still recoverable from clients who are not in a position to pay.

In the present circumstances, in the forthcoming federal budget, there is an urgent need to introduce a fair and simple tax system, as elaborate in Towards Flat, Low-rate, Broad and Predictable Taxes [PRIME Institute, 2016] and referred to in recent PIDE’s Policy Viewpoint [16:2020] Doing Taxes Better: Simplify, Open & Grow Economy. In this article, we are presenting a comprehensive plan that can help to generate adequate revenues for the government, slashing all wasteful/unproductive expenses, reduce fiscal deficit as well as overcome the Covid-19 economic toll. It is an excellent opportunity for the federal and provincial governments to take the right measures to not only help the needy through a comprehensive social security system, but also ensure return to a vibrant economy and creation of new jobs after partial and ultimately full withdrawal of lockdown caused by Covid-19 pandemic.

The most essential step to achieve the above goals is fundamental structural changes in the existing tax system. We need simplification of the tax system, moving towards ease of doing business, reducing cost of doing business, providing level-playing field and independent market operations without manipulations, monopolies and cartels.

The present challenges are a great opportunity for us to do which we gave failed to do for decades though it was promise of every government—military and civilian alike—but proved to be a mere lip-service.  It is time that the federal and provincial governments should come out of inertia and status quo ante and focus on improving human capital, tapping resources and generating employments. For all these, dismantling and reconstructing the oppressive, inefficient and unproductive public institutions, especially the tax system, is a prerequisite. Without raising funds from our own sources and ending reliance on borrowed money, we will never be able to come out of a fiscal mess that successive governments has created.

The existing system imposes high taxes but yields low revenues. Only 2000 companies pay 75% of total taxes. The standard sales tax rate is 17% but effective rate in 2016 was not more than 3 to3.5 percent as highlighted in report of Tax Reforms Commission. The situation in 2020 may have improved, but it still not more than 7% to 8%.  Refunds of billions of rupees of sales tax and income tax were unlawfully withheld to show higher figures in the past many decades as documented in Of unpaid refunds and figure fudging, Business Recorder, November 9 & 14, 2018 and Unpaid refunds: continuation of ‘Dar(k) Era’ .

Out of about tax returns of 2.5 million filed for tax year 2019 until now, one million shows nil income or income below taxable limit. It is a farce in a country of 220 million populations where 95 million unique mobile users are paying advance, adjustable income tax of 12.5% alone, but filers are 2.63% of this single withholding tax regime. According to data of 2018 compiled by Pakistan Electric Power Company (PEPCO) as on June 30, 2018, there were 3,028,054 commercial and 339,853 industrial electricity users paying advance income tax under section 235 of the Income Tax Ordinance, 2001 but all of them are not filers. For K Electric the number of commercial and industrial users is 463,670 and 20,647, respectively. Out of these how many filed income tax returns and sales tax statements is not disclosed by FBR on its website or in its Year Book 2018-19 or any other documents.

FBR has recently closed audit of 310,000 cases, selected merely on account of late filing of returns. The reason for closure, assigned by FBR, is “lack of capacity” [FBR: audit closure, capacity & legality, Business Recorder, May 8, 2020]. Either this lack of capacity is due to shortage of officers or absence of proper training/skills or pressure from political masters is again not disclosed by FBR or the coalition Government of Pakistan Tehreek-i-Insaf (PTI).

The central point of budgets 2020, by federal and provincial governments, should be achieving the long-delayed and much-needed goal of welfare of the common people and providing universal entitlements to all citizens through a comprehensive social security system. It is only possible by following a rational tax system proposed in 2016 [Towards Flat, Low-rate, Broad and Predictable Taxes, PRIME Institute, 2016]. Without wasting any further time, the federal and provincial governments must take the right measures aimed at not only helping the needy but also ensuring revival of the economy with partial and ultimately full withdrawal of lockdown caused due to Covid-19 pandemic.

In Pakistani context, FBR is blindly following Allingham Sandmo study [its crux is: “Income tax probably offers much larger opportunities for tax evasion than commodity taxes do”.]. It needs to be re-examined from our own peculiar circumstances where evasion starts at import and manufacturing stage of goods that leads to massive non-reporting or under-reporting of income. FBR must read the article, Dismantle containers’ mafia, Business Recorder, September 14, 2018 that proves that picture in Pakistan is the other way around.  

FBR has only 240,000 registered persons under Sales Tax Act, 1990 but tax comes only from about 44,000 people. Shockingly, out of 360,500 industrial connections as on June 30, 2018, only 18,000 were registered under sales tax regime. Out of 3,491,724 commercial electricity users as on June 30, 2018, less than 350,000 filed income tax returns though tax of Rs. 33.832 billion was paid with bills as admitted in FBR Year Book 2017-18 and figure for fiscal year 2018-19 was Rs. 35.5 billion—FBR Year Book 2018-19. Allegedly, National Database & Registration Authority (NADRA) and banks are not ready to share data with FBR and utility companies are not ready to indicate on bills Computerized National Identity Card (CNIC) of actual users in many cases.

The successive governments showed no inclination to provide necessary resources for improvement of the system. This has never been the priority or even consideration of any political party in power, but they conveniently shift blame on FBR. Then, there is elite capture of policies that we have been discussing repeatedly in our articles. One of the many maladies in the tax system is cumbersome withholding tax system contained in the Income Tax Ordinance, 2001, Sales Tax Act, 1990 and all provincial laws relating to sales tax on services. It is operationally inefficient, anti-business, complex, time-consuming and costly and must be abolished except for payroll [tax on salary], dividends, interest, and all payments to non-residents if chargeable to tax as per rate given in the Income Tax Ordinance, 2001 of relevant tax treaty.

The agenda of simplification of tax codes and revamping of tax administration can improve tax compliance. No agenda for reform will succeed unless there is substantial improvement in public perception regarding the efficiency, technical competence, integrity and ability of the tax authorities to collect taxes fairly and justly, using modern technological tools. The present structures of the federal and provincial tax bodies have failed to achieve these objectives. Therefore, the fundamental challenge is providing simple tax codes administrated by an efficient and competent administration, which is presently non-existent.

In addition to suggesting effective measures for documentation and revenue generation a serious effort needs to be made to bridge the trust gap between Government/FBR and citizens/taxpayers, because there is severe trust gap between the two and general apathy on the part of Government/FBR towards genuine problems of citizens/taxpayers. There is absolutely no facilitation for taxpayers and nature of most of our taxes is confiscatory, and behaviour of government/taxmen is that of extreme apathy. All tall claims of taking steps for ease of doing business are hollow and people who matter in the government including the Prime Minister are unaware of even genuine problems of taxpayers.

Tax administrations, both at federal and provincial levels, lack the requisite level of digitization, professionalism and human skills. Tax reforms certainly do not mean mere alteration of tax laws or making cosmetic changes here and there. Meaningful tax reforms are not possible without first establishing an efficient, workable structure. The best example of an efficient tax structure is that of Sweden’s tax agency, Skatteverket that maintains data of each and every person, natural or juridical. Skatteverket is accountable to the government, but operates as an autonomous public authority. We need to establish National Tax Authority (NTA)—FBR top management want to rename it as Pakistan Board of Revenue (PBR)—on the same lines as in many other countries. It is highlighted in Towards Flat, Low-rate, Broad and Predictable Taxes [PRIME Institute, 2016] and draft laws law is also presented. The Legislature must also pass Data Protection Law as is the case with Skatteverket and all many other fully digitized tax agencies, for example, Canadian Revenue Agency. Canada id a federation like us but has single national revenue agency.  

The issue of fragmentation of taxes and multiple collection agencies was discussed in detail in ‘Case for All-Pakistan Unified Tax Service: PTI & innovative tax reforms’ [Business Recorder, August 31, 2018] and viable solutions were offered. Strangely, the World Bank has not acknowledged in any of its papers/reports related to Pakistan Raise Revenue Project, the contribution of local writers and presented the same as its own recommendations. For example, it may be noted that we gave the idea of National Tax Agency first time in 2013 in ‘Need for National Tax Agency’, Business Recorder, November 1, 2013, then in Too taxing, TNS, Political Economy, June 22, 2014, Revamping Tax system, TNS, Political Economy, December 7, 2014,Tax proposals—VII: Need for NTA,Business Recorder, May 22, 2015 and ‘Need for “NTA”, Business Recorder, November 27, 2015.

It was suggested in the above articles that the FBR or any other tax collection agency need to be run by a competent board as a short-term reform measure before all of these finally merged into a single national tax agency. The NTA should not only collect taxes at all tiers of government but should also disburse benefits like social security, food stamps, universal pension and income support etc. The linkage of database of various bodies with NTA (complete digitisation) can be a great step towards e-government model for the country that is presently non-existent.

The models of Swedish revenue authority [Skatteverket] and Canadian Revenue Authority (CRA) suggested as worth studying/adopting after debate and suggesting modifications suiting our peculiar requirements. This was later elaborated by us many a times in various articles and in a paper, Towards Flat, Low-rate, Broad and Predictable Taxes, Islamabad: PRIME Institute, April 2016] and in Need for National Tax Authority, Business Recorder, October 20, 2017, ‘A case for ‘National Tax Authority’, Business Recorder, November 30, 2018 and December 2, 2018. 

Our idea of NTA was also included by the Tax Reforms Commission in its final report submitted in February 2016 [which was marked confidential and till today is not made public despite our repeated requests].The agenda of simplification of tax codes and rationalisation of tax system can improve tax compliance, unless there is substantial improvement in public perception regarding the efficiency, technical competence, integrity and ability of the tax authorities to collect taxes fairly and justly, using modern technological tools. The present structures of the federal and provincial tax bodies have failed to achieve these objectives. Therefore, the fundamental challenge is providing a simple tax system that is manned by an efficient and competent administration, which is presently non-existent.

FBR Year Book 2018-19 concedes that withholding taxes constitute 67% of the total collection of income tax (it was 65% last year). Out of total collection of Rs. 1445.5 billion [it was Rs. 1536.6 billion in 2017-18], Rs. 39.2 billion [2.7%] received with returns and Rs. 344.2 billion [23.8%] as advance tax. FBR’s own efforts (collection of demand created) yielded only Rs. 84 billion (5.8%, it was 7% last year) and from arrears Rs. 18.6 billion (1.3%, it was 1.2% last year). It confirms negligible share [7.3%] on the part of FBR. The same trend continues in the first nine months of the current fiscal year and after Covid-19 crisis, the situation further worsened.

The Centre is unwilling to grant provinces their legitimate taxation right of sales tax on goods, while it collects too little to meet overall needs of the federation and federating units. Sales tax on goods at time of independence was a provincial subject. The subject of sales tax was on the Provincial Legislative List at Serial No.48 in the Government of India Act, 1935 and was described as “Taxes on sales of goods and on advertising”. In the Constitution, 1956, “tax on sales and purchases” was mentioned at Serial No.26 of the Federal Legislative List, and therefore, for the first time it became a Federal subject. The position was maintained in 1962 Constitution, which mentioned “tax on sales and purchases” on the Federal Legislative List as clause (j) at Serial No.43 in the Third-Schedule.

In the present 1973 Constitution as originally adopted, ‘tax on sales and purchases’, was kept on Federal Legislative List at Serial No.49 of Part I of the Federal Legislative List given in the Fourth Schedule. The item was, however, completely substituted by Constitution 5th Amendment Act, 1976 with effect from September 13, 1976 to read “Taxes on sales and purchases of goods imported, exported, produced, manufactured or consumed”. The second half of the amended entry appears to have been taken from the amendment made in Sales Tax Act, 1951 by Finance Ordinance, 1960. Through that amendment the words “consumption of goods” in the preamble were substituted by “importation, exportation, production, manufacture or consumption” [see detail discussion in WAPDA v. Collector of Central Excise and Sales Tax (2002 PTD 2077 and also in Pakistan through Chairman FBR and others v Hazrat Hussain and others (2018) 118 Tax 260 (S.C. Pak)]. 

The size of the cake—Divisible Pool—is so small that it cannot help the country to come out of debt trap and spend adequately for the welfare of the masses, no matter which part of the country they belong to. The relief/stimulus package announced on March 24, 2020 by Prime Minister exposed our economic and fiscal vulnerabilities during testing times. Under the given scenario, Pakistan will remain in debt prison, and more and more people will be pushed below the poverty line, especially due to corona crisis. If we want to overcome it, the Parliament will have to reconsider the prevailing social contract between federation and the provinces.

The way forward is that provinces should have the exclusive right to levy sales tax not just on services but also on goods as was the situation in 1947. It is also imperative that further amendments should be made in the Constitution after debate and consensus to assign right to levy tax on all kinds of income, including agricultural income, to the federal government and it can tax the rich and mighty to improve infrastructure, retire debts and bridge fiscal deficit without sharing proceeds with provinces. This alone can eliminate/reduce fiscal deficit at the federal level and achieve fiscal stabilisation in Pakistan. It must be highlighted that Article 160(3A) of the Constitution, inserted by Constitution (Eighteenth Amendment) Act, 2010 [commonly called “18th Amendment”], categorically says: “The share of the Provinces, in each Award of National Finance Commission shall not be less than the share given to the Provinces in the previous Award”. However, outside the ambit of Article 160 of the Constitution, the Centre can impose taxes to meet budgetary gap as it did in 2013 by enacting Income Support levy Act, 2013, but repealed it the very next year [A tax for the poor that the rich never paid, Daily Times, October 21, 2018].

The most difficult sector to tax is wholesale/retail sector because of shutter power of the traders—see detail in these two part series [Dealing with traders—I &II, The News, January 19 & 28, 2020]. According to a study of retail business by Punjab Board of Investment and Trade [Project & Policy Research Wing: www.pbit.gop.pk]: “….Pakistan’s current retail market is estimated at USD 42 billion with sales in excess of USD 105”.

In order to tap the real tax potential of retail sector, in Finance Bill 2020, the following simple and fair tax system is proposed:

Section 3 (9) & (9A) of the Sales Tax Act, 1990 should be omitted and following new subsection (9) should be inserted:

“(9) Notwithstanding anything contrary contained in the provisions of this Act, tax on retailers be charged, levied, collected and paid as provided under rules issued under section 99B of the Income Tax Ordinance, 2001 at the rate of 4% of the gross turnover or at such a lower or higher rate as the Federal Government may specify by notification in official gazette.

Provided that provisions of subsection (7) of section 3 shall not be applicable in the cases of retailers covered under this sub-section”.

In the Income Tax Ordinance, 2001 substitute section 99B as under:

“Notwithstanding anything contained in any other law for the time being in force a tax shall be charged, levied, collected and paid at the rate of 3% of the gross turnover inclusive of Sales Tax as provided under subsection (9) of section 3 of the Sales Tax Act, 1990 on 15th of every month next following the month to which such turnover relates. The Federal Government may, by notification in the official Gazette, prescribe special procedure for scope and payment of tax, filing of return and assessment in respect of such retailers, as may be specified therein

Provided that the provisions of section 147, withholding of tax under Part “V” of Chapter X (except tax on salaries under section 149) and Chapter XII and provisions of Schedule 10 shall not be applicable to retailers covered under this section”.

The Federal Government may prescribe the following procedure for retailers covered under subsection (9) of section 3 of the Sales Tax Act, 1990 read with section 99B of the Income Tax Ordinance, 2001 as under:

1. All retailers covered shall file monthly return and make payment on monthly basis along with return calculated as per formula provided below on 15th of every month next following the end of month to which such turnover relates.

Turnover                                                                                          PKR 10,000,000

Sales Tax on above @ 4%                        (A)                                 PKR      400,000

Total Amount Subject to Income Tax                                             PKR 10,400,000

Income Tax @ 3% on above                     (B)                                 PKR      312,000

Total Tax Liability to be paid with return (A+B)                           PKR      712,000

• All retailers must get themselves connected with FBR through Point of Sale (POS) irrespective of their turnover. No audit shall be conducted for retailers who opt for POS.
•  Retailers shall be allowed to incorporate profit in their books working back the income tax paid applicable to total income (imputable income).
• 1% cash back/rebate on yearly basis will be allowed to such retailers who have adhered to all the provisions prescribed. However, if it is proved on the basis of information that cash back/rebate was claimed on erroneous basis then notwithstanding anything contained in any law for the time being in force, such retailer shall be charged with a penalty of 5% of annual turnover and imprisonment that may be up to 5 years.

If we take even negative impact of Covid-19 pandemic, the retail sales in fiscal year 2020-21 will not be less than $105 billion, otherwise would have cross $ 140 as per study of Punjab Board of Investment and Trade. By applying sales tax of 4% and income tax of 3% on gross turnover, the total collection will be around Rs. 1,184,198 million as per calculation below:

Total budget USD 5 trillion = 31.2 B USD @ 160 each

4% of 105 B = 105,000,000,000

+4,200,000,000= 109,200,000,000

3% of above = 3,276,000,000

So total Sales Tax plus Income Tax= 7,476,000,000 USD

Less 1% cash back of tax = 74,760,000

Net tax after rebate= 7,401,240,000 USD or

PKR 1,184,198,400,000 @ 1USD =160

The above simple taxation system for retailers will bring a large segment of undocumented sector into tax net, reduce fiscal deficit and revive the economy. The prices of all products will come down due to low tax rates and abolishing of withholding regime for retailers. This proposal has been given to the government, but there are apprehensions that the vested interest—unscrupulous traders, tax advisers and administrators—will resist it as it will end their blackmailing the taxpayers and making speed money.   

The following measures/steps are necessary to recoup damage already inflicted to the economy by pre-Covid-19-lockdown policies, due to closing down of businesses [now partly opened from May 9, 2020] and other global factors resulting into demand contraction and absence of reliable national socio-economic registry as maintained by Skatteverket and many other tax agencies:

1. All individuals, whatever the level of income may be, should be facilitated to file simple and easy tax returns made available both in English and Urdu—incentive for filing return should be Rs. 2,000 cash payback in the bank account of the filer. It would enable the process of creating National Registry about households and their earning levels at national level. Individuals earning below Rs. 400,000 should be paid income support (negative tax) till the time the State provides them employment and not keep them beggars for life.
2. For individuals, income tax rate exceeding income of PKR 0.6 million should be 10% with alternate minimum tax 1% of net wealth exceeding Rs. 20 million. Corporate income tax rate should be reduced to 20%. Retailers may opt for above scheme under section 99B of the Income Tax Ordinance, 2001. 
3. All citizens should be given a chance to pay any past unpaid liability due to non-reporting or under-reporting by just paying 10% tax latest by June 30, 2021. After the deadline, stringent action including confiscation and imprisonment should be provided. 
4. For the next three years due to challenges posed by Covid-19 economic toll, under a self-assessment scheme if any taxpayer pays more than 25% tax over the last year’s liability, no audit should be conducted. If definite information for underreporting or non-reporting of any income is received, the retrieval be made with penalty of 100%.
5. Simplified and harmonised sales tax on goods and services at a low rate of 8% by making recourse to Article 144 of the Constitution. The collection will be through single national agency but provinces will get shares according to the provisions of the Constitution.
6. Simplify Customs tariff with ‘One-Chapter One-rate’.
7. Radiographic scanning of all inbound and outbound containers to plug revenue leakages.
8. Effective mechanism to counter unfair practices on the part of tax administrators—subjected to punitive actions and pecuniary damages after the final fact-finding authority adjudges their actions arbitrary, excessive and beyond their assigned powers. The Federal Tax Ombudsman should be given the statutory power of awarding damages in such instances.
9. Taxpayers’ rights must be safeguarded and strengthened by giving adequate rights under Taxpayers’ Bill of Rights ensuring quality of treatment, guaranteeing privacy and confidentiality of their declarations, providing right to assistance by the State in tax matters, ensuring unfettered right of appeal through an independent tax appellate system and providing facilities for independent review of disputes with tax authorities.
10. In Pakistan under the repealed Income Tax Ordinance, 1979 (until assessment year 1995-1996), three specific characteristics were the hallmarks of advance tax, viz.
11. Advance tax was paid by the taxpayer on the basis of last declared/assessed/estimated income for that assessment year;
12. Credit for any advance tax collected for an assessment year was accounted for in that year and not the year of collection; and
13. 6% mark-up on the amount retained as advance tax was paid to the taxpayer at the time of assessment thereby compensating his cost of funds or opportunity cost for the period his money remained with the government.

The above should be revived by suitably amending section 147 of the Income Tax Ordinance, 2001 which will help in ascertaining collection for the current tax year without accumulation of refunds after abolishing all regressive withholding provisions.

1. Recovery of tax demand should be made only after decision of National Tax Court as suggested below.
2. An efficient tax judiciary to help in removing impediments in the way of collection of genuine tax demands by the State and settling tax dispute within 12 months. For this we need to make the Tax Appellate Tribunals a truly independent forum. After merging Appellate Tribunal Inland Revenue and Customs Tribunal, the new entity should be renamed as National Tax Tribunal (NTT) andplaced directly under the Supreme Court as is the case with Federal Service Tribunal. After one intra-court appeal right with the NTT, only the substantial questions of law to go to the Supreme Court by way of leave to appeal as provided in Article 185(3) of the Constitution. Members for NTT should be recruited in the same manner as judges of High Court. The pay, perquisites and salary structure of NTT members and staff should be at par with that of High Courts.
3. For reducing fiscal deficit to the level of 6% of GDP, it is imperative for both the federal and provincial governments to
   1. (i) curtail unproductive and wasteful expenses by 30%
   1. (ii) increase non-tax revenues by leasing out valuable state lands and assets and palatial government houses etc through public auction for specific activities to generate employment/boost economic activity
   1. (iii) taxes at all levels—federal, provincial and local—should be made simple, low rate, broad-based, payable with ease as the Punjab Government recently decided to abolish around 50 taxes.

Tax revenues have a critical role in municipal self-governance in all successful social democracies. The power to levy and collect taxes is one of the cornerstones of municipal self-governance as it ensures that the municipalities can manage the functions that they have undertaken to execute or those for which they are responsible for under the law. Take the example of Finland where the most important levy is municipal tax, which amounted to almost 44 billion Euros in2019—Pakistan collects less than 30 billion Euros as taxes both at federal and provincial level in 2018-19!

If a country of 5.4 million people (Finland) can achieve this level of taxation at municipal level alone, then we a nation of over 220 million can do much more, but only if there is the will. One of the central constitutional principles regarding municipal self-governance in Finland is that, when allocating new functions to municipalities, the State has also to ensure that they have the necessary resources to carry them out. We have the resources but system for self-governance as in vogue in Finland and elsewhere in the world is non-existent, despite the clear command under Article 140A of the Constitution. Resultantly, power is not with the people but in the hands of the privileged few and mainly bureaucracy even at local government level.

Economic revival, socio-economic equality and prosperity, peace and social tranquility can never be achieved unless taxation system is reformed completely. It needs partial decentralization where taxes are collected for education, health care and social welfare services through municipalities working on the principle of self-governance ensuring that revenues are spent for the benefit of public and not the powerful segments of society alone.

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The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS)