Narrowing the Tax Net

Narrowing the Tax Net

Dr Nasir Javed

Yes. I mean ‘Narrowing the tax net’… not broadening.

A teacher asked his class, what is a ‘Net’… The best answer was, ‘A large number of holes, tied together with many ropes’. In fact it’s the size of ‘holes’ that determines the efficacy of the net. If one wants to catch more fish, the holes are made smaller (narrow) and not wider. Making holes smaller, means putting some more ropes. In terms of Tax –Net, it means more data, data analytics and data integration.

There has been a plethora of discussion on bringing more tax payers into the FBR net and on documentation of the economy. Both these objectives are inter-related and require robust data. 

By tax I mean all kind of ‘public dues’… from water rate, to property tax, to provincial duties to all FBR dues.  We should target that everyone pays all such dues, user charges and taxes. 

Who is a tax payer? In general, taxes are either:

1.       Individuals (person based)  or

2.       Businesses (property based)

Almost all businesses (manufacturing, services, utilities etc) are ‘located somewhere’ in the country. So essentially all tax liabilities can be linked to either a Person or a Property.  

Now that we have documented almost all ‘persons’, under CNIC and NADRA data bases, what is needed is to ‘create a similar database of all properties in the country. This requires a ‘central property registry’. That means a comprehensive data base of all properties in the country, just like NADRA has a registry of persons.

And it’s a fairly simple process. The Bureau of Statistics Pakistan has a comprehensive coding system for population census that includes a Province code, a district Code, a tehsil Code and a Mauza code for rural areas and a block code for urban areas. Based on this coding system we can develop a computerized Map based code for ALL property units in the country…. Including all land parcels and all buildings, houses, flats, shops, industries etc. This code would be something like this:

Province		District			Tehsil				City		Ilaqa			Ward		Block		Street		Plot
1	1	1	1	0	1	1	1	0	1	1	1	1	1	1	1	1	1	1	1	1	1	1

This registration and coding of properties would be prepared using Satellite Imagery linked GIS based maps, so that NO land parcel / property is missed. Since this is a Spatial Database, we can establish a younger sister of NADRA, called SIDRA. (Spatial Information & Data Registration Authority).

Now all business transactions and dealings with the Governments and their authorities & agencies, (Local, Provincial & Federal) must be linked to this PIN code. The Electricity connection and bills, Gas bills, ptcl, water, bank loans, mortgage, sale-purchase, SECP registration etc MUST include this PIN code in all documentation, permissions, NOC, licenses etc….. just like we use CNIC for all personal transactions.  

In Punjab, while computerizing the Urban Property Tax system, this kind of coding has been introduced for more than 4m property units, though currently being used for limited purposes. The SIDRA can easily replicate the system and achieve full documentation in a few years time.  Just like CNIC, the SIDRA should issue PIN Cards. (Property Identification Number Cards) and in addition provide every property owner, with a metallic plate of the PIN card to be affixed at the gate / door.

Once this is achieved, we now need to integrate the NADRA data base, with this SIDRA database and that practically means ALL government transactions and business dealings are documented and mapped.   So almost all databases and transactions and businesses would be comprehensively documented. Just imagine if an authority knew the location, area, use, utility bills, all business activities, kind of business, etc for each and every property in the country and that too mapped, providing innumerable data analytical opportunities. The data generated from all these data sets would provide excellent triangulation and cross checking that would make it very difficult to avoid any taxation. 

This system shall have other benefits as well, in regulating the land and property markets, eliminating fraud and embezzlement and improving revenues of local governments as well. Not only that but mapping and time series analysis of the businesses would help us achieve economic planning and evidence based policy making, including regional GDP and disparities.

Last but not the least, every property owner should be made to pay for the issuance of this PINC, so no loans or public funds are needed and only those would pay who can afford it.

PS:          The PIN Card is ONLY for Identification of property and would not be a replacement for ownership documents / Registration deed etc….in the beginning at least.