Wednesday, July 10, 2019

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 databaseand 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