"The closer the collapse of an empire, the crazier its laws”
—Marcus Tullius Cicero
Can laws be considered crazy? This depends upon the mental capacity of legislators. How they perceive laws and what end they intend to achieve by enacting certain statutes. One would imagine that persons at the helm of affairs ought to be wise, prudent, visionary, and have the best interests of the public at large. If they are sitting there they are more keen on passing ridiculous laws, then it implies that something is fundamentally wrong with the entire legislative set-up.
The truth is that some countries do have rules that defy human consciousness. Some examples mentioned here are:
- It was illegal to change a light bulb unless one was a licensed electrician in Victoria, Australia, and if done by any other person, there was a fine of ten Australian dollars. This rule was revised in 1998 exempting changing a light bulb and removing a plug from a socket from this act.
- It is a legal requirement from Austro-Hungarian times that has yet to be revised in Milan, Italy, of smiling at all times except at funerals or in hospitals.
- In Samoa, it is illegal to forget your wife’s birthday. In Thailand, it is illegal to step on money because it has the image of the king on it, and stepping on it amounts to disrespect.
Although these appear ludicrous, they are not as insane as Pakistan’s Income Tax Ordinance 2001, which in the first place is a misnomer as it implies tax on income alone. In reality, it is quite contrary to all norms of income and should be renamed “Deemed Taxes Ordinance/Act” to portray its true nature. For a layman, it is an encrypted document that can only be decoded by expensive tax consultants because many times those who are responsible for enforcing this law find themselves in a vacuum.
Consequently, and because the actual legislators are incapable of understanding it either, as it appeals to their superiors and in their frenzy to collect more revenue, authorities keep on messing with it by introducing amendments that merely add to its complications.
Income is something that is earned by members of all walks of life—ranging from highly literate to illiterate, from professionals to the unskilled workforce. Income tax is a legal outcome that is quite comprehensible, therefore any legislation to this effect is considered normal. In the ‘Wealth of Nations’, economist Adam Smith has given a few sensible principles to impose taxes. These are certainty, convenience, economy, efficiency, equity, simplicity, minimum tax gap, progressive tax, tax risk management, transparency, diversity, equality, flexibility, neutrality and predictability. If one analyses the present Income Tax Ordinance, 2001, it hardly meets these criteria.
Rampant corruption prevailing in this department because of which the entire character of this scheme of law has become stigmatised. The public at large is willing to suffer excruciating exaction of taxes but reluctant to get themselves registered, knowing well the consequences of interacting with revenue authorities.
Starting from Chapter II, which deals with the charge of tax, it would be noted that the element of presumed income highly overpowers real income. Another glaring problem is that despite being an annual tax, the public is subjected to withholding taxes on an almost daily basis. What happened to the concept of focusing on earning money throughout the year, then submitting a return at a specified time and paying the due amount of tax?
Agreed that sometimes it is convenient for taxpayers to pay some amount to avoid a heavy burden but it certainly is unfair to spread the tentacles of withholding over all conceivable transactions making taxpayers’ lives miserable. After all, it is not necessary that by the end of the year, they would all have positive incomes. There could be genuine losses.
Again, there is hardly any equity if one examines, for instance, taxes on rental income of property whereby the owner of a small rented apartment would immediately fall in the tax net while a landlord leasing out acres of land enjoys millions without any charge. The idea of separate blocks of income too has rendered this piece of legislation meaningless. If taxes are imposed on a progressive basis, plus subjecting some incomes to full and final discharge of tax then how can it be fair as most of the time taxes are being extorted from those who are constitutionally not liable to tax while ones who have both types of income are not being taxed according to their actual ability?
As for certainty, this Ordinance has been the most unpredictable law since its inception. Lacking consistency, it has caused many businesses to shut down because of the erratic amendments from time to time defeating all projections and strategies of planners. Only the shrewd ones who can navigate this law continue to survive, but for how long?
Efficiency is the missing link between the law and its executors. In its nascent form, it contained a lot, like section 114 pertaining to the return of income that could have been utilised to expand the tax net and enhance revenue. Another example can be taken from the definition of the word ‘business’ that has the term ‘adventure or concern like trade, commerce, manufacture, profession or vocation.’ This was sufficient to tax persons engaged in frequent sale and purchase of immovable properties but no. These morons had to violate the country’s constitution in order to tax gains arising out of immovable property, the sole prerogative of the provinces. Contorted and distorted, this law has become nothing but a nightmare, especially for the compliant.
Last but not least is rampant corruption prevailing in this department because of which the entire character of this scheme of law has become stigmatised. The public at large is willing to suffer excruciating exaction of taxes but reluctant to get themselves registered, knowing well the consequences of interacting with revenue authorities. They would rather be invisible than pay heavy amounts to reclaim their legitimate refunds.
If we are desirous of cutting our ties with the International Monetary Fund (IMF) and becoming truly independent, then it is high time that we revisit tax laws, prevent the target-oriented legislators (sic!) from playing havoc with this law, and reclaim public trust in authorities otherwise the twenty-fifth IMF programme is just around the corner.