Documentation is an integral item on the government’s agenda to bring about a systematic discipline in the country’s economic management. Various governments in the past have tried to evolve a workable process to bring about this documentation but there have always been insurmountable roadblocks and hurdles in the implementation of this course. The Musharraf Administration also embarked upon this route once again, but this time with a determined vigor and sense of purpose. Documentation of the economy has become a hallmark of the present government’s agenda for economic revival.

The Central Board of Revenue has, of course, taken maximum advantage of this intention and has gone whole hog towards bringing into net the zero-tax payers or those who skimmed off the cream from the milk of their revenue. This ensued into a very tense scenario where the business and industrial community took up cudgels against the "infiltration" of the CBR personnel into their establishments and vociferously demanded a rethinking of this exercise. The Finance Minister, buoyed by the success of the various measures, incentive-based as well as punitive-centered, rallied the government machinery behind CBR and intensified the process to document the economy. The more the intensification, the greater the resentment. The Survey Forms and, in a way, the Amnesty Scheme are a manifestation of the documentation modes adopted by the government.

What then is "documentation of the economy"? The answer invariably lies in the concept that the economic activities of the country must have a well-maintained record system so that the various essential components of these activities are provable, are certifiable, and are historical. The universally accepted syndrome in Pakistan has been to maintain a dual accounting and record keeping system, where on the one hand there is the glorified and sanctified maintenance of the records that can be, and is, presented to the concerned authorities, agencies, or departments, while on the other side, certain records are enmeshed in a network of coded language, covert figures, and secret hideaways. The latter records, generally referred to as No. 2 books, are maintained either by the owners or by trusted accountants, and are zealously guarded, secured, and protected.

The advent of a fully documented economy would bring about a more transparent way of doing business and would also bring about a true market price of the commodity in question. It would also encourage the maximum realization of taxes, duties, and levies, and also inculcate a corruption-free culture in the country. The following are areas where the benefits of a documented economy are more prominent.

The anti-business tax regime in the country and the reliance on more punitive-based measures have led to a tradition of either under-invoicing the prices or even over-invoicing when so needed. The high incidence of custom duties alongwith the influx of smuggled goods also led to the under-invoicing of importable goods. The importers-custom officials’ nexus played a pivotal role in bringing about the widespread under-invoicing menace. Of course, it devastated the domestic industrial base, especially of those products that were produced at a higher cost due to several government fiscal measures. However, under-invoicing is also prevalent in the local market where the manufacturers, or their dealers, are in a position to dictate their sales terms and are able to enforce these conditions and thus give less than the actual price invoices to their customers. The end-user may not have a need for invoices and thus there are no controls or checks to discourage the issuance of under-priced invoices. The desire to maximize profits by resorting to undeclared or under-declared sales has been a norm in many organizations. This desire stems from the conviction that the government machinery squanders away the revenue on non-developmental expenditures and thus the non-declaration of sales or under-declaration of sale price.

The high tax rates, the exorbitant custom duties, the backbreaking levies, and the anti-business attitude of tax collectors, have been major reasons for traders and industrialists to shy away from accurate and exhaustive documentation. It has been widely observed that those who maintain detailed records are susceptible to intense audits, irrational interference, and illogical demand of documents by the tax collectors. It is considered hara-kiri if one goes and registers with the tax authorities. The businessmen who are outside the tax net are generally considered as fortunate and those who are inside the tax net have a lot of sleep to lose. This is the prevailing environment in the country today. This has made businessmen cautious to the ramifications of the concept of documentation. Inspite of repeated representations, the government has not heeded the advise or listened to the proposals and suggestions on this very imperative aspect of hurdles in the documenting of the economy.

The ages-old scenario to have a plethora of paperwork is still in vogue and the administration has never been able to extricate itself from this bureaucratic muddle. The tendency to demand documents and more documents should have been reduced years ago, especially with the liberalization of the economy, but the ground realities are contrary to this. It is so routine for governmental agencies to require documents or figures when these have already been submitted to that department in the past. The lethargy prevalent in the governmental corridors is pathetic, and the bureaucracy has not come out of this rigmarole. The more liberalized the economy, the more the paperwork. This is the absolute misuse of the concept of documentation and the government officials are bent upon aggravating the atmosphere by being more ruthless and obnoxious in this respect.

The government can become more involved in bringing about a comprehensive documentation system in the economy if it affirms its determination to continue with the process. The trend towards dilly-dallying on important issues has brought about a negative response to various governmental measures and has fortified the resolve of those who do not agree with the government’s scheme of things. It is imperative that the administration provides a sustainable solution to the process of documentation and that can only be done if the government can establish its writ but at the same time bringing about a kinder, gentler tax regime. The high-handedness of tax collectors must be checked and those elements in the tax collecting agencies that are bent upon creating a polemic condition must be removed from the scene. The government must understand that the pragmatic way to bring forth universal documentation is to provide an enabling environment.

It is essential that the government ensures that there is an enabling environment so that the objective of documentation of the economy is attained. This can be achieved thru bringing about continuity in the policies and bringing about a sustained process flow. The government must discourage those who insist on using the powers of the state to succeed. This is a myopic view and would lead to a backlash in other areas and, in the longer run, would be detrimental to the business of the country. There should be incentive-based measures that are undertaken to attract proper record keeping. The present practice of excessive penalties for even minor infractions must be curtailed and benefit of the doubt should be given to the taxpayer. The sadistic streak in many tax collectors must be restrained and those who are involved in the mental torture of businessmen must be forbidden to work in a tax-collecting agency. The chain of record keeping must be introduced and must be guaranteed so that those who have documented businesses are able to justify their records and are able to take advantage of the inputs and adjustments.

The benefits and the advantages of a documented economy are substantial. The customer would be willing to attest the purchases if it is from the proper channels and can take the required credit for future adjustments. The smuggling regime would gradually become non-remunerative if there is appropriate accounting of goods and if there are genuine invoices available to the customers. The country would have the correct picture as to the import bill and would know what has been the real value of the exported commodities. The businessmen would be at a vantage position and would not have to succumb to the extortion of government officials or indiscreet employees, and there would be a drastic reduction in graft and corruption while the inflow into the Treasury coffers would be formidable.

The country’s traders and industrialists who genuinely want to be accepted and treated as honest taxpayers have always demanded that the economy must be documented. So much so, SITE ASSOCIATION OF INDUSTRY, has always been in the forefront in demanding this and this can be ascertained by the very fact that the first item on every budgetary proposal has been the demand for documentation of the economy. The Association has also called for payment by checks for every transaction over Rs 10,000 and that the concept of receipts should be encouraged.

SITE ASSOCIATION OF INDUSTRY very strongly demands that the government must continue with this process but in a more dignified way so that the business atmosphere in the country is not vitiated and that the honor of businessmen is respected. At the same time, the Association does not subscribe to any notions of having an undocumented business culture nor would it protect those who are not willing to come into the tax regime. It supports whole-heartedly all measures to bring about industrial prosperity in the country so that Pakistan can proudly stand among the developed nations of the world.

As Allama Iqbal said:

I thank you very much for your presence and attention and, with the permission of the chair, I am ready to interact with you on this subject or on any other relevant topic. Thank you very much.