AS tax-filing season draws to a close, for those innocent enough to be part of the exercise, it is perhaps worth taking stock of what has worked and what has not in the recent past. One thing that has clearly not worked is schemes designed to give retailers incentives to become filers. Another thing that has not worked is mounting penalties on non-filers, and ramping up the FBR’s powers to enforce such schemes.

Let me qualify what I said. When I say these have ‘not worked’ I mean something specific: they have not worked to break the barrier that keeps our tax-to-GDP ratio so dismally low that the structural fiscal deficit becomes the biggest ball and chain that holds the rest of the economy back. There is only one way to end this vicious cycle, and that is to come up with a tax reform programme that unlocks the significant tax potential locked up in those areas of the economy that see large-scale turnovers but contribute little to nothing by way of taxes. Not surprisingly, most of these areas are found inside the services sector, which accounts for more than 50 per cent of our GDP (in constant 2015 prices).

And within services one constant headache has been wholesalers and retailers, second only in size to communications, whose size and weight are inflated due to the sheer scale of mobile communications in Pakistan. Mobile communications are reasonably easy for the tax machinery to reach.

In his first year of power, Gen Pervez Musharraf targeted the retailers in a documentation drive, and the combined........

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