Familiarity will enhance performance

According to a report in this newspaper appearing on October 6, the Central Board of Revenue (CBR) has decided to send its officers holding positions in Grades 17 to 19 to different corporate companies and industrial units, so that they may acquaint themselves with the working methods and procedures of leading corporate entities in the country.
The move is reflective of a correct approach within the framework of the on-going taxation reforms along with the planned restructuring and capacity building of the administrative set-up in the entire hierarchy of the taxation departments.
It is for the first time that the officers belonging to the customs and income tax departments would be visiting as observers and learners for four to six weeks at the offices of various leading companies in the manufacturing sector, such as textiles, tobacco, cement, pharmaceuticals, automobile assembly, in addition to shipping, banks and financial institutions besides Export Promotion Bureau and other public sector agencies.
The CBR officers deputed as observers will be expected to equip themselves with first-hand knowledge of various segments of operations in a corporate company, including administrative control, financial management and internal audit, cost management, sales, debt management, accounting methods, etc.
The working methods may differ from one company to another which may be engaged in different types of manufacturing. Moreover, the difference in the quality of management may also be noticeable between a multinational company and a Pakistani company.
Thus the taxation officials would have an opportunity to understand and grasp the entire system of management and cost accounting in corporate entities. After finishing the prescribed period of learning in the offices of these companies, the taxation officials would also visit their to factories where they will be able to gain first-hand knowledge of the cost structure of various products.
The knowledge and information gained by the taxation officials through this process will definitely contribute to their ability to properly judge and assess the tax returns by the taxpayers while the customs officials in particular will be enabled to obtain an insight into the manufacturing process in different industries.
The programme will thus definitely help to bridge the vast gap that now exists between the taxation officials and taxpayers in respect of declaration of taxable income. Due to lack of knowledge about the working of a company and about the ingredients of cost and expenditure, a taxation official usually uses his own discretion in the determination of income and expenditure. This practice is usually the source of friction between the two sides, while at the same time it breeds corruption.
The newly adopted course of attaching the CBR officials with various corporate companies for a short duration should pave the way for a better understanding between the taxation officials and the corporate companies, which would ultimately remove the mistrust between the two sides.
Suspicious of concealment of real taxable income will be set at rest as a result of interaction between the taxation officials and the commercial executives. Major benefits may accrue from the new scheme in the long run in the form of sustained increase in tax revenue both through correct declaration of income and expansion of the tax base as many other income earners may be encouraged to enrol themselves within the fold of income tax, seeing an improvement in the thinking and behaviour of taxation officials.
The CBR programme to impart specialised knowledge, education and modern techniques of tax assessment to its officials is indeed a laudable initiative in the direction of making the various taxation departments adequately knowledgeable about the field of business and industrial management.
It may be recalled here that the CBR had also sent a number of its newly appointed officials last year to the Institute of Business Administration, Karachi, for courses in the field of fiscal and taxation management and corporate affairs.
These steps for comprehensive reforms in the administrative and professional working of the taxation departments will definitely prove immensely useful in giving them a tax payer friendly image.