Revenue losses for not rolling out Pakistan Automated Customs Computerised System (PaCCS) in Karachi at airport, air freight unit, appraisement and Port Qasim collectorate are estimated to be over Rs 47.65bn (Rs 47,658,941,906.75), according to authentic figures available here on Monday.
So far, the new system has helped the government collect Rs 400 billion and has 30,000 satisfied persons involved in overseas business. This figure of collection does not cover high tariff items like vehicles, or other commercial items that have been shifted out of PaCCS. Still it is collecting 32 percent of additional revenues than any other collectorate in Karachi.
PaCCS during 2008-09 collected over Rs 58.31bn (Rs 58,319,792,409) under the head of sales tax, over Rs 11.58 billion (Rs 11,584,616,274) of income tax, over Rs 51.35 billion (Rs 51,358,875,476) of central excise duty while total import value remained over Rs 774.69 billion (Rs 774, 670, 536,915).
A former senior tax official said that tax law is body of rules under which a public authority has a claim on the income of people. It requires earning members of society to transfer part of their income to government for collective good. Tax payers have a tendency to respond only if they see their money well spent, he said.
He explained that culture of tax evasion, a major hurdle in increasing tax-to-GDP ratio, takes roots if there are flaws in the tax laws, collections, and primitive systems. Incidence of dodging tax collectors steps up if some sector enjoys tax holiday without justification. Pakistan's current tax-to-GDP ratio is around 8.5 percent despite best efforts of Federal Board of Revenue (FBR).
FBR officials in private conversation confirm that their efforts are paying some dividends but they were sure that it would not have an impact of over .5 percent on whole scenario. This indicates that there would be no positive progress in the ratio during the current fiscal year.
Pakistan government had promised IMF before standby agreement to hike tax-to-GDP ratio by 15 percent by phasing out tax cuts and bringing in new tax payers in the net. According to a senator, once 13 percent tax-to-GDP ratio was achieved but current situation is "alarming and painful". He attributed the failures to rampant corruption and outdated systems. In India, this proportion hovers around 18-20 percent while it is 50 percent in Denmark.
Presently, industry is making up for 24 percent of the GDP and generates over 70 percent of revenues. The contribution of agriculture and service sector adds up to 74 percent of the GDP but their contribution to tax revenues is insignificant. "Economy cannot progress until some restraints are slapped on the powers of taxing authorities," the former tax official said, adding that the law of uniformity and equality of tax payers has fallen prey to manual procedures.
Procedural attacks are mounted on those who do not want to bribe officials, an exporter explained. "We see gifts to authorities as an additional tax," he said. "We are short of guarantees against unfairness or error. Discrimination follows disagreement with determination of the assessing officer," complained an importer.
There was a consensus among all stakeholders that many issues relating to taxation could be resolved through automation. Revenue of a terminal, which was automated through PaCCS, witnessed jump of 32 percent.
Transparency is taken as facilitating traders and hurting interests of corrupt government officials. Therefore, some elements are hell-bent on amending the PaCCS software.
The changes carried out so far have given many discretionary powers to customs officials that have forced the tax payers to revert to time-tested system of pleasing officials.
"Manual procedures and amendments in automated processes will not add a penny to the public exchequer. Instead, it would increase the cost of doing business. This is the considered view," the knowledgeable former tax official said. It is not surprising that Pakistan, with GDP worth USD 164.56 billion, stands 155th among 179 nations listed on the US think tank Heritage Foundation's 2009 index of Economic Freedom.
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