Proactive approach against big tax evaders a must: FTO says country has potential to collect Rs 5 trillion revenue

Federal Tax Ombudsman (FTO) Dr Muhammad Shoaib Suddle has said that the country has the potential to take annual revenue collection up to Rs 5 trillion by adopting a proactive and across-the-board approach to go after big tax evaders. It will require the Federal Board of Revenue (FBR) to change the mindset of tax functionaries to encourage honest taxpayers to positively interact with the tax department for redressal of their complaints.
In an exclusive talk with Business Recorder here on Wednesday, Dr Suddle said that doubling of the existing tax collection should not be a big deal. By improving the compliance level, the tax machinery can take the revenue collection up to Rs 3 trillion within a year. A new approach aimed at transforming the culture of 'indifference and heartlessness' that has existed for too long in the FBR is critical to realise the true tax potential. Let the FBR develop necessary ability and capacity to be able to collect due tax from each and every individual, irrespective of who he or she is. Sending a few top tax evaders, with all their might and influence, to prison every year would be key to a new tax culture in our homeland.
According to Dr Suddle, a fundamental change is needed in the complaint handling mechanism of the FBR. Most taxpayer complaints should be handled at the FBR's level, and only systemic issues or major complaints by the FTO. The taxpayers should not feel hesitant to directly go to the concerned tax officials for redressal of their complaints.
Sharing his vision to substantially improve revenue collection, the FTO said that some of the measures which could substantially raise revenue collection included payment of taxes by all persons, irrespective of their position or influence. Everybody should pay their due share in taxes, without burdening sectors already paying taxes.
Secondly, large-scale exemptions are causing distortions in the tax regime. There should be no exemptions which benefit the rich and the influential. Thirdly, there should be horizontal and vertical equity in the taxation system. Fourthly, effective deterrence can be created by focusing on big tax evaders. Exemplary punitive action against top tax evaders would give a clear message about the much needed rule of law in the country. Fifthly, the FBR needs to undergo a cultural transformation to be able to take strict disciplinary action against tax officials involved in corrupt practices. The officials habitually involved in maladministration need to be made examples to create general and specific deterrence across the FBR.
Sixthly, the FBR should ensure that tax due is collected on all forms of income, irrespective of their source. The controversy about agricultural income needs to be laid to rest at the earliest. Let the FBR collect tax on agricultural income in the like manner on behalf of provinces, and charge them reasonable collection charges.
The senior hierarchy of FBR, in particular, needs to demonstrate a visible change in the organisational mindset. Let senior officials be seen proactively welcoming the taxpayers while handling their genuine complaints, he maintained.
The FTO further explained that the existing practice of allocation of monthly and quarterly revenue collection targets was leading to many malpractices within the field formations of FBR, particularly with regard to prompt issuance of taxpayers' refunds. Without doing away with the policy of fixing revenue collection targets, the menace of maladministration in the field formations cannot be frontally tackled. On the contrary, the targets should be area-specific and activity-specific.
For instance, let the target be to bring every trader in the major markets of the country within the tax net in, say, two year's time. Similarly, let every professional be in the tax net in a fixed time span. Every city has a number of markets, business centers and trade centers. Let them be made to pay their due share of taxes, without any consideration of their party affiliations.
Dr Shoaib Suddle further said that the simplification of tax laws and rules/procedure was necessary to encourage voluntary compliance. Moreover, the better the quality of interaction between the taxpayers and the tax collectors, the higher the revenue collection. In a broader perspective, a part of the tax collected from a specific area should be spent in the same locality so that the taxpayers' know that their money is being utilised on improving services like health, education, water, security, etc. The FTO said that the desired cultural shift in the mindset of the tax officials is not possible without a passionate resolve on the part of FBR's top management to effectively discipline the rotten eggs in their midst.
Let there be zero tolerance for those known for routinely harassing the taxpayers. Let it be ingrained in the tax officials that facilitating taxpayers and handling their bona fide complaints is an organisational imperative for broadening the tax base, Dr Shoaib Suddle added.