Inner story of 'wonderful performance' of Revenue Board: the quandary of tax collectors-II

The presumptive taxes were imposed in the federal budget of 1991, when the fiscal deficit was just Rs 80 billion. In FY 2000, our fiscal deficit soared to Rs 206.7 billion, proving beyond any doubt that irrational taxes did not solve our fiscal management rather forced us to the verge of total economic collapse.
Irrational tax measures have always played a decisive role in destroying civic society and paving the way for anarchy and chaos. This is exactly what the rulers are doing in Pakistan.
Fiscal policy in Pakistan has become a tool of oppression. Resultantly our economy is facing distortions where the poor people of Pakistan are the victims of "financial terrorism", as day by day the gap between the rich and the poor is widening.
The State is imposing more and more indirect taxes. The commercial importers (the mighty traders who do not want to pay their taxes) and powerful contractors (who get contracts by bribing officials) are passing on their tax burden to others, courtesy presumptive taxation in income tax law which increased the State revenue from Rs 40 to 102 billion within five years [from 1991 to 1997] under the so-called direct tax regime, whereas in reality it was a collection in terms of indirect tax. The levy of taxes on contracts , goods and services is the constitutional right of the provinces, which is blatantly denied by the Federation.
The federal government violated this constitutional command by levying indirect taxes under the garb of income tax. This is the worst example of "federal highhandedness" where the victims are the poor people of the less privileged provinces.
The constitutional responsibility of distributive justice and social equality has been altered, to show just higher collection of tax targets.
Our financial mangers are caught up in a dilemma. On the one hand there is a mounting pressure from the donors to reduce the fiscal deficit through improved collections and on the other the fragile economy is not in a position to meet the growing revenue targets, unreasonably increased on yearly basis in utter disregard of ground realities.
The tax machinery is under tremendous pressure to collect more and more revenue. They are using all kinds of negative means to extort money from the already crushed taxpayers and by showing inflated figures, intentionally withholding refunds and by widening the scope of presumptive and indirect taxes.
In the financial year 2004-05, the CBR showed Rs 157 billion as collection under income tax. According to independent sources, the total refunds withheld by the Income Tax Department were not less than Rs 20 billion. Thus, the actual net collection was only Rs 137 billion which was short of target fixed at Rs 154 billion. More or less the same position was for other taxes in FY 2004-05, so net real increase in collection of taxes after taking into account the inflationary rate, was quite nominal or may be even negative.
On the contrary, the CBR took great credit of exceeding the fixed target or even revised targets and kudos were showered on them from official and unofficial quarters for "brilliant" performance.
This brilliant performance now stands exposed as the Finance Division is asked to issue bonds to banks. In their case arbitrary assessments were made to show higher figures and in certain cases completion of assessments was deferred to avoid creation of refunds. The arbitrary additions failed to stand the test of appeals and now the Department is facing mounting pressure of refunding of billions of rupees.
The "brilliant" performance of the CBR revenue collection team has destroyed the overall business environment in Pakistan as well as shifted the burden of taxes from the rich to the poor. It is a lamentable act that should not go unnoticed and unpunished. Such jugglery of figures by withholding of huge refunds shows the mismanagement and abuse of our tax system at the highest level.
The tax bureaucrats sitting in the CBR always accuse the tax officials of taking bribes, and what they are doing by data manipulation is by no means less heinous crime. Had they not withheld refunds of banks, this colossal sum could have gone for investment in the private sector. The money market in the country is at a very nascent stage and is now saddling the burdens of the fiscal sector due to shameful, unethical acts of the tax manipulators, which is simply unthinkable in any civilised society.
The banking sector refunds episode clearly exposes the "brilliant" performance of the CBR. The top brass in the CBR is a team of data manipulators who collect excessive advance tax, withhold genuine refunds, and indulge in over-reporting and all this is being done under the noses of the IMF and World Bank. This is a serious situation as the malpractices have discredited the entire image of the tax machinery and the collection figures reported by CBR are no longer credible. Adding insult to injury, the CBR approached the Finance Division to provide resources for the payment of refunds to the banks.
In the face of these realities, the CBR stalwarts are entrusted with the job of tax reforms, whereas it should be through the parliament which represents the will and interests of the people. The irony of the situation is that certain IMF-World Bank hand-picked reform experts CBR officials (sic) are getting full support from the international donors to make the lives of ordinary people more miserable and costly. Many of these IMF-World Bank favourites, after retirement from CBR, are engaged in lucrative consultation jobs and are still busy to implement their agenda in Pakistan.
It is strange that on the one hand these bodies talk of transparent procedures and on the other are not implementing reform agenda through parliament. Huge funds have been given at the CBR's disposal by the IMF-World Bank to hold workshops at lucrative places like Bhurban and elsewhere, CBR and its so-called consultants are wasting precious resources [including foreign debts which our future generations have to pay with interest] on lip service and expensive entertainment. Through these workshops they intend to reform the tax system!
For the last many years substantial money has been wasted by hiring the so-called consultants [local and foreigners imposed by donors] who produced sub-standard reports on tax reforms and now officers of the department are being entertained in the name of workshops on tax reforms. This is the inner story of wonder performance of CBR and tax reforms in Pakistan that is both sordid and loathsome.
Pakistan is a strange place where the corrupt, law-offenders, loan defaulters and manipulators are rewarded. Some have become Federal Ministers after striking deals with the National Accountability Bureau (NAB) and lending their full "support" to the regime of the day. Those who mercilessly looted and plundered the wealth of nation are enjoying wonderful life in exile and chanting the slogans of patriotism and democracy. So no wonder if the CBR is also using all kinds of negative tactics to maintain its "brilliant" performance.
(Concluded)