The Minister of Finance Dr Hafeez Sheikh, warned the Chief Commissioners of Large Taxpayers Units (LTUs) to 'pull their weight' or else 'leave their positions.' Pulling their weight was defined by the Finance Minister as ensuring that the revised revenue target for fiscal year 2010-11, revised downward due to the summer floods, is met.
The exhortation to leave their positions if they are unable to meet targets leaves little room for any other interpretation: chief commissioners must opt for voluntary resignation in case he/she is unable to meet targets, the Finance Minister urged. The reason for this exhortation is simple; termination from government employment is a slow process, made all the slower if the employee goes to court. Thus the Finance Minister's statement must be seen as an attempt to shame the chief commissioners into improving their performance.
Critics may well argue that this is rather an extreme proposal especially given the fact that, in Pakistan, cases of career hara kiri are rare amidst poorly performing politicians, who can cost a political party a seat in a subsequent election, and almost non-existent in bureaucrats.
Be that as it may, the Finance Minister's rather strong words are a reflection of the state of the economy that is between the devil and the deep blue sea. The devil may well be defined by the country's economic managers as the International Monetary Fund (IMF) that has refused to be convinced by mere promises of a revenue increase through irreversible structural reforms sometime in the future, a fact accounting for the stalled penultimate tranche under the Stand-By Arrangement (SBA). And the deep blue sea may well point to the heavy political cost of structural reforms which no one is willing to take - not the opposition and coalition partners who remain unconvinced that taxing the already taxed and bringing the large illegal economy into the tax net through enhanced documentation to be made possible through implementation of the Reformed General Sales Tax is politically tenable; and not the PPP itself which has refused to go it alone through passing a presidential ordinance or indeed through the issuance of Statutory Regulatory Orders, both with an effectivity of three months which would resolve the deficit crisis for the current year at least. In short, the political commitment to reform remains small and Dr Sheikh must take responsibility for failing to convince any one that his vision for structural reforms would be in the interest of the economy.
Be that as it may, the Finance Minister did propose a viable strategy to increase revenue collections. According to estimates made by the FBR, which were revealed in a meeting of the Public Accounts Committee, a whopping 130 billion rupees are stuck up in arrears with a major share attributed to stay orders granted by the country's courts. In this context the Finance Minister quite appropriately suggested that the chief commissioners must instruct their lawyers to get vacated all stay orders that were taken by those who did not pay their due taxes and who had gone to court as a tactic for delaying payment.
Given that stay orders, even though valid for six months, are not automatically vacated until and unless the FBR proactively engages in litigation is a fact that Dr Sheikh correctly pointed out could increase revenue collections significantly. It is not clear if the fruits of this proposal would be evident in the current year with only three months and three weeks left but the fact remains that this is a legitimately viable proposal and needs to be followed.
The Finance Minister also exhorted the FBR to propose tax measures that are equitable for the forthcoming budget with the objective of spreading the perception that the rich are paying taxes commensurate to their income. In this context, the fault lies not with the FBR that proposes, each year, a range of taxation measures, with its permutations that indicates how much to vary a tax to net a specific amount in revenue. Equitable tax proposals including a tax on the income of the rich landlords, most heavily represented by members of the country's national and provincial assemblies, and ending exemptions on the rich and influential have been proposals put forth to the Ministry of Finance by the FBR. It is unfortunate that the Finance Ministry has been unable to sell these ideas to the parliament for their successful implementation. The fault for this failure must necessarily lie with the Ministry of Finance that is a critical political wing of any government in power.
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