Aziz served as Federal Minister four times: Food and Agriculture (1985-88), Finance and Revenue affairs (1990-93 and 1997-98), and Foreign affairs (1998-99). He was elected to the Pakistan Senate in March 1985 and remained its member till October 1999. He has received the award of Sitara-e-Khidmat for his contribution.
Aziz joined Civil Services of Pakistan in 1952. He was Joint Secretary for Plan Co-ordination in the Planning Commission when he decided to join FAO in 1971, as Director of Commodities and Trade Division in Rome. He has written several books and articles. He received Masters' degree in development economics from Harvard in 1963. He is the Vice Chancellor of the Beaconhouse National University at Lahore.
"FBR cannot be reformed, their culture is irreparable", asserts former finance minister Sartaj Aziz, while speaking to BR Research in an exclusive interview. "It is time for drastic changes in the collection of government revenues", says Aziz, currently serving as Vice Chancellor at Beaconhouse National University.
He contends that a drastic approach such as that used in Brazil recently might be considered in Pakistan. "They abolished the revenue department and asked the central bank to develop a team of five leading personalities from the private sector who then went on to create a completely new revenue collection body," he says.
Aziz was the country's federal finance minister under Nawaz Sharif's two tenures in the 1990s. Recounting measures undertaken during his tenure as finance minister, he contends that the presumptive tax regime was initiated in 1991 as a stop gap measure to be done away with once FBR reforms were completed.
"We had established Pakistan Revenue Automation Limited (PRAL) so that "all transactions may be computerised and banked and so that receipts and payments from all individuals and firms could be linked and reconciled" he says. However, despite the passage of almost 20 years since its establishment, Aziz says PRAL has not even addressed the fundamental reasons for its creation, let alone accomplished feats in this regard. As a result, "about 70 percent of all income tax collected continues to be on a presumptive basis".
Describing the tax collector's current approach as "draconian", Aziz asserts that FBR has mastered the art of finding lacunas and exacting more out of those who follow the system, while turning a blind eye to others who evade taxes.
Terming FBR's revenue target for the next fiscal year to be "unrealistic", Aziz believes that without the revival of the economy, it will be difficult to achieve the tax target of Rs 1952 billion for 2011-12. The growing fiscal deficit is the most serious economic issue facing Pakistan and in the final analysis it is a reflection of bad governance. Corruption, red tape, inefficient use of resources, tax evasion; losses incurred by the public sector enterprises, uncontrolled increases in non-developmental expenses are the fundamental reasons for persistently high gaps in the expenses incurred and revenues collected by the government, and in essence these are governance issues according to the former minister.
Due to the lack of fiscal space and the heated geo-political situation prevalent in the region, the government has limited scope for dealing with the energy crisis or taking other initiatives. The government must step up efforts to enhance the tax base. "Exemptions on agricultural income are being used to channel non-agricultural income by tax evaders," he says, adding that all income must be taxed in an equitable manner.
Sartaj Aziz believes that cuts in defence spending are not possible at this stage even though he favours an enduring peace process with India. He asserts that given the internal and external security risks, the country can ill-afford to "fall too far behind" in safeguarding its security. "Achieving revived economic growth is paramount," he says. "Once that resumes, defence spending as a percentage of GDP will fall automatically," adds Aziz.
The renowned economic expert feels that economic issues are not receiving the priority they deserve from the present government. That is why the economic team does not enjoy the full political support they need. In most other countries, the finance minister is typically the person next to the prime minister in term of political strength and stature. PPP, on the other hand, has generally been having technocrats as Finance Ministers during their successive tenures.
Demand for the creation of new provinces has gathered support in recent times. The former finance minister considers the creation of smaller administrative units to be beneficial for the country, but very unlikely to take place. Right now these demands are based on ethnic lines and that is not desirable, says Aziz. He considers the creation of provinces based on ethnicities to be detrimental to the unity of the federation.
Aziz believes that the country cannot afford to severe the umbilical chord with the IMF right now. Other avenues of foreign funds such as coalition support funds may be harder to come by in coming months and that the country still needs to implement structural reforms, chalked out in the stand-by arrangement with IMF. In the meantime, the central bank must ease its monetary stance and the government must come up with targeted programs to facilitate sectors such as agriculture, SMEs and livestock which have immense potential to generate growth, jobs and revenues, concludes Aziz.
Interview by Ayesha Aftab
An interview with SARTAJ AZIZ
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