EDITORIAL: The Federal Board of Revenue’s (FBR’s) directive that taxpayer profiles shall be filed electronically as well as the introduction of the facility of e-audit for sales tax registered persons, to conduct proceedings via video links, are both steps in the right direction and therefore very welcome. This newspaper has been consistently among a growing chorus of voices calling for just such reform. Because unless you put some space between the taxpayer and tax collector you are always going to struggle to control corruption. And since the only credible means of ensuring such space lie in the electronic realm, and most countries have indeed taken their tax machineries online precisely to ensure efficiency and transparency, it’s about time Pakistan also did the same. However, corruption is so deeply entrenched in the Board that whatever form of reform has ever been initiated by any administration has been quickly and convincingly thwarted by the many layers of corrupt officials in the organisation that stand to lose their free rides from such things. It goes without saying, of course, that they almost always receive help from the big fish that they help evade taxes, some of whom regularly roam the corridors of power and are only too happy to help nip such evils in the bud.
And it’s not as if FBR’s earlier attempts at going electronic, so to speak, have inspired much confidence about its commitment to tax reform. For example, the first time it experimented with making taxpayers file their returns electronically it came up with the most unique website in the world. It had a built-in mechanism that only allowed systems using licensed Microsoft Windows applications to log on. Since that meant acquiring the original Microsoft Office pack, any taxpayer that wanted to play along was also obliged to pay at least Rs200,000 to Rs250,000 for the privilege. This went on for more than a decade, during which FBR had at least 11 different chairmen. It’s as if it goes out of its way to break the law and encourage a culture of corruption and lack of transparency within it. That is pretty much what the Islamabad High Court (IHC) noted when earlier this year it scrapped the multi-million dollar license FBR awarded to a company for installing a track and trace system for tobacco products in the country. When the lowest bidder’s bid was wrong, FBR allowed it to correct the mistake post facto instead of awarding the contract to the next bidder in the line, as the law required.
FBR is primarily responsible for the incredibly low tax collection rate of the country. Even when its officials are not directly harassing individuals and businesses it’s forms and procedures are so complicated that even the most honest taxpayers’ lives are made miserable for no reason at all. The result is that a country whose tax revenue should have been somewhere around 20 percent of GDP is stuck with nine-point-something percent with nothing to suggest even the remotest chance of improvement anywhere on the horizon. It is for a reason that multi- and bi-lateral lenders insist on FBR reforms whenever we go to them for more loans. Each time we make promises, even take multi-million dollar grants from institutions like the World Bank to carry out reforms, yet things get lost when time comes for implementation and all we do is set yet more ridiculous targets and always fall short of them.
Taking the electronic route will make FBR more productive and efficient only if the strictest checks are put in place to ensure that the process is transparent and above board. But when there are clauses in the e-audit for sales tax registered persons like ‘The registered person shall produce the record as required to be maintained under Section 22 of the Act through IRIS or an electronic data carrier as notified by the board’, one can only wonder how transparent FBR really intends to be and if it has even begun to learn any lessons from its many, many mistakes. Since it is an organ of the federal government, the ruling party is urged to monitor this process very closely because its own number-one problem is low tax collection, which drags down reserves. And the number-one problem in increasing those reserves is FBR’s inability to do its job properly.
Copyright Business Recorder, 2020
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