FBR (Federal Board of Revenue) has failed to meet original tax targets for the last six fiscal years, three of the coalition government of Pakistan Tehreek-i-Insaf (PTI) and rest under two-time now Prime Minister of Pakistan, Shehbaz Sharif as head of various alliance governments.
He became Prime Minister under the Pakistan Democratic Movement (PDM) in the wake of first ever successful no-confidence resolution against an elected prime minister in Pakistan on April 9, 2022 that was now admittedly moved on the dictates of then chief of army staff.
It is an incontrovertible fact that nearly 94 percent taxes of IRS are collected at source, through advance tax or voluntarily with returns—share of own collection by field formation is merely six percent. Customs collection was only 24% in total tax collection of FBR for fiscal year 2023-24.
Collection out of current/arrear demand by IRS has been less than 10% over decades. Further, if due refunds of billions unlawfully withheld are deducted, net increase in collection since June 2013would be negligible.
Blame for blocked refund mainly lies with successive governments—see details in Unpaid refunds, Business Recorder, July 17, 2020, therefore, unless some fundamental changes are made the story of early years would be repeated. The position, however, can change if comprehensive reforms are made as suggested in Meaningful budget proposals, Business Recorder, April 21, 2017.
It is unfortunate that FBR has become a handmaid of political masters. For showing higher tax collection, FBR is not clearing refunds, rather unlawfully creating and recovering disputed tax demands even before orders from independent appellate forum.
Major responsibility of tax collection has already been shifted onto the shoulders of withholding agents. Sectors contributing to the economy have been facing difficulties due to FBR’s highhandedness, coupled with faulty tax policy, highlighted in Advance tax, refunds and compensation—I, Business Recorder, January 15, 2020, Advance tax, refunds and compensation—II, Business Recorder, January 16, 2020 and Advance tax, refunds and compensation—III, Business Recorder, January 17, 2020.
It is a matter of record that appointments of chairmen of FBR since 2009—from Sohail Ahmad to Salman Sidique to Mumtaz Haider Rizvi to Ali Arshad Hakeem to Ansar Javed to Tariq Bajwa to Nisar Khan to Dr Irshad to Tariq Mahmood Pasha to Rukhsana Yasmin to Mohammad Jehenzeb Khan to Syed Muhammad Shabbar Zaidi to Nausheen Javaid Amjad to Muhammad Javed Ghani to Asim Ahmad to Muhammad Ashfaq to Asim Ahmad again and then Malik Amjad Zubair Tiwana—rendered things from bad to worse.
The political appointments in FBR have indicated crisis of competence, cronyism and incompetence. It is, thus, not surprising that FBR as an institution has lost its credibility—there exists huge trust deficit between tax collectors and taxpayers. It has been frequently accused of highhandedness, freezing accounts without waiting for the Tribunal’s judgement, raising unlawful and excessive demands, misreporting collection figures, blocking bona fide refunds, taking advances etc.
Repeatedly, different FBR chairmen have admitted before the Standing Committees of Parliament on Finance & Revenue that tax reforms had miserably failed.
On November 10, 2015, then chairman FBR, Tariq Bajwa, admitted before the Senate Standing Committee that in order to issue all refunds, FBR had either to impose more taxes or government to issue bonds. Since his days huge refunds have piled up and FBR is not ready to pay all these in one go to show higher (sic) collection—see detail in ‘Blocked tax refunds: FTO comes under pressure, removes report from website’, Express Tribune, July 4, 2016.
Adding insult to injury, successive governments kept on accusing businessmen of evading billions, submitting incorrect declarations, etc., but frequent amnesties were extended. They never explain how tax evasion is possible without the connivance of tax collectors and huge loss caused by amnesties.
Unfortunately, nothing has ever been done against FBR’s high-ups for causing losses of billions of rupees annually to national exchequer—Dismantle containers’ mafia, Business Recorder, September 14, 2018—proving it beyond any doubt. It is strange that the Standing Committees on Finance & Revenue of National Assembly and Senate have also never recommended removal and punishment of FBR’s top notches even after established cases of corruption, over-stating of collection figures, making false statements and misleading the entire nation.
The provincial governments are also guilty of protecting the elite by not collecting tax on “agricultural income” as per prevailing laws. The rich and mighty in Pakistan do not file tax returns but FBR issues notices to filers alone! It has failed to tap at least 20 million income tax filers (Historic collection by FBR, Business Recorder, July 2, 2021).From 2003 to 2024, FBR and provincial tax agencies have miserably failed to improve voluntary tax compliance through a strong deterrence—the automation system. Tax culture will never improve unless deterrence is created along with assurance to people that taxpayers’ money is actually being spent for their welfare (Taxes and social democracy, Business Recorder, July 24, 2021).
There is a need to dismantle the existing oppressive tax system and reconstruct it to restore public confidence in the State but even a good tax system cannot work if the machinery to run it is incompetent, corrupt and inefficient. The biggest challenge before new Chairman is to work on making FBR an efficient national tax authority, details are available in ‘Case for All-Pakistan Unified Tax Service: PTI & innovative tax reforms’, Business Recorder, August 31, 2018.
It is high time that FBR stop harassing compliant taxpayers and protecting the cheat. It should have zero tolerance for non-filers and tax evaders. Tax policies should encourage investment, especially for all those who generate more goods and services, leading to greater employment opportunities. A higher and sustainable economic growth can increase taxes after revamping of the entire system and devising a rational tax policy.
As elaborated above, challenges before the new chairman are enormous—the most daunting one is how to undo the ugly legacy of cronyism, favouritism, nepotism and mediocrity. Will he be able to rise to the occasion? Only time will tell.
Copyright Business Recorder, 2024
The writer is a lawyer and author of many books, and Adjunct Faculty at Lahore University of management Sciences (LUMS), member of Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE). She can be reached at [email protected]
The writer is a lawyer and author of many books, and Adjunct Faculty at Lahore University of management Sciences (LUMS) as well as member of Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE). He can be reached at [email protected]
The writer is a US-based corporate lawyer, and specialises in white collar crimes and sanctions compliance. He has written several books on corporate and taxation laws of Pakistan. He can be reached at [email protected]
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