Taxes are levied by public representatives to find resources for public good. For recovery of taxes, detailed systems of laws, rules and regulations are laid. Statutes are framed by representatives of the public. Laws framed contain details of the tax machinery responsible for working the relevant tax statutes. Pertinent details are provided in sub-ordinate legislations. Authority for framing these subordinate legislations flows out of words in the main law. The administration/collection machinery issues its directives, rulings and clarifications to the end of working the taxation system, in keeping with the statute and the subordinate legislation, as a matter of principle. There may also be specific, case based, subordinate legislations.
There are three groups in a taxation scenario. Two of these are the tax collectors and the taxpayers. Tax practitioners appear on the scene with claim for getting correct assessment of tax and to facilitate resolution of tax related issues by way of interpretation of statutes and the related mechanics. At times they are employees of the tax payer, often independent professionals. In case of large taxpayers, both are there. They help filing assessees' tax returns and in presenting their view point to the authorities. In professional circles, in higher echelons of tax planning bodies and the government, it is this group helping to steer. Whether it is during the budget formulation or to quell disputes between taxpayers and tax collectors or other queer situations they are called to help out, to find solutions, present prescriptions for getting out of the impasse. Rightly so, because they are neither payers as such nor are they tax money receivers. Staying within the discipline provided, they are trouble-shooters in their own rights.
Another distinctive feature associated with the tax professionals is that their exposure to the system is multi-dimensional. As advisors at large, by virtue of extensive and intensive studies, they come to find what is what in typical situations. They get knowledge also from their post-mortem of tax matters of tax laws at different fora - from varied angles. As independent arbiter, they help exchequer's tax recovery. Knowledge and expertise the tax professionals deliver. When called upon to extend helping hand by the ones who bear the brunt, they assist tax planning. An authority may not like them, may not have a fancy of them because of their being at variance with them. Helped through impasse, planners come showering rose petals when they show them way out of quagmires.
On the other side of the fence are assessees aiming to pay the least. Cutting fine edges of laws and regulations having ado with 'tax planning' and 'tax evading', many of them tend not to accept 'state' as partner in business. Not appreciated is that like salaries and wages to employees and return on borrowing to the financiers, payment for utilities, the state has to be given its due - taxes. It is normally they, the taxpayers, to engage tax practitioners, to tell them how best to manage their tax affairs. For the purpose a tax practitioner should know relevant laws with greater depth vis-a-vis people whose 'principal activity' is not pursuing tax laws' intricacies.
Delicacies attached with the laws demand their expression with precision, with legal jargons. This can not be done away with, when aim is to duly deliver - to serve the purpose. Because these require precision in delivery, tax laws can not be written in plain language, a language which an average English knowing person understands. The sort of precision needed in law is hardly possible in layman's expression.
Disputes on the meaning of laws the affected parties have. Longevity of tax disputes and adjudication orders which do not cater to the taxpayers' submissions are core to the disputes, which often lead to sorts of grapevines.
Ishaq Dar has called upon the Tax Reforms Commission to put forth suggestions for devising a proper appellate system to effectively dispose of litigation cases. According to him, litmus test of their recommendations would be their implementation in the short run and revenue increase in medium term, the press report says.
The urge for effective disposal of tax related litigation one finds manifest in Mr. Dar's demarche. He would like that appeals' disposals should be effective, delivered in a way that the issues involved are resolved by the appellate system - as a matter of fact. He appears in unison with the agitators who demand quick dispensation through speaking orders, orders which take care of and deliver in relation to the points raised in a tax appeal, giving analysis of and decision in relation to the issue raised in tax appeals. Simultaneously, agitated is that adverse orders passed against tax assessees are received over longer time and that such orders do not, as a matter, of course, provide decisions called for in relation to the issues raised.
Analyzing to find out what Dar has ruled and desired the Tax Reforms Commission, one would surmise:
1. Existing tax appellate system is not all that it should be.
2. There is need to craft a new appellate system.
3. The appellate system to be in place should be able to effectively dispose of tax related litigations - not to continue these.
Getting rid of non-speaking order, orders that do not cater to the taxpayers' plaints, the Finance Minister rules. Also in view of his exposure and skill, the Commission should pay heed to the Finance Minister.
The speaking orders bring fore malaises the assessments have. Unfolding system's ailments, such upbringing will go to eventually state what the law is, pave way to standardise 'treatment to be' of tax related issues.
In 'Letter to the Editor' carried by Business Recorder of 18th October, 2014, Sumbul Qureshi has urged that while march to improve remains on, alleviation in tax culture can be ushered through upping the adjudication process. To this end it will be putting in place (in house) judicial review of adjudication orders by retired superior court judges reporting to the Ministry of Law, it says. The Ministry of Law may refer selected cases for action against habitual delinquents to FBR.
A depolluting exercise would improve tax flows, check back flows, upgrade skills of the laws pronouncing gurus, cutting inefficiencies and delinquencies. What goes to cause delay, what transpires in between and the delivery, benefits ... but not the state.
The communication referred attempts a detailed, meaningful, efficacious, yet least expensive plan for fruition. It is here that the Commission should not be found wanting. All, what is there, causes distortions in adjudications mired in the orders delivered by the system. If the Commission ignores such proposals, which can be implemented by stroke of the Finance Minister's pen or refers this to FBR (for making law / rules), it could be surmised that the Commission has its own agenda.
In addition to this, the adjudicating officers should be detailed to monthly seminars and courses in all major cities. At these, should be discussed tax decisions at home and abroad, current and past judgements against the backdrop of 'rules for interpretation of statutes' through case study methods and otherwise. Since in most of the cases tax disputes have ado with accounting, often with cost accounting, it is necessary that the adjudication officers have a good accounting skill. Monitored by the Member (Training) FBR, performance evaluation at these seminars and courses should go to Chairman FBR or Law Secretary, depending upon 'under whom the officer is'.
The very act of going to the courses or seminars would have positive effects on the intellectual outfit of the relevant officers, provided they are not chased by guys who, when in service, did little to the cause of taxation system.
The Finance Minister is reported to have told the Tax Reforms Commission:
"....... we wish to promote tax culture in the country, broaden the tax net and ensure improvement in tax-to-GDP ratio."
This is a statement we have been having from all the Finance Ministers, memories in relation to whom stands by. 'Improvement in tax to GDP ratio' smacks equal contribution by all, a status quo. This is not in keeping with what Pakistan now craves. Pakistan demands equity that the wealthy and mighty should contribute more. They should be made out to dish out more vis-a-vis their less fortunate brethren. Growing fermentation in the society, the jalsas and dharnas bear testimony.
Target should be evolving 'a taxation system' to improve tax collection in a way that the less fortunate Pakistanis are not further pressed'. Simultaneously, the Tax Reforms Commission should be providing guidelines in relation to outflows of money collected by way of taxes.
The Finance Minister has been a practising accountant. So is Chairman and some other member(s) of the Commission. They need not have lesson in the concept of 'governance' in relation to governance of the country's economy and consequences of not being careful in relation to 'governance of the economy'. They should have edge over economic theoreticians in the universities and research nests. They can not only cite ways for higher collection of taxes, they can also dovetail machinery provisions for such collection, equitably.
The Tax Reforms Commission can provide machinery for measurement of 'trickle down effect of governmental spending out of tax money'. It is already on the wall that we need this. Representatives of affluents in the Commission may resent this on the ground of this being its beyond scope. But what is a 'scope'? Scopes of such Commissions, visionary Finance Ministers tailor, including by way of their off the cuff proclamations. There may be people of this scribe's specie to believe that it is very much these in the scope of the Commission.
One may not, however, whole heartedly agree with Dar. Litmus test of the Commission is not 'increase in the revenue in the medium term', which rests with the government (FBR) and the parliamentarians, who may have own notions. The legislature has all shades of members, coming also from the ranks who should be paying more. It is for the Finance Minister to manage through personal efforts.
Our legislators, as a community, may not be well aware of what tax culture in a civil society has to be. They have around lobbies with armories for misdirection and misguidance. Then it is FBR whose cake of authority the Commission is aiming a bite at. The Commission should be called upon to find ways to promote tax culture, improve tax laws also through inculcation of experiences had through the system and bring down tax administration costs. This scribe would judge the Commission in terms of reduction in administration cost of the tax system and in terms of ease it helps providing to the taxed.
A committee consisting persons with exposure of tax practice and running industry may be carved out of 'galaxy' of the Commission. Its jobs should be to purge what is wrong with the system - no theorising please. Just weeding out the wrong, malicious, obnoxious and impractical. Putting such a system in place will go to unleash weak / faulty laws and regulations in relation to which the FBR will have little option except getting into amends.
This also does not even require involvement of the Commission. To this end required is just a word of the Finance Minister, after taking Law Ministry in the loop. The arrangement can be reviewed in terms of an administrative order, just the way it is put in place, after a period of say two years. The Chairman will do a good job by going to the press to make an announcement in this behalf, after the Finance Minister's approval.
What needs to be done is not just having 'recommendations' by the Tax Reforms Commission, comprising members from all sections of the society, all of whom can not be charged 'being guilty of knowing the tax laws'. Then appraisal of the Commission's recommendations by the FBR guys, may not be the thing one would like the Commission's have fancy of, also because it may delay action or the action plan unfolded may be distorted version of what was intended.
On its receipt, Ishaq Dar may opt to appoint a Committee to study the Tax Reforms Commission's findings. It may consist of:
1. Chairman of the Tax Reforms Commission.
2. Law Secretary.
3. Chairman, FBR.
4. A former member of the Appellate Tribunal Inland Revenue (preferably with exposure of FBR's working).
This Committee may divide formulations etc rendered by the Commissions into:
(a). it would not opt to proceed with, leaving action to FBR and
(b). it would opt to proceed with.
Thence the Commission should strive to locate, which findings for implementation require: (i) change of law (ii) issue of gazette notification by way of SRO etc (iii) release of general order or (iv) statement of clarification.
In relation to (b) it should have Finance Minister's authority to go ahead without further reference.
In relation to matters at matters covered by (b) above, implementation should be made by issue of circulars, notifications or SROs (whatever form it takes), with the signature of an officer of Law Ministry or FBR, draft of which should be approved by the Commission's Chairman, Law Secretary and Chairman FBR. To this end a period of 30 days should be enough.
After first meeting of the Commission, the press release was pretty elaborate. The Commission may appreciate that through long press releases words pressed in by the interested quarters often creep in. At times they are taken for rulings or commitments of the authority which may induce complications. The Commission may speak through its Chairman, by way of short press releases. The Chairman should opt not to be in news so long as the matters are not wrapped-up.
(The writer is a former Chairman of ICAP & ICMAP Joint Committee, Vice President ICMAP & ICSP and Founding President PIPFA, and a Corporate Counsel)
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