According to a Business Recorder report from Islamabad in the issue of January 9, the Federal Investigation Agency has approached the Central Board of Revenue to seek concurrence with its proposal for action against the taxpayers involved in tax fraud, evasion of duties/taxes and financial bungling, under the Sales Tax Act 1990, Income Tax Ordinance, 2001 and Central Excise Act, 1944. Quoting official sources, the report pointed out that with this end in view the Agency has proposed amendment in the FIA Act, 1974, thereby incorporating powers under the Sales Tax Act, Central Excise Act and Income Tax Ordinance.
The Board-in-Council will take up the proposal at its meeting on January 12, where the CBR Chairman, Abdullah Yusuf, and his team of tax managers, will analyse the possible impact of FIA recommendations on industry and trade. Understandable, of course, should be the Revenue Board's initial response to the FBI's proposal, in view of its overall concern in ensuring flawless functioning of the taxation system and eradication of corruption and tax crime.
This also has reference to the ongoing process of reforms and restructuring which it has pursued over the past several years.
In so far as the government's efforts towards eradication of tax-related aberrations, including maladministration is concerned, a serious beginning was made with the creation of the institution of Tax Ombudsman, which has certainly helped bring about quite some improvement.
The same can be said about the various reforms and restructuring frauds present a much bigger problem. It will be noted that tax-related fraudulent activity is thriving as white collar crime even in the highly advanced countries. For one thing, because of the legal complications and ingenious devices the criminals keep on using to their advantage, its total eradication can be seen as yet remaining a tall order.
The lacunae in laws, as they say proverbially, are meant to be exploited. This is, perhaps, why, in many advanced countries, including the United States, Australia, and the United Kingdom, which has a Serious Fraud Organisation (SFO), recourse has been taken to establishment of entirely separate departments to deal with serious frauds related to taxes, to operate in liaison with the revenue services/tax department.
Needless to point out, there is no concept of tax-related prosecution powers vested in police or investigating agencies in those countries.
Again, since serious tax related crimes, happen to be based on tampering with figures, they can best be tackled through expert accounting and auditing skills, on which increasing reliance is being understandably placed.
In so far as the defined role FIA in the fight against crime is concerned, its officials may exercise powers in pursuance of certain acts/laws. However, FIA is not empowered to act against tax evaders under the CBR tax laws. If the authorities give these powers to the agency, it will considerably enhance the powers of FIA officials for directly taking action against violations under tax laws.
But, under the existing circumstances and particularly in view of FIA's overall performance, such empowerment is unlikely to make any big difference. Again, since the Central Board of Revenue is now already seeking expert advice from IT companies of the world to develop a 'Total Revenue Integrated Processing System' (TRIPS) for management of revenue collection, and for reducing the possibilities of fraud and non-compliance, it will be in the fitness of things for the department to ignore the FIA initiative, and to continue its effort in that direction from a single-minded approach.