The Kuwait-based software supplier, Agility, is unlikely to extend provision of Pakistan Automated Customs Computerized System (PaCCS) beyond September 30, sources told Business Recorder here.
After five years of successful tax reform in Pakistan, it is imminent that PaCCS would be shut down at the end of the current month as the government of Pakistan, Ministry of Finance and Federal Board of Revenue (FBR) have failed to sign the promised agreement with Agility.
Sources said that FBR has once again requested Agility to continue PaCCS for two more months, but the supplier may not extend the system because this is the third time that FBR has asked for extension, without giving any logical reason for another extension, instead of reaching an agreement or initiating negotiations on the issue.
Industry stakeholders, expressing deep concern, said that PaCCS closure would bring abrupt losses in term of short collection of revenue to the government beside adding another high raise in the cost of doing business. The dwell time will increase and many signatures would be required to clear a single consignment.
FBR's plan to replace PaCCS may throw back the country to 'Stone Age' as FBR has no capacity (human resources) to launch fully automated, paperless and corruption-free system. In this scenario, FBR's move towards termination would adversely affect the national exchequer and severely hurt genuine importers and traders of the country.
Sources said that after the shutdown of the corruption-free software, the discretionary powers of customs officials, contact between taxpayers and tax collectors, and lack of transparency would return to FBR, and vested interests would prevail over national interests. Customs process would return from the technology and automation of the 21st century to the manual red tape of the British Raj.
According to PaCCS users' club, structural weaknesses in the tax system have heightened Pakistan's vulnerability to economic shocks. Five years back, the tax reform agenda enjoyed the commitment of highest offices in the country that employed the services of outstanding officials to drive the reform on ground. Riaz Malik and Abdullah Yusuf had made significant contributions to the process of reform in the FBR.
Since the reform agenda was clearly a priority of the government, the seething resentment of vested interests within the FBR against reform and loss of discretion and control over trade could not stop the progress of PaCCS which has made history in tax reform in Pakistan. It was the most successful model for e-governance in the country and its success was comparable to Nadra. But while Nadra caters to registration and immigration, PaCCS was geared towards business and had a huge economic footprint. After 2007, vested interests in FBR began to prevail. The government at the top lost its interest in economic reform; chairman of FBR was a generalist; traditional bureaucrats without commitment or vision simply sided with the majority and chose to reverse the process of transparency and automation, sources said.
Angry stakeholders say that the government tries to retain control over everything, but the irony is that it controls nothing. In 2001, a Task Force was created to suggest measures for economic growth of the country. It reported: "Pakistan's fiscal crisis is deep and cannot be easily resolved. Taxes are insufficient for debt service and defence. If the tax-to-GDP ratio does not increase significantly, Pakistan cannot be governed effectively; essential public services cannot be delivered and high inflation is inevitable. Reform of tax administration is the single most important economic task for the government."
At about the same time Yusupha Crookes, World Bank country director for Pakistan, had this to say: "Reforms of tax policy and administration are among the most crucial economic reforms for Pakistan. Pakistan's tax-to-GDP ratio at around 10 percent is among the lowest in the world, severely jeopardising national goals of reducing poverty, and increasing and improving vital public services such as healthcare, education, and infrastructure. Moreover, the structural weaknesses of the tax system have heightened Pakistan's vulnerability to economic shocks."
"Our government and its functionaries are quite adept in ensuring that Pakistan never gets of the time-tested old traditions of the past, ensure that the lot of people never improves and our masses remained within the vicious circle of pain and poverty," stakeholders say.