Syed Fawad Ali Shah
THE Sales Tax Department was established under the Federal Board of Revenue in the early 1990s after the successful implementation of the Value Added Tax in the United Kingdom. Its executive posts were filled through posting of officers from the Customs and Excise Group while the line or support staff that is the auditors and senior auditors were recruited separately.
The officers of the Customs and Excise Department tried to run this Department on the pattern of Customs Department and assigned roles to the auditors and senior auditors some of whom were recruited on political considerations. It witnessed rampant corruption during that period when fake and flying invoices were order of the day in the Department. The official files of the Department were lying in the houses of these auditors (bugs). All deals relating to assessment, refunds, registration, deregistration were taking place in the houses of these auditors.
In that stage of history, the taxpayers started preparing two sets of record for income tax and sales tax purpose. One Department was not allowed to examine the record of another Department. Auditors became billionaires through direct or indirect bribe and the so-called consultancy. The World Bank in its report for reforming the Federal Board of Revenue stated that Income Tax Ordinance and Sales Tax Act are applied on the audited accounts/record of the same business and taxpayer. It further stated that if these two laws are applied simultaneously by the same officer then the writ of the Department would improve. It cited the examples of the success of the Inland Revenue Service, Inland Revenue Authorities around the world. Almost a decade ago, the two Departments were merged by creating the Inland Revenue Service mandated for the collection of Income Tax, Sales Tax and the Federal Excise Duty. This move of the government was coined as clipping the wings of the unbridled auditors of the defunct Sales tax department.
The Inland Revenue department through its programs for modernization introduced the concepts of e-filing of the Sales Returns and adoption of the Integrated Tax Management System software for audits and retrieval of other information relating to Income Tax, Customs, Sales Tax and Federal Excise including withholding tax. It also developed CREST software for bringing an end to the concept of fake and flying invoices. The IRS officers introduced the concept of zero rating of various sectors for successfully bringing an end to the so-called refunds processed by the Sales Tax auditors. These developments ruined the consultancy services and other corrupt practices of the Sales Tax Auditors. They lost their desire for work as they were not used to signing a single piece of paper without accepting bribe.
The sales tax collection witnessed a record increase through effective monitoring, audits conducted simultaneously for the purpose of Income Tax and Sales Tax and cross matching of various data by IRS officers without the help of Sales Tax auditors. The concept of fake and flying invoices in vogue during the defunct Sales Tax Collectorates came to an end. The auditors contrary to the above, filed cases in various courts and tribunals for upgradation of their posts. It was in a short period of time that they managed to obtained upgradation with arrears in a couple of years without visible improvement in their performance. The auditors filed another case for encaderment in the executive class in a court which granted them the same without even looking at their appointment letters as auditors and their promotion path as Assistant, Deputy and Manager Audit.
The rich and influential auditors of the Federal Board of Revenue have their relatives as parliamentarians. They are running from pillar to post for the reestablishment of the defunct Sales Tax Collectorates for restarting the corrupt practices in the name of reforms in the Federal Board of Revenue which would be a deviation from the concept of clubbing domestic taxes and promoting ease of business.
The Premier of the State is requested to take notice of the above state of affairs. We can’t undo the good steps taken by the previous governments. The future of Pakistan lies in a corruption free, empowered, resourceful Inland Revenue Service.
—The writer is a freelance columnist.
