CARETAKER Minister for Privatization Fawad Hasan Fawad Monday called for undertaking the much-needed civil service and taxation reforms to fix the ills facing the country’s economy. Addressing a conference on Pakistan Prosperity Forum organized by PRIME in collaboration with Friedrich Naumann Foundation, he highlighted the privileges enjoyed by the country’s powerful elite and said that the people will have to rein them in and a lot more depended on how they were going to elect their representatives in the upcoming elections.
The Minister has served on key positions in the past enabling him to have a deeper insight into the working of the government, loopholes in governance and how the cherished objective of good governance can be realized and, therefore, his views must be given due consideration by the authorities concerned. His emphasis on tax reforms was timely as an IMF technical mission is in Pakistan for talks on the subject. The Minister revealed that they analyzed the FBR’s data in 2016 at the PM Office and found that 93% tax was collected through voluntary compliance and withholding taxes, while only 7% tax equivalent to Rs200 billion was the result of the FBR’s staff efforts. The same analysis showed that the FBR generated tax demand of Rs150 billion, Rs175 billion and Rs270 billion through audits in 2013-14, 2014-15 and 2015-16 respectively but recovered only Rs750 million, Rs2.5 billion and Rs1.6 billion during the said period. Overwhelming reliance on withholding taxes means the government was forcing even those to pay taxes who, otherwise, do not fall within the criteria set for the filing of returns, which is nothing but sheer extortion. As against this, there are sectors that have remained out of the tax net during the last 75 years and they were also showered with benefits and incentives by successive governments. A case in point is the agriculture sector, which, according to the Minister, earned additional Rs650 billion in 2016 but tax contribution stood at just Rs7.5 billion. Now the IMF is urging the government to bring at least one million new tax payers into the tax net with focus on renters, agriculture income and real estate. The government has prepared a special scheme for retailers, which might be considered to be introduced with effect from January 2024 but it is a million dollar question whether or not the authorities concerned would succeed in implementation of the scheme in the face of pressure tactics adopted by this powerful class. The interim government might be in a position to do so but it would be a test for the next elected government to make businessmen pay their due taxes as lobbies representing them make their way to the elected houses. Same is the case with the agriculture tax, which has the potential to generate billions of rupees in tax but feudal pressured successive governments not to impose this tax effectively despite the fact that they are earning hugely due to quantum jump in procurement prices of different crops and relief given to the sector under different schemes and packages.
The FBR is also considering launching special rules to integrate 145 departments to broaden the narrowed tax base. This would enable the Board to have access to a vast reservoir of information concerning income and expenditure of individuals and it would be up to the Board to translate into actionable measures to increase the tax collection. As for public service reforms, scores of committees and commissions were formed by different governments and they made valuable recommendations but their reports were not implemented in letter and spirit. The latest is the comprehensive report presented by Dr. Ishrat Hussain, which also faced the same fate. Both quality and output of work has degenerated in government offices because of manipulated inductions, rampant corruption, lack of training and modernization and absence of proper monitoring and vigilance. The 18th amendment devolved many subjects to the provinces but there is still duplication of functions and roles resulting in wasteful expenditure. In fact, issues are crystal clear both in respect of taxation and civil service reforms and what we need is commitment on the part of the government to address them in the light of best practices elsewhere in the world.
