- FBR needs reform
There has been a year-on-year fall in the collection of direct taxes, which indicates that the PTI government’s economic thinking is off-target. It should be noted that the figures that have come in are for the first nine months of the year, and cover the period when Asad Umar, the fallen PTI paladin, was Finance Minister. The PTI presumed that the economy had a much greater capacity to pay taxes than were actually collected. One important factor was that the taxpayer would not give his income to those who would merely waste it, so when the squeaky-clean PTI government took office, taxpayers would line up to pay taxes, secure in the knowledge that their money wouldn’t be wasted.
The figures tell a different story. Where did the PTI go wrong? What was the flaw in its assumptions? One immediate suspect is the collection agency, the Federal Board of Revenue, itself. Tax evasion is not possible on a large scale without FBR connivance, and any attempt at increasing revenues, is not possible without substantial FBR reform. So far, there have been no signs of a reform of the FBR, and it has been left to meet its targets by methods that can only be described as overused.
First would be force. This is merely a form of blackmail, where taxpayers accept the FBR official’s views and pay up, to avoid the considerable coercive powers at its disposal. Then would come an amnesty scheme, in which previously concealed income is declared, and assets bought with it, is thereby whitened, at a rate less than what is liable under the law. Amnesties are dicey. Asad Umar’s attempts to push through an amnesty scheme may have cost him his place in the Cabinet. His successor, PM’s Finance Adviser Dr Hafeez Sheikh, has hinted that there will an amnesty scheme, but the problem remains: such schemes are one-offs, and may generate funds for one tax year. It has not helped that MNAs, including those from the PTI, continue to use their positions to pay as little tax as possible. The fall also reflects a fall in earnings, which means that growth is stagnant. Again, that does not speak well of the PTI’s governance.
