Improved tax collection numbers for FY11 only reinforce the centrality of the FBR to any meaningful initiative at raising revenue, especially since the 18th amendment enhanced provincial share and responsibility. Since the current budget’s ambitious growth target centres predominantly on sizeable increases in tax revenue, especially when provinces have yet to record meaningful collection, the bureau should be mandated with providing institutional and infrastructural support to the provincial mechanism, without which inflows will be nowhere near necessary levels to meet the growth target.
However, it bears noting that as the FBR tutors the provinces, it must also undergo a necessary overhaul itself, for which institutions not directly involved with revenue generation and collection will also figure prominently. Despite the technicalities involved, the principal matter is one of political will. If Islamabad cannot muster the resolve to tackle the tax problem once and for all, the centre’s fiscal space will remain constrained, keeping growth low and unemployment high.
At the provincial level, too, a paradigm shift in conventional political thinking will have to give way to legislature necessitating reorientation of crucial taxes, especially agriculture. The present economic situation demands proactive expansionary posturing from fiscal authorities, which will not be possible without significant improvement in revenue collection. While blocking leakages will go hand-in-hand, both tax and export receipts will have to grow phenomenally for the economy to snap out of stagflation and position to exploit advances in regional and global trade dynamics.
Strangely, even as the west retards and Asia slows, Pakistan has remained immune from global downtrends, its economic mess being its own creation. Even low growth in traditional export markets has only remotely affected earnings. But that owes to a miniscule export base as opposed to strong fundamentals. We must immediately reorient our growth mix. But, at the risk of repetition, such an initiative is not possible so long as the tax structure, the government’s prime earning avenue, is compromised by political impasse.
