ISLAMABAD: The government of Pakistan subscribed to a World Bank Tax Reform Project to fundamentally reform the Central Board of Revenue (CBR), now the Federal Board of Revenue (FBR), “for a more efficient and effective revenue administration system”. The project referred to as TARP began in December 2004 and was concluded in December 2011, costing $149 million, the total amount including the World Bank-committed amount of $102.9 million to be eventually borne by the taxpayers of Pakistan.
As I remember, the CBR was generally believed to be an outmoded organisation and was regarded to be in need of reform and so it was subject to persistent reforms, in one way or the other, since the early 1980s, but another reform was warranted as each spell of reform concluded. The above project was, perhaps, the longest in duration, and, perhaps, the costliest. It was led to believe that as TARP would conclude, the CBR would indeed be reformed and in that process, its name changed from CBR to FBR. What also changed was almost the entire nomenclature of offices and officials under it. In actual terms, seven years of reforms have elapsed but nothing has materially changed so far, both in terms of the quality and the output of the FBR.
Sometime ago, I read in newspapers that the World Bank mission that reviewed the reforms had commented that there was risk to the achievement of key development objectives of TARP due to performance of the FBR not being up to expectations. This comment is simply bizarre as the reforms in question were actually meant to improve the FBR’s performance and if that was not attainable, then there were no reforms or simply put, the reforms have failed; however, hiding behind this reprehension upon the FBR, the World Bank was now proposing a follow-up reform programme.
Recently, I again read that the government is considering another reform, at a whopping $300 million, envisaged by the World Bank, as a new TARP, and that $3 million have already been given for project preparation. The news report said that the World Bank experts, now working for the new reform programme, were unfamiliar with Pakistan’s tax issues. They were citing examples of the European Union and the US with the experts having no link with the ground realities.
At the beginning of the TARP reforms in 2004, our tax-to-GDP ratio was 11.5 per cent, which, in a seven year period of reform, came down to a dismal 8.6 per cent. There may be many reasons for this massive fall in revenues. One that I see is that the tax machinery whose sole job was to be at all times mindful and devoted to the collection of revenues was hardly doing that job; instead, it was litigating against each other in various courts of law with the FBR turning into a battlefield, which was surely of the making of that policy which was dispensed by the World Bank. The two brother services of the FBR, namely the customs and the income tax, which had a history of a most congenial relationship, were not the same brothers anymore and they were at draggers drawn as the broth of litigation was still simmering in the courts.
The CBR’s long history of reforms is that of like a fool who was expecting different results while doing the same thing again and again. What different thing is the World Bank now proposing to do, in yet another set of reforms? The World Bank might be looking for some job for its seemingly out-of-work experts; otherwise, if they were honest enough, they would have by now declared our case unfeasible for any reform for the reason that what we actually need is a systemic reform of our politics of taxation. What we do not need is new looks to the bricks and mortars housing the tax officials, which is what the World Bank has fruitlessly done at the expense of the taxpayers’ money.
Abdul Waheed Khan
Published in The Express Tribune, May 6th, 2013.
