After changing the chairman of the FBR last month, the government now plans to replace members at key posts, including customs, audit, direct taxes, indirect taxes and enforcement, according to sources. However, the plan may run into obstacles from those who have the final say in the matter.
“A member is the main person in tax policy formulation, implementation and achieving tax targets,” said former member strategic planning and statistics at the FBR, Zafarul Majeed. He said that without the full support of members, no chairman could achieve tax targets.
The annual tax target was last achieved in fiscal 2007-08 but from then onwards corruption and inefficiency in the tax machinery began to rise, sources claim.
According to a World Bank study, every year about Rs796 billion goes down the drain due to corruption and tax evasion in the country. Former finance minister Shaukat Tarin had estimated annual losses between Rs350 and Rs500 billion on account of tax evasion and corruption in the FBR.
For financial year 2010-11, the government had given an ambitious tax collection target of Rs1,667 billion, which was later revised to Rs1,604 billion. During the first half of the year (July-December), collection was only Rs659 billion – about 39.5 per cent of the original target and 41 per cent of the revised target.
It was only in the month of December that the FBR could surpass the revised target of Rs147 billion by Rs12 billion. In total, it collected Rs159 billion in December. The tax machinery now faces an uphill task of collecting Rs945 billion in the remaining six months, which could prove politically explosive.
However, former chairman Sohail Ahmad – now secretary Planning Commission – was satisfied with his performance. Talking to The Express Tribune, Ahmad said that he enjoyed full support of line members and that was why he managed to surpass the revised revenue collection target for December.
Former finance secretary Salman Siddique is now heading the FBR. Like his predecessor, he hails from the District Management Group and is likely to face resistance and half-hearted cooperation from income tax and customs officials.
Sources say that these groups were lobbying to nominate a chairman from within the FBR. The cost of FBR’s inefficiency can be gauged from the fact that over Rs100 billion in taxes is under litigation. The economic managers believe that these cases are not being aggressively pursued since many of them are pending at the tribunal level and could be settled within a matter of days.
In 2009, the government initiated an audit of taxpayers yet again. Initially, it decided to audit over 900 taxpayers, including association of persons and large corporations. Many months later and after spending Rs500 million, the authorities have failed to come up with any noteworthy results.
“Political appointees at important positions within the FBR have also added their own share of corruption and inefficiency to an organisation which has become a state within a state, refusing to be reformed and resisting adamantly steps that would curb their sleazy practices,” said one official who has been sidelined after refusing to toe the line.
The official said that at least one of the key members of the FBR has direct links to the corridors of power. Reportedly, former finance minister Shaukat Tarin was also unsuccessful in changing this particular member.
Another official close to Finance Minister Abdul Hafeez Shaikh said the new FBR chairman has indicated that if certain individuals of his choice were not appointed as members, he would prefer to go on leave. The official added that Siddique told the finance ministry that he could only deliver if allowed to work with the men of his choice. The chairman is scheduled to retire in January 2012.
Published in The Express Tribune, January 7th, 2011.
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