Budgetary debacles

Uncomfortable with this baggage from old Pakistan, the PTI government introduced a supplementary finance bill

Dr Pervez Tahir January 04, 2019
The writer is a senior economist. He can be contacted at pervez.tahir@tribune.com.pk

This fiscal year got its budget two months too soon in April due to electoral compulsions. Uncomfortable with this baggage from old Pakistan, the PTI government introduced a supplementary finance bill in September to give a touch of new Pakistan. By mid-December, the Finance Minister was talking about another round of budgeting, an admission that the September mini-budget failed to supplement the original budget, leaving room for a complementary budget. Reportedly, a further tax effort larger than the Rs183 billion mounted in the supplementary budget is in the offing.

There was a serious hole in the supplementary budget, covered up by the holier-than-thou in charge of the exchequer. These columns warned on September 21, 2018: “In the overall additional resource mobilisation effort, the largest amount of Rs92 billion is expected to come from the infamous miscellany of improved administrative measures, this time based on technology. If this black box had any potential, there would be no need for tax reform.” The Finance Minister had boasted that half of the additional taxation would come not from new taxes, but from better administration by using modern technology backed up by ‘Political Will’ to crackdown on tax evaders. This assertion, he claimed, was based on careful analysis. As Sahir Ludhianvi would have it: Magar yeh ho na saka aur ab ye aalam hai. The number of filers is below those registered with the FBR, what to speak of adding new ones. Revenuecracy is a past master at these games. In the 1990s and before, the estimate of additional resource mobilisation routinely contained a gap to be filled by the so-called administrative measures. Later, the development of technology raised the prospects of preparing large datasets of potential taxpayers by detecting information from a multiple of sources and speedy processing. What happens in fact is the cosmetic issuance of a large number of notices, sometime to the dead as well. The Finance Minister and the Minister of State of Revenue must have seen and been impressed by a lot of running around, but failing to appreciate that it signified nothing. I am now beginning to feel that the only sensible reform undertaken so far — the separation of tax policy from tax collection — has been subverted before taking off.

Let there be no doubt. In the presence of the FBR as it exists, tax reform has no chance. It needs to be abolished. A large bulk of the revenue is collected by withholding agents anyway. Similarly, a good number of tax offices collect less than the cost to maintain them. Sending the entire personnel home, with full perks and privileges, will actually save money. WHAT IS TO BE DONE has been said by me and others ad infinitum. First, to ease the doing of business, reduce the number of taxes and create a single tax authority to collect all government taxes, federal, provincial and local. Second, to avoid any jurisdictional wrangling, the new authority should be placed under the Council of Common Interests, with members from all levels of government on its governing board. Third, the authority should have financial autonomy by automatically retaining a reasonable percentage of collection. Fourth, the authority would have operational autonomy and directly disburse the shares determined by the NFC and the PFCs. Finally, it will be a professional organisation, headed by a tenured chief executive. The existing revenue services will cease to exist and the authority would recruit professionals directly at market salaries. The existing revenue personnel would have the option to compete.

Do this and you will see a budget with compliments from all.

Published in The Express Tribune, January 4th, 2019.

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