PTI govt's efforts to widen tax base partially successful

Administrative problems and poor data quality hinder drive

ISLAMABAD: The government’s attempts to broaden the tax base by using information technology tools have remained partially successful due to the administrative problems being faced by the Pakistan Revenue Automation Limited (PRAL) and the poor quality of data gathered from various sources.

PRAL - a Federal Board of Revenue (FBR)-owned company and its information technology backbone - is being run on an ad hoc basis.

The data of 53 million transactions that the FBR collected from various sources and made public in June this year was also not actionable, which put a question mark over the government’s strategy of hooking high net worth individuals before doing the proper homework.

Resultantly, these factors have undermined the government’s desire to use information technology as a tool to broaden the tax base and increase revenue collection from existing taxpayers.

The number of return filers did increase from 1.8 million to 2.6 million after the FBR gave repeated extensions and delayed the close of the tax year 2018 by 11 months. However, the additional tax payments by these 800,000 additional filers were less than Rs4.5 billion, according to the FBR.

One of the reasons was that the FBR did not utilise the data as it was incomplete and people could not be properly identified.

Earlier this year, the FBR and National Database and Registration Authority (NADRA) had claimed before Prime Minister Imran Khan that they had information about 2.7 million potential taxpayers.

But now it seems that the government wants to correct the things in the future. PRAL’s board of directors has recently approved a plan to engage the private sector to ensure ease of doing business, improve transparency and process efficiency at an accelerated pace.

It wants to seek the help of the private sector for improving tax return filing, improving current Customs clearance and tariff enforcement with minimal human intervention and facilitating withholding tax agents in accurately assessing applicable taxes according to the type of transaction.

The business plan also talks about facilitation of sales tax agents by providing them access to a certified point of sales network for hassle-free and accurate capture and processing of transactions and establishing a tax facilitation centre accessible round the clock through multiple communication channels and requiring minimal personal interaction among citizens, taxpayers, and enforcement officials.

But again the expression of interest to acquire these services has been given in the press without first addressing administrative weaknesses in the FBR. There is still no permanent CEO of PRAL.

FBR spokesman Dr Hamid Atiq Sarwar said the government would soon complete the process of hiring the new CEO.

PRAL’s management decisions are supposed to be taken by the board of management (BOM) that must comprise three officers, the chief executive officer, general manager operations and GM software development.

There is no permanent CEO. One man, Ahmad Nawaz, is wearing three caps - acting CEO, general manager software development and general manager operations.

Contrary to the government’s austerity drive, PRAL gave up to 25% increment to its employees and the decision was taken by the one-man BOM.

When contacted, acting CEO Nawaz defended the decision of giving pay raise, claiming that under the rules of business, the BOM was entitled to take such decisions. He said the government’s austerity policy was not applicable to PRAL, which was a private company.

Inquiries had also been launched in the past against some PRAL officers for issuing illegal sales tax refunds but no action was taken. Quality checks are also not effectively applied before uploading the new income tax return form.

Lately, the new board of directors of PRAL has stopped bonuses that the current ad hoc management again wants to give to a few people.

Despite the fact that PRAL expenditures are being financed by the FBR, no serious efforts have been made by the FBR administration to revamp and restructure PRAL to make it an efficient IT-based organisation for better management of tax collection.

Published in The Express Tribune, October 16^th, 2019.

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