Giving FBR a decent burial

Revenuecracy has given the country many of its patronageattuned business tycoons, but not efficient revenue collectors

This column has consistently argued for a single tax authority across all levels of government. The announcement of setting up the Pakistan Revenue Authority (PRA) should, therefore, have been an occasion to commend the government. However, it seems that before announcing any reform, the government does not do proper homework on the content of reform. Nor is any serious attention paid to preparing an implementation strategy.

The ink of the terms of surrender to the traders has not yet dried, and we are now witnessing a post-haste surrender to revenuecracy. If the FBR could be reformed by involving the revenuecracy, the World Bank’s Tax Administration Reform Project (TARP) would not have ended up in a trap. The revenuecracy has given this country many of its patronageattuned business tycoons, but not efficient revenue collectors.

It cannot collect its dues from the withholding agents, what to speak of the large numbers that fail to file. The case of the now-bankrupt Shaheen Air is just one example. What has been done in the case of PMDC bears repeating here with a much stronger justification — abolition of what exists, lock, stock and barrel and creation of an entirely new organisation.

Call it the PRA or whatever. To avoid unnecessary debate on federal-provincial jurisdictions, place it under the Council of Common Interests (CCI). The CCI should also have a tax policy board with members from all provinces and the federal government. The PRA should be mandated to collect federal, provincial and local taxes in the light of policies formulated by this board. It will keep the PRA focussed on collection and the one window would be the single most important factor in easing the doing of business. Autonomy is the key to success.

It has to be ensured in operations, budgeting and human resource. Tax policy objectives and targeting should be the only interventions from outside. Once these parameters are determined, the PRA should be completely autonomous in organising and ensuring tax collection. There should be a governing board with members appointed by the respective governments. This board will have the power to appoint, following a merit-based process, an operationally independent CEO for a non-renewable term of five years.

The operational autonomy would be meaningless without financial autonomy. Towards this end, the PRA must be allowed to deduct and keep with it one per cent of the proceeds of each tax collected. It should make its own budget accordingly, subject of course to audit by the Auditor General. After keeping its share of one per cent, the PRA may be charged with the responsibility to automatically disburse the share of the provinces and local governments in accordance with the NFC and LFC awards.

The powers to hire its own human resource at salaries it deems fit and to fire as per rules formulated internally are equally important. As a first step, the fresh recruitment to the income tax and customs groups of the CSS should stop. A new organisation ought to have new recruitment under a system devised to attract the best and the brightest professionals. The resistance from the present FBR can be overcome by leaving them undisturbed. They can stay at home and continue to enjoy their salaries and receive pension when due or seek early retirement with all benefits. Those who come up to the standards of the PRA should be allowed to compete for entry. If selected, they will have to forgo the FBR position. This will cost far less than the revenue potential to be realised. But who will bell the cat?