Fudging tax figures

Just days after the federal budget for the next fiscal year was announced, Federal Board of Revenue (FBR) Chairman Salman Siddiqui proudly stated that he would not let wealthy tax dodgers escape the tax net again. The budget was partly predicated on increased revenue so it is essential that Siddiqui keeps his promise. The early signs are not good. It is has now been revealed that the FBR chairman’s boast that they had managed to meet their revised tax collection target of Rs1,588 billion was just empty rhetoric. In fact, the figure was off by Rs38 billion, a not inconsiderable sum which according to a report in this newspaper, now puts our budget deficit at 6.5 per cent of gross domestic product.

There are real world consequences to the FBR’s apparent mendacity. One of the IMF’s main conditions for continuing to bail out Pakistan’s economy is that it raise revenue and cut expenditure. Now that our budget deficit is well beyond what the IMF demanded, there is a chance that they will withhold the next few tranches of money. Since the FBR has now proved itself incapable of meeting its targets, the budget deficit will have to be lowered by eliminating subsidies. Removing subsidies on gas and electricity, as the IMF would like us to do, will hurt common citizens, who are essentially going to have to bear the pain that was meant for rich tax-dodgers.

Beyond that, there need to be consequences and accountability for the FBR. Too many government agencies set unrealistic targets and then just shrug when these, as is likely to be the case, aren’t met. One should not forget that in the past, albeit under a different government, Pakistan was even fined by a multilateral agency for presenting what turned out to be concocted macroeconomic figures. In this case, the obvious person who should be held accountable for this tax fudging (what else is one to call it?) is the FBR chairman. But let us be realistic. In Pakistan, accountability never begins at the top and so the FBR chief can rest easy in his chair.  If there are any firings over this, it will be at a lower level where scapegoats will wash away the sins of their superiors.  At least we now know one thing. Every time Siddiqui claims that the culture at FBR has been changed, corruption has been ended and tax-evaders are being targeted, we will know to take his words with a very large pinch of salt.

Published in The Express Tribune, July 25^th,  2011.