The taxman cometh

After serving in an interim capacity for about five months, Javed Ghani has formally been appointed as chairman of the Federal Board of Revenue (FBR). Ghani, a Customs officer, was already an FBR member when he was given the additional charge of FBR chairman. His interim charge period is being seen in some quarters as a trial-run for the job. Whether or not this is true, he is already one of the longest-tenured of the FBR chairpersons appointed by the PTI government. His predecessor, Nausheen Amjad, a career tax officer, lasted less than three months before being removed and appointed secretary of the Culture and National Heritage Ministry. Many saw this as a vote of no-confidence wrapped in the facade of a promotion. Of course, the fact that her term coincided with a host of external issues, including the start of the pandemic, cannot be discounted.

Under Ghani, the FBR’s performance has been mixed thus far. The board has missed the tax target for the first half of the ongoing fiscal year by a whisker — collecting Rs2.20 trillion as against the pursued Rs2.210 trillion — but the target was already very low. This leaves the FBR with a gigantic task of collecting Rs2.8 trillion — with a growth rate of 45% — in the remaining period. If things continue as they are, the government will miss its target by Rs600 billion. This is not, however, all on the FBR. Government’s austerity measures that began even before the pandemic, and public austerity measures since then, caused a significant decrease in economic activity, which also hit tax collection. Also in the FBR’s defence is the fact that the collection target was calculated with the assumption that the pandemic would be mostly gone by this point in time. Instead, we are in the middle of a crippling second wave, and vaccines will not be widely available anytime soon.

Even if the virus and other factors are brought under control, experts see a shortfall in the Rs500 billion range for the full fiscal year. That has the potential to create more problems on several fronts. Pakistan is likely to miss targets given by the IMF and World Bank relating to collection and reforms. Coupled with the revenue reduction, we could see further austerity in the years to come.

Published in The Express Tribune, January 3^rd, 2021.

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