Taxman’s woes

Pakistan’s top taxman did not hold back his punches during a recent public interaction at a think tank in Islamabad. FBR Chairman Mohammad Ashfaq admitted that the revenue bureau lacks the capacity to convince or force about four million registered taxpayers to file their returns. Keep in mind that there are only a paltry 7 million registered taxpayers in this nation of 220 million — over half of the handful of registered people still face no consequences for not filing. The situation is only slightly better for sales tax, with only 191,000 of the 305,000 registered persons filing returns.

However, the FBR chairman clarified that solving this is the responsibility of parliament — laws need to be reworked to allow tax authorities to take action in such situations, and the state needs to significantly invest in tax administration to address structural problems. He also noted for the FBR critics that the cost of tax collection was only 0.6% of revenue, offering further proof that the FBR was one of the most under-financed tax authorities in the world. However, he was critical of the Rs400 World Bank loan taken in the name of improving the FBR’s performance. He said the agency had little to do with pursuing the loan and had not even received much of the promised funds from the Finance Ministry.

Ashfaq was also unafraid to hit his bosses on other issues, noting that after the massive hack of the FBR that led to his predecessor being fired and promises of more heads to roll, he had still prepared his presentation on “pirated software”, adding that several people in the FBR’s data wing were recently promoted and given bonuses, suggesting that the opposite has happened. He also noted that the oft-criticised Rs1.4 trillion in tax exemptions were created by parliament, not the FBR. “If you elect better people, you will have better laws,” he said. He added that action on the IMF’s demand for increased personal income taxes would be delayed as talks continued.

Ashfaq’s remarkably candid talk may have offered a detailed window into the problems facing the FBR, but for those seeking solutions, it only served to solidify their concerns.

Published in The Express Tribune, November 20^th, 2021.

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