Spend smart, not big

Listen to article

FBR's recent push to secure 1,087 new vehicles and other incentives under a Rs32.5 billion package has sparked heated debate in Pakistan's corridors of power. While the FBR argues that the cars are critical for physical verification of tax returns and locating non-filers, a Senate panel has raised serious objections, recommending cancellation of the purchase contract. The broader question however is whether massive expenditures are the right approach to improving tax collection in a country with one of the lowest tax-to-GDP ratios in the world.

The FBR's case hinges on its need for mobility to physically verify tax declarations, conduct audits and expand the tax net. Digitalisation, it contends, is not a panacea. Physical surveys and on-ground inquiries remain essential to capture elusive non-filers and verify online submissions. However, this rationale is being scrutinised, especially since public trust in the FBR's operations is already shaky due to allegations of corruption and inefficiency. The introduction of the Revenue Reforms System (RRS), which controversially requires officers to label their colleagues as corrupt or lacking integrity, has further tarnished the department's reputation. Critics argue that these internal dysfunctions cannot be resolved by doling out perks such as cars and additional salaries. The government's decision to link these incentives to recovery of ambitious revenue targets may seem pragmatic. However, without addressing the structural flaws in the tax system, such as rampant evasion and institutional corruption, these measures risk becoming mere cosmetic fixes.

Instead of incentivising officers with perks, resources should be redirected towards training programmes that enhance the expertise of tax officials. Equipping them with the right tools and skills can improve efficiency without extravagant expenditures. Cancelling the contract for the purchase of these cars would not only send a strong signal about fiscal discipline but also compel the FBR to innovate beyond its current reliance on traditional, resource-intensive methods.