Game-changing tax reforms?: FBR chief vows to ‘name and shame’

To instil a frisson of fear in the biggest dodgers, Hakeem is threatening to freeze assets and ban them from travel.

ISLAMABAD:

Ali Arshad Hakeem, appointed as the Federal Board of Revenue (FBR) chief this year, has declared war on some of the country’s worst offenders. And they are not the militants blamed for so many of the country’s woes.

The new tax chief is determined to force the elite to pay their fair share, challenging an unspoken consensus among politicians and businessman that writing cheques to the government is strictly optional.

Less than 1% of Pakistan’s 180 million citizens pay income tax and no one is believed to have been prosecuted for tax evasion in 25 years, to the dismay of Western allies who have contributed billions of dollars in aid.

“We will name and shame,” said Hakeem.

Freezing assets

Hakeem, 49, believes he can inculcate a greater sense of responsibility in the top layer of society through a carrot and stick approach.

To instil a frisson of fear in the biggest dodgers, he is threatening to freeze assets and ban them from travel. But he is also about to offer a 10-week amnesty that forgives past offenses and only places a small tax burden in the first two years of those who choose to accept.

The scheme is the best Hakeem can come up with given the government’s failure to muster the political will to implement key economic reforms, including widening the tax base.

To tempt them into the programme, tax cheats will only need to pay a flat fee of around Rs40,000 for any amount of income they bring in over the next year. The following year, they will have to pay Rs40,000 more in taxes.

At the end of the second year, the tax rate will be re-evaluated and could return to normal rates, which run as high as 25%.

The National Database and Registration Authority (NADRA) had profiled more than 2 million offenders, detailing their luxury cars and houses, bank accounts and overseas trips. Hakeem says he will release the names of offenders to the media.

“It’s like a war,” he said, displaying the profiles of offenders with their faces and names obscured. Foreign accounts, vehicles, trips and properties are listed. “If this fails, I have to go,” he adds.

Some are sceptical, but the FBR chief is convinced he can achieve the seemingly impossible.  “We will eventually get each one of them. We must give people a chance to come and pay their taxes,” said Hakeem.

“It is a computerised system ... We even know what colour shirt he (an offender) was wearing when he got on that flight,” he added.

Hakeem says evaders may have their identity cards suspended, although it was not clear if such action was legal.

The amount of tax collected had been going down in real terms even as the country looks to the West for help.

The FBR had already presented cricketers such as former captains Younus Khan and Shahid Afridi, with a whopping tax bill. But there has been no public demand for wealthy politicians or their millionaire backers to pay up.

History shows that Hakeem faces an uphill battle. Businessman and Pakistan Tehreek-e-Insaf (PTI) leader Jehangir Tareen said when he was serving as a lawmaker; it took him a year to get tax authorities to accept his payment because they were so afraid of setting a precedent for taking cash from the powerful.

“We filed a (tax return) and sent a cheque. They returned it and said, ‘please don’t do this’,” he said. “People who pay tax honestly do not get rewarded.”

Published in The Express Tribune, November 6^th, 2012.