A depressing tradition
Finance ministry complains about FBR’s failure to meet targets, but it is complicit by not forcing FBR to improve.
FBR is always struggling to catch up during the first half of the fiscal year.
There is, perhaps, no institution more crucial to the progress of the nation that so consistently fails to adequately do its job than the Federal Board of Revenue (FBR). If the financial sector is the lifeblood of an economy, then taxes are the lifeblood of government, but the FBR seems thoroughly uninterested in fulfilling this vital role. For the second month in a row during this fiscal year, the FBR has missed its monthly revenue collection target by a substantial margin.
It has now become an annual tradition. Every year, the FBR starts off slow because it has used advance tax collection and other shenanigans to boost its collection figures during June, the last month of the fiscal year. This means it is always struggling to catch up during the first half of the fiscal year. At that point, the finance ministry throws the tax men a lifeline and lowers the revenue collection target. This target is usually revised downwards at least twice, sometimes more, and the FBR inevitably fails to meet even that thrice-lowered target.
In order to ensure that this problem does not happen again, the government must crack down on the FBR’s habit of using ad hoc measures to try to achieve revenue collection targets. The finance ministry often complains about the FBR’s failure to meet targets, but it is in fact complicit in the matter by not forcing the organisation to focus on long-term improvements in institutional effectiveness rather than short-term collection tricks. In the end, the problem boils down to the tendency of virtually everyone in Islamabad to think in the short run and leave long-term strategy to hope and prayer. Yet, as business students around the world are taught every year, hope does not constitute a strategy. The government cannot simply keep muddling along year to year, praying that someday the country will magically fix itself. There needs to be a more deliberate plan of action. We are impressed by the Nawaz Administration’s focus on energy. Now if only it would bring that same dynamism to taxation.
Published in The Express Tribune, September 5th, 2013.
It has now become an annual tradition. Every year, the FBR starts off slow because it has used advance tax collection and other shenanigans to boost its collection figures during June, the last month of the fiscal year. This means it is always struggling to catch up during the first half of the fiscal year. At that point, the finance ministry throws the tax men a lifeline and lowers the revenue collection target. This target is usually revised downwards at least twice, sometimes more, and the FBR inevitably fails to meet even that thrice-lowered target.
In order to ensure that this problem does not happen again, the government must crack down on the FBR’s habit of using ad hoc measures to try to achieve revenue collection targets. The finance ministry often complains about the FBR’s failure to meet targets, but it is in fact complicit in the matter by not forcing the organisation to focus on long-term improvements in institutional effectiveness rather than short-term collection tricks. In the end, the problem boils down to the tendency of virtually everyone in Islamabad to think in the short run and leave long-term strategy to hope and prayer. Yet, as business students around the world are taught every year, hope does not constitute a strategy. The government cannot simply keep muddling along year to year, praying that someday the country will magically fix itself. There needs to be a more deliberate plan of action. We are impressed by the Nawaz Administration’s focus on energy. Now if only it would bring that same dynamism to taxation.
Published in The Express Tribune, September 5th, 2013.