The tax problem

Once again development budget will be cut because finance minister did not admit govt had problem with tax collection.

There has never been a shortage of excuses as to why the government’s tax collection efforts have fallen short of their announced expectations and this year appears to be no exception. Admittedly, it took Finance Minister Ishaq Dar a little longer than it used to take his predecessor, but that is not because Abdul Hafeez Shaikh was any better at the job, merely that Mr Dar appears to have been in denial for a lot longer.

On New Year’s Day this year, Mr Dar announced to a meeting of the cabinet, somewhat audaciously, that the government would not be taking any extraordinary measures to increase tax revenues, unless the situation worsened. It seems, given the data now being disclosed, that even as he was making that declaration that all was well on the taxation front, the Federal Board of Revenue was struggling to meet its targets. This means that, at best, Mr Dar was kept in the dark by officials who report to him. At worst, it means that the finance minister deliberately misled his cabinet colleagues.

The excuses being proffered by the finance minister for this annual tradition of disappointment is that the previous administration was unable to meet last year’s revenue targets and, therefore, his administration is struggling with the effects of a low base. That claim is flatly untrue. The budget announcement was made in June 2013, a time when the government knew full well that it would fall grossly short of its expected tax collection target for FY2013. The tax target was set bearing in mind that expected shortfall, so this excuse is not only feeble, but simply inaccurate.

As it stands, the already eviscerated development budget will now be cut further as the government scrambles to meet its commitments to the International Monetary Fund on the budget deficit numbers. And once again, many a town will go with an unbuilt school, an unrepaired hospital, or an unfunded road project, all because the finance minister was too stubborn to admit the self-evident fact that the government had a problem with tax collection, let alone work towards finding appropriate solutions.

Published in The Express Tribune, March 9^th, 2014.

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