The country’s top taxman has backed the proposal of setting up a national revenue authority to ensure better coordination between federal and provincial tax agencies and hiring the Federal Board of Revenue (FBR) chairman from the private sector to induce professionalism in the organisation.
There should be a common platform or at least a clearing house between the centre and federating units to avoid double taxation under federal and provincial laws, said FBR Chairman Tariq Bajwa on Wednesday.
After the 18th Amendment to the Constitution that empowered provinces to collect sales tax on services, the taxpayer’s problems have increased, highlighting the need to have a national-level platform to address these issues.
Bajwa backed the proposal, put forward by government-constituted Tax Reforms Commission Chairman Masoud Naqvi and former State Bank of Pakistan governor Shahid Kardar.
However, he said the FBR would keep its separate identity like the provincial tax collection agencies.
Bajwa, who belongs to the all-powerful Pakistan Administrative Services, also appeared willing to discuss the proposal of handing over reins of the tax machinery to professionals from among generalists, like him.
He said he was open to the discussion of civil service reforms where separate exams may be held for hiring employees in the FBR. There was no harm in hiring the FBR chairman from the market through the publication of advertisements – a proposal moved by Dr Idrees Khawaja, the head of Pakistan Institute of Development Economics (PIDE) School of Public Policy.
Khawaja suggested that the position of chairman should be tenure-based and the person should be hired through a competitive process from the market.
“Can an MBBS doctor be a good tax manager,” he asked, while stressing the need of bringing professionals in the FBR for better tax management. He claimed that FBR officers did not possess the right kind of knowledge and expertise.
However, the government will have to amend the law to hire a person from the private sector. Owing to the same reason, Prime Minister Nawaz Sharif could not appoint current Privatisation Commission Chairman Mohammad Zubair as FBR chief after taking office in June 2013.
Khawaja suggested that the FBR should be delinked from civil service and only judges be appointed on appellate tribunals. He also proposed that the FBR should privatise tax collection, particularly the collection from retailers.
The general perception was that the FBR had a deep-rooted culture of corruption and nothing had been done to change it, said Masoud Naqvi, citing a World Bank report. He said the FBR’s tax compliance was extremely poor, standing at only 39%.
Bajwa admitted that the FBR had a reputational problem and people tried to remain outside the tax net due to that reason.
Naqvi said there was a need for declaration of assets including bank accounts held by Pakistanis abroad and undisclosed income kept outside the country under a special law and regularising the declared assets by payment of tax at a specified rate. He sought severe accountability of both the FBR officials and non-compliant taxpayers.
He regretted that there was a lack of consideration for values and integrity besides incentive for dishonesty in the shape of tax amnesty schemes.
He asked the government to set up a stronger institutional mechanism for monitoring implementation as all efforts for tax reforms in the past failed to achieve the objectives due to unsuccessful implementation.
Commenting on broader parameters of the upcoming budget, Bajwa said the government would build upon the pillars of withdrawing tax concessions and increasing cost of doing business for non-compliant persons through higher withholding tax rates. He said the higher cost for the non-compliant was an effective tool to check the informal economy.
Published in The Express Tribune, April 9th, 2015.