Tax needs democratic oversight
THE tax administration seems to have lost economic policy objectives. It is not only a tool for raising revenue for the government, it is also expected to so design its capacity to function as to enhance social benefits and enable the economy to achieve a progressive track and make it self-reliant and free of both foreign and domestic debt shackles.
In contrast, the FBR has been employed both by civilian and military regimes to extort taxes from the already overburdened taxpayers. Coupled with this, the tax and economic circle is mired in dire straits.
Meanwhile, there has been a growing misconception that by merely amending the tax laws, the entire system of taxation can be sorted out. The progressive tax laws, as envisaged on their introduction exactly a decade ago, were expected to help streamline and simplify the taxation system and strengthen the economy.
However, the efforts have proved futile as no sustained industrial expansion in foreign direct investment or domestic development was adequately perceived and addressed, because the sole aim was to increasing tax collections.
Financial managers have been posting revenue targets by neglecting ground realities at a time when the the country is struggling to recover from the ailing economy, a rising fiscal deficit and reduction in the power of domestic resource mobilisation.
As a result, tax collectors are forced to absorb pressures and employ unjustifiable tactics like the collection of huge advance taxes much before these are applicable, otherwise they show a strong reluctance to decide the cases and thereby withhold refunds.
The problem is deep-rooted and has derailed the entire tax administration. The foremost factor behind this menace is the absence of democratic oversight of the tax machinery. For long, the FBR has been presumed to act in dual capacity: i.e., both as a policymaker and as an enforcer. Moreover, it makes the matter worse by introducing the policy without doing its homework.
Explicitly, in any democratic country, public representatives own state policies. They are expected to ensure policies based on equality and transparency. On the contrary, in Pakistan the entire tax administration is run by bureaucrats, who cannot be expected to play the role of public representatives when it comes to transparency and equality. This also affects the performance of taxation officials.
Time and again, the performance of these officials has been questioned because of inefficiency, incompetence and incapability.
That can be gauged from the fact that though ‘automation’ has become the catchword and international donors have poured huge aid in it, the majority of officials have yet to understand the basics of information technology, even though they realise its importance that it is a fully efficient, result-oriented and taxpayer-friendly apparatus.
There is no doubt that an effective tax law is already in force in theory,but it is a matter of urgency to reform the mindset of the functioning hierarchy. It is time the people’s representatives asserted their ownership of policymaking.
For this purpose, a parliamentary committee on tax reforms should be formed, composed of members from both treasury and opposition benches. The FBR should play a crucial role in enhancing the committee’s importance by paying heed to its recommendations and submitting the administrative record before the committee at regular intervals so that it can place itself for proper accountability.
Similarly, there is no more need for conducting experiments in tax administration. Instead, the FBR should hold full-fledged training programmes for its staff to address their low performance and structural weaknesses.
More importantly, they should improve the capacity to detect tax-evaders through a tax intelligence system instead of exercising unjustifiable tactics. Unless administrative shortcomings are done away with and public representatives assume their responsibilities, no tax reform can be meaningful.
MUHAMMAD AZAM SHAIKH
Gen-Sec, Tax Bar Association, Larkana