THE International Monetary Fund (IMF) has recently directed the Pakistani tax bureaucrats to further burden the taxpayers by asking them to pay at least 40 to 50 per cent of the demand before filing an appeal against the orders passed by tax collectors (which everyone knows, are mostly arbitrary).

The case where’muk muka’ (deal) is reached between the taxpayer and the tax collector, no appeals is filed. The appeals are preferred where the taxpayers do not “satisfy” the demands of the tax collectors.

The suggestion by the IMF shows that people sitting in Washington DC, who want to reform our system, do not know even the fundamental realities of our peculiar tax culture and social milieu. The directions given by the IMF to the CBR are reflective of their staunch anti-people role in Pakistan.

The right to unfettered justice is a constitutional guarantee for every citizen of Pakistan, which the IMF and local bureaucrats want to curtail in utter disrespect of many judgements of the superior courts on the issue.

According to a story published in an English daily , the IMF has asked the CBR to enhance mandatory payment from 15 per cent to 40-50 per cent on filing an appeal against the income tax assessment orders and the balance amount should not be pursued by the tax authorities till the resolution of the dispute. The CBR immediately accepted the suggestion and constituted a committee of income tax and sales tax officers “for revamping the existing appeals system to be effective from fiscal budget 2002-2003. The committee will finalise the proposals on revised income tax and sales tax appeals as well as dispute resolution process. The tax authorities have agreed to establish sales tax tribunals and an alternative dispute resolution (ADR) mechanism by March 31, 2002. The Chairman, CBR. Riaz Ahmed Malik, has directed the committee to immediately take short-term measures to incorporate changes in the law for implementation of the new income tax and sales tax ‘appeal procedure’ in the next budget. The IMF has also asked the CBR to pay interest [although our apex court has already directed the federal government to disband all kinds of interest payments embodied in any law of the land] to a taxpayer where mandatory payment has been made and the taxpayer’s appeal is successful, in relation to the period from the date of payment of taxes until the day of refund. The IMF has suggested that the rate of interest should be marginally in excess of the market-based interest rate i.e. five-point plus Treasury Bill rate. In case of an unsuccessful appeal, the taxpayers would pay the CBR interest on the amount not paid at a rate sufficiently excessive of the inter-bank interest rate,i.e. five points plus treasury bill rate. Why this discrimination? The IMF people are giving leverage to first appellate authorities to further fleece the appellants, as any adverse order by them will enhance the taxpayers’ liability manifold. If the taxpayer ultimately wins the appeal in Income Tax Appellate Tribunal or High Court, who will compensate him and what punishment is prescribed for the worthy departmental appellate authorities, who are nothing but an extended recovery arm of the tax collectors.

The committee comprising Chief Sales Tax and Chief Direct Taxes reforms (DTR), according to the newspaper, has already initiated an evaluation process of the IMF recommendations in order to revise the appeals mechanism: the refunds should be made within one month of the decision in appeal; additional staff should be provided to remove the backlog at the secondary levels of appeal; the CBR should compensate reasonable costs of professional representations before an appellate body, to the extent that the taxpayer is successful in the appeal; modify the law so that the costs of an income tax appeal, to the extent it is not compensated by the CBR, are a deductible expense to taxpayers, require taxpayers to pay the greater portion of any tax in dispute 40-50 per cent, the balance amount should not be pursued by the CBR pending resolution of the issues being disputed; compensation should run from the date of the initial appeal in the event that the taxpayer’s appeal is ultimately successful, even if referred back for reassessment.

Notwithstanding the reasonableness or otherwise of these dictates of the IMF, the question is how inviolable constitutional right to seek free and fair justice can be conditional or burdened with such monetary conditionalities. If an assessing officer passes an arbitrary order against a taxpayer creating a huge tax demand of Rs. 100 million, why the poor assessee should be penalized to pay at least 40 to 50 per cent [Rs 40 to 50 million]. The conditions suggested by the IMF are meant for civilized societies where tax collectors are reasonable which is not the case in Pakistan. The reality here is that only those taxpayers get huge tax demands that fail to grease the palms of tax collectors.

No doubt the Central Board of Revenue is facing a huge recovery burden and an overwhelming portion of it is blocked in adjudication or auditing processes but does it mean that a reign of terror should be unleashed against the taxpayers? In majority of the cases, tax levied is unjust as no’ muk muka’ was reached. The cases where tax was levied in a “friendly” manner, there are absolutely no arrears or appeals. The IMF is actually asking the CBR to penalize the honest taxpayers, as those who are ‘friends’ of tax collectors are not tax dodgers or tax defaulters and in their case the question of filing any appeal does not arise at all. There is no doubt that the role of the IMF is fast becoming that of a new East India Company in Pakistan. It has decided to take over our revenue administration in the same manner as was done by the East India Company in the subcontinent that led to a long colonial era. There are remarkable similarities in the operations of the IMF in Pakistan and the colonial era of the East India Company vis-a-vis revenue collections.

To discourage holding back tax liabilities, the CBR has already, on the instructions of the IMF, increased the penalty for late payment of tax to two per cent per month in direct taxes, and the penalty for non-filing of sales tax returns to Rs 5,000. What more does the IMF want to penalize taxpayers. In the West there is loud talk of protecting the rights of taxpayers and in Pakistan, the IMF wants to violate even their universally accepted uninfringeable basic rights. This policy clearly portrays double standards while dealing with the poor countries. We have a right to know in which other countries the IMF has imposed such harsh conditionalities as it has done in the case of Pakistan?

In seeking justice no preconditions should be imposed. Amendments suggested by the IMF are violative of the well-established principles of free and fair justice guaranteed under the Constitution of Pakistan. These amendments will certainly be challenged in the High Court under Article 199 of the Constitution of Pakistan being impediments in the way of seeking unfettered justice. In fact such conditions were imposed earlier as well and a number of writ petitions were filed challenging their constitutionality. The CBR is reminded that in a number of reported cases the superior courts have already held that such conditions, if mandatory, will be violative of fundamental rights of free and unfettered justice guaranteed under the Constitution of Pakistan.