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Reforming FBR

Reforming FBR

The reform process in FBR initiated by the new Chairman, Tariq Bajwa, was long overdue. FBR is the source of the lifeblood needed by the national economy for sustenance and growth. But, because of the loopholes and gaps in the working of FBR, the government is not getting the revenue it needs to run its affairs. FBR has continuously failed to meet the target of revenue collection set by the government. The result of this failure is that the government has to resort to deficit financing which accentuates inflationary pressures. Last year, the revenue collection target, to start with, was set at around Rs 2.3 trillion, but later due to the sluggish performance of the taxation machinery in the first six months, it was revised downward to a little over Rs 2.1 trillion. But even this target was not met.

Due to the lackadaisical performance of FBR, the tax-to-GDP ratio in Pakistan is around 9 percent, which is one of the lowest in the world. In India this ratio is around 15 percent and in other countries as high as 25-28 percent. There are many reasons why our tax income is so deplorably low. There is no culture of paying tax here. According a recent media report, two-thirds of the elected representatives pay no taxes. There is no tax on agricultural income while exemptions and relaxation in rules for various sectors and special interests deprive the exchequer of billions of rupees every year.

The element of corruption that permeates all layers of the taxation system makes matters worse.  According to an estimate, the unholy alliance between dishonest tax collectors and cheating tax payers results in the loss of Rs 500-600 billion to the national exchequer every year.  The virus runs through all parts of the machinery, including income tax, sales tax, customs duty, etc.

As against the supine attitude of the previous government, the new PML-N government has adopted a pro-active attitude in the matter. It has started the process of reform by selecting Tariq Bajwa, a senior bureaucrat, to head FBR. The appointment of Tariq Bajwa, an upright and honest officer with a distinguished record of service, has been widely hailed as the right choice for the challenging assignment. He has the requisite professional expertise and experience to tackle the difficult job of putting a new life into FBR.

As a dynamic officer, he has promptly launched a drive to ginger up the organization, starting off with large scale transfers and postings to put the right person in the right position. All his decisions are merit based, with an eye to producing quick results. He has chosen Nisar Muhammad Khan for the vital post of Member  Customs, while the former Member Customs Muhammad Riaz  has been posted as DG Customs Intelligence.

The task ahead is not easy.  The target is to increase revenue by over 27 percent to reach the figure of Rs 2475 billion during the current financial year as compared to Rs 1942 billion collected last year. This will require strict monitoring of progress in revenue collection from day to day and initiation of a process of accountability to reward hard working and honest officers and penalize the incompetent and the corrupt.