With the meetings with the IMF ongoing and the future course of our economic policies to be decided, it is clear that moving forward, the government will have to plug the funding gaps and maximise revenue going forward. All eyes are on the FBR because there is an expectation that the IMF will necessitate a reformulation of the tax collection targets.
The expectation is that to secure the next tranche, the government will have to raise its tax target from Rs7.47 trillion to Rs8.3 trillion. This will bring additional pressure on FBR, which is already struggling to meet the annual target even if the monthly numbers are favourable. The troubling aspect of all of this is that disturbing reports are coming from within FBR offices of a possible change in the structure of the way the organisation is run to try and facilitate this.
The FBR’s current organisational setup is divided along three main lines, enforcement audit and legal: enforcement does most of the collections, audit checks the data of filers to see if their tax submissions check out, and legal handles litigation. This division of labour was put into place to allow for specialisation and improve efficiency and output. Before this system was implemented, all three aspects of one filer were usually handled by a single officer. Naturally, allowing one officer to handle the whole case file opened up room for graft and corruption, and it is rumoured that the tax collection body is mulling moving back to the old system to try and maximise collections and deploy more officers to collection duties.
The problem is that we have been down this path before, and the system simply does not work. The idea to get all officers to focus on collection works in principle, but only if there is oversight on their actions. And with collections becoming the focus, there is little attention paid to oversight, administrative issues and corruption, problems that government institutions are still plagued by.
In an organisation that is overly reliant on physical documentation and is very slowly heading towards digitisation, this is a recipe for disaster. Chopping and changing the system and transferring officers and shifting files to try and expedite the process will enable a period of chaos, where files and data will be ‘misplaced’ and oversight will be minimal.
There is no point in changing the system every two years, especially if moving to an old and antiquated method is being considered. Revenue maximisation can only take place if the government stifles room for corruption and allows for actual progressive and automated structures of tax collection. Shortcuts will not work.