The International Monetary Fund team’s visit for the first quarterly review of the 39-month programme went more or less as expected. However, one of the more interesting revelations from this visit was the Mission Chief’s advice to Pakistan of creating a single tax base by instituting uniform tax rates across provinces and creating one tax administration body instead of the current practice of relying on several provincial and federal departments.
The key benefit of this would be streamlining the collection system and making the process more uniform across the country, something which is desperately needed. However, even before Mr Rigo’s suggestion, the Prime Minister and his cabinet had already taken the matter into consideration, as the minutes of a meeting held on October 3, 2019 revealed that the government is looking to dissolve the “archaic and highly bureaucratic” FBR and replace it with a leaner and more streamlined Pakistan Revenue Authority (PRA), which will also look to reduce redundant manpower and use technology in its place. FBR has also been directed to move towards the Value Added System of taxation from the General Sales Tax in the next 2-4 years, to both broaden the tax base and improve documentation of transactions.
The Ministry of Finance has been given till the end of June next year to bring about a comprehensive proposal to establish PRA, alongside finalising the organisation’s functioning capabilities, from recruitment to its daily scope of work. On paper, this is a very good idea; the FBR is often seen as a body lumbering to collect taxes and removing some of the red tape may indeed help in improving the system of tax collection in the country. Ultimately, this may also lead to an increased tax base for this country, by how much is not clear at this point.
Bringing uniformity into the tax collection system will surely streamline the process, cut costs and lead to smoother revenue collection, but what is important to note is that this on its own, this is nowhere close to being that one solution that will lead to more money pouring into the country’s coffers. Perhaps using all of the government’s development funds as a means of kickstarting the economy in conjunction with removing overlaps and redundancies in the tax collection system will be more beneficial. Pakistan’s journey towards economic stability is long and arduous; with the right revenue collection system, getting there might just become a little smoother, at the very least.