In a gathering of some star tax officers of FBR, an interesting question, surprisingly erupted as to what capacity the tax officers would generally most likely to assume while exercising their powers for collection of taxes. Shall he behave like an officer of NAB or FIA, a chartered accountant or a businessman, a prosecutor or a judge or perhaps, simply a tax officer? Someone with glowing eyes says that he would never hesitate to assume the powers of a ‘blunt’ NAB, FIA or police officer to recover the fraudulently tax evaded money by means of coercive measures such as fierce show cause notice, raiding, collection of stocks, attaching the bank accounts, administrative, illogical and non-speaking assessment orders, lodging FIR and even arrest, no matter an ‘honorable’ delinquent tax payer is hand-cuffed while boarding on the airplane on this sole presumption that the taxpayer is a “thief”. Another officer says that “No, no”, he would behave like a chartered accountant or a businessman to collect taxes by employing all negotiation skills with peace even though he has to lose his increments or even job for not meeting targets. Yet another officer with judicial bent of mind says that he would proceed like a judicious prosecutor and a judge in accordance with the existing tax and other laws of the land and the procedures to meet the ends of justice.
Amongst them, a seasoned lady tax officer comes up with a news contrary to the economists. From top to bottom, they are all like ‘munshis’ or financial secretaries of the past, wearing special round caps with long tops having a hanging ribbon on its side, as they served under the Mughal and the British rule to collect agricultural and wealth tax for the State from the peasants, traders and the other subjects of the State by hook or crook.Once, agricultural tax was a major source of revenue for the state in the past. However, a new era of diversified taxes started when in 1857, the British government had to bear heavy expenses in the wake of so called mutiny or the War of Independence. The ‘Crown’ imposed income tax and the license fee which paved the way for ever new and rising types of taxes which are still carried today. Over the time, the importance of ‘Munshi’ kept on growing and today we find its manifestation in the form of a largest tax bureaucracy in Pakistan under Federal Board of Revenue.
In its inception, Pakistan adopted Central Board of Revenue Act, 1924 and the status of Tax Department was reduced to an Attached Department from a Division in 1960. In 1974, it was again upgraded and the office of a Chairman of Central Board of Revenue was created. The revenue powers were delegated from the Finance secretary to the Chairman to impart more autonomy to the Department. In 1991, its status of a Division was restored but again diminished in 1995. Under Federal Board of Revenue Act, 2007, the Department was given status of a full fledge Revenue Division and the Chairman was also delegated the powers of secretary revenue.
Paradoxically, in all its bids towards evolution and the development of the Tax Department, no development for tax culture was ever focused except the powers and mandate of its head or to some extent of its officers. In its ups and downs, the Chairman appears nothing more than a “Munshi” or merely a collector answerable to the Finance Minster who in turn seems to be more a “Meer Munshi” or chief collector of the past than an economist meant to collect money from the business and to put it to the mega economic projects enabling an effective and the most delivering economic cycle leading towards both economic and human development in the country. Naturally, the chairman and the officers are bound to follow the policy, spirit and approach of the Finance Minster which runs for collection of taxes by all means regardless of any deterioration and depression found in the economic fields.
The tax payers and the collectors are seen to be warring groups always at a tug of war with each other, devoid of enjoying any mutual confidence and trust in the best interest of country. At one hand, every year the representative bodies in pre-budget seminars and conferences jointly attended by all the stakeholders including the policy makers of FBR, voice their reservations and suggestions and consider the department as apathetic to the needs of taxpayer and the promises made to them during such seminars. On the hand, department always looks at the tax fraudulent with squint eyes and laments the legal fraternity not to give cover to such delinquents. Tax-payer and legal fraternity suspects illogical and unrealistic assessing orders by the tax officers, due relief from the Commissioners Appeal, Tribunals having accountant and the official members from the department in its composition and even the superior judiciary in some cases for its being non-conversant with the tax laws and practice, incomprehensive and having load of work. Whereas, the department is more concerned to frame new coercive laws to plug all grey areas and tax pilferage than to the developmental work. The more the laws, the higher the complexity, the harassment, the mistrust, corruption, the litigation, the tax evasion and the erosion in tax culture that the entire philosophy and ideals of taxation fall to the ground. The three principles that is, first, to generate funds for running the state affairs; second, equitable distribution of income and wealth from the ‘haves’ to the ‘haves not’ and third, to create or impede any general and special economic projects beneficial or injurious for the human growth in the walks of employment, health, education and standards of life meet sheer frustration.
South Korea, Bangladesh, Singapore and India with similar cultural roots, have developed very healthy tax cultures. India has recently struck down thirty five chronic ailments irritating both the department and the taxpayer, by a single stroke of order comprising of only one and half page. It has facilitated the taxpayer, increased the volunteer tax net and enhanced such respect for the department in the business community that Indian Tax Department has been awarded Prime Minister award for the best civil services. Transferring the refund claims up to rupees fifty thousands in the bank accounts of the tax payers and drop of all frivolous litigation have sent a thrilling wave in the hearts of the taxpayers rendering the department and the taxpayer more integrated towards each other and the department justified to squeeze the actual delinquents. We find here that genuine refund claims are withheld and parked in accounts to show maneuvered figures of tax collection to the international loaning bodies to get renewed the loan contracts.
Admittedly, here a large segment of the taxpayers, too, do not come up with clean hands and are unwilling to contribute by paying genuine taxes or by discharging its corporate social responsibility towards the welfare of the poor. By approach, NAB, FIA or Police officer collects evidence to prove guilty of an accused; Chartered Accountant or businessman believes in negotiation and judge appraises evidence to prove innocent of the accused and an ideal tax officer may be a blend of all that.
Decentralization of powers from the Board to the field officers, drop of litigation, provision of genuine refund claims, plain interpretation of laws, facilitations for doing business and tax compliance, single digit charging in the sales tax to end input/output puzzles and fake/flying fraud refund claims, reduction in tax charging ratio, capacity building, cash performance awards and administrative facilitations for the tax officials who collect billions at lowest salary cost are certain steps which may lead to a healthy development of this sector. Ministers and his team have to be more the economists than to be the ‘munshis’ only. It will send a cordial message towards the taxpayers and the officers at one hand and generate economic activity and build capacity for the taxpayer to pay the taxes happily. By this approach, no innocent will be hanged and no guilty will be able to escape.