OMER ZAHEER MEER - Federal Board of Revenue (FBR) is a semi-autonomous federal institution that is responsible for auditing, enforcing and collecting revenue for the government of Pakistan. It’s one of the most critical components of the revenue collection apparatus in Pakistan. As such it is supposed to be the pinnacle of professionalism, discipline and support to taxpayers. Whether this is really the case shall be examined in this write-up. About couple of weeks ago, Chairman FBR invited this scribe while representing ACCA (UK) and LTBA at a historic pre-budget seminar that I organized with the collaboration of ICAP, ICMAP, ACCA, LTBA, PTBA, LCCI, and several other tax bars, to send him proposals about the issues in and reforms for FBR. Below is a brief overview from this perspective.
Currently there are approximately 800,000 active income taxpayers out of a population of roughly 200 million in Pakistan. This is a meager 0.4pc of the total population. On the other hand, every Pakistani is paying indirect taxes on whatever they consume. The lack of trust of the taxpayer on the system and the resulting regressive taxation policies are a big hindrance in the attainment of an optimal taxation system. We’ve often discussed the problems with the taxation policies in Pakistan and proposed practical solutions. Frankly speaking there is only FBR that can do so much in this regard since the policies are often driven by the IMF, World Bank and/or the political interests of the rulers. However, the areas where FBR can and should play a very effective role are not in the best of states either and that is simply unfortunate.
Considering the tiny tax base it was only natural for FBR to attempt to broaden it. However, the way they went about it is unprofessional to say the least while messing up a good endeavour big time. Recently notices claiming no existing tax registration based on “economic activities”, usually citing vehicle purchases were sent out to masses. Sounds positive? Many of those receiving these notices were not only tax payers already registered but paying millions in Income Taxes annually? This exemplifies a total lack of coordination within the systems and functions of FBR, which is unfortunately becoming a norm of late. Missing out on the records already held by FBR simply reinforces the misconceptions amongst the taxpayers that FBR is out to bother already registered tax payers instead of acting as a facilitator and initiating genuine drives to catch tax evaders.  
What’s tragic is that while on one hand such steps are undertaken citing the need to broaden the tax base but on the other hand proposals with huge potential to broaden the tax base such as bringing agricultural income and other exempt sections within the tax net as well as allowing use of CNIC as National Tax Numbers (NTN) and Sales Tax Registration Numbers (STRN) have been falling on deaf years for almost a decade now. Of late, there has been news that CNIC may finally be allowed as NTN. If done, this will be a step in the right direction.
To underline the vast difference in the workings of FBR and similar bodies in developed countries, I’ll share a personal experience with the readers. While working in UK, this scribe needed to change tax code. For ease of understanding you can say it was like claiming a tax refund and I was not even a British national. It took me one phone call to UK’s HMRC (Her Majesty Revenue and Customs) during my office lunch hour to get it done by the end of the lunch. Yes, just in less than an hour. Now compare it to the experience of a genuine taxpayer in Pakistan who is ridiculed and abused for even genuine works. Presumptive and advance taxes are collected but when it is time to issue refunds in line with the law, actual due refunds are held for months and even years despite completion of all legalities and verification. What is worst is that in most cases the FBR officials verbally accept the cases as genuine but claim that due to the pressure to meet revenue collection targets they are unable to follow the law and deliver the tax payer their due right.
The problem manifests from the nepotism and non-professional attitudes of some officers who treat taxpayers with utmost contempt instead of the dignity they deserve. Un-realistic targets setup by higher-ups then further aggravates the matters with coercive, non-coordinated and even illegal measures used by certain sections within FBR. The widespread corruption within the department further worsens the matters.
It’d be reasonable to point out that although PRAL (Pakistan Revenue Automation (Pvt) Ltd) does mess up things at times, many of its positive endeavours were blocked for fears of eradicating corruption using different pretexts by certain sections of FBR. For example, PRAL once finalised a completely automated system of issuing refunds to taxpayers with even an online payment instrument. Naturally there was a huge hue and cry. The project was dumped and the corrupt manual practices continue to date.
Now as if all this was not enough, even the laws governing the whole taxation system are made mockery of within FBR by several officers undermining the good work and efforts undertaken by their more professional colleagues. Just ask any genuine taxpayer or tax practitioner about the treatment meted out to them by most FBR officials and you’d be shocked.
As for now, perhaps the policy makers and senior FBR officials should consider this dire situation seriously to rectify all the serious problems within FBR. If they fail to do so, the next time they complain about low proportion of tax payers in Pakistan as compared to UK or other developed countries, they should realise that they only have themselves to blame.