By broadening of tax base, improving voluntary tax compliance, lowering tax rates, withdrawing all withholding provision (except on salary, dividend, interest and payment to non-residents) and Pakistan can collect Rs. 14 trillion at federal level and Rs 4 trillion at provincial levels. For achieving this level of collection, Finance Minister Muhammad Ishaq Dar must immediately take fundamental structural reforms to achieve sustainable growth rate of at least 7 percent in the next three years. It is not possible without simplification of tax system [FBR, tax potential & enforcement—I, Business Recorder, March 5, 2021 and FBR, tax potential & enforcement—II, Business Recorder, March 7, 2021].
The idea of restructuring of Federal Board of Revenue (FBR) presented in Need for National Tax Agency, Business Recorder, November 1, 2013 was later elaborated in various articles, Need for National Tax Authority, Business Recorder, October 20, 2017, A case for National Tax Authority—I, Business Recorder, November 30, 2018, A case for ‘National Tax Authority’—II, Business Recorder, December 2, 2018 and Case for All-Pakistan Unified Tax Service: PTI & innovative tax reforms, Business Recorder, August 31, 2018.
The complete draft of national tax agency is available in Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020, PRIME Institute, Islamabad) and in Tax Reforms in Pakistan: Historic & Critical Review (PIDE, Islamabad).
There cannot be two opinions that FBR or any other tax collection agency needs to be run by a competent board as a short-term reform measure before all of these are finally merged into a single national tax authority. The officers of FBR in the past reportedly suggested the name: Pakistan Revenue Board (PRB). This body, whatever may be the name, should not only be responsible for collection of taxes for federal, provincial and local governments but also to administer various social and economic benefits and incentive programmes, otherwise tax compliance will remain a distant dream.
People must get free education, quality healthcare, decent housing/transport plus social security, such as universal pension, disability allowance, old age benefits, income support, child support, just to mention a few, in lieu of paying due taxes as suggested in There’s need for new tax model, Business Recorder, February 26, 2021.
The National Tax Agency (NTA) can be assigned the task of collecting all taxes for the federation (levied in terms of Article 142 of Constitution of Islamic Republic of Pakistan [The Constitution] read with the Fourth Schedule to the Constitution of Pakistan by federal and provincial parliaments). This is necessary for reducing the monstrous size of multiple collecting agencies at federal and provincial levels that are marked with inefficiencies, incompetence and corruption and creating unnecessary compliance cost, rather than operating under one-window. Presently, taxpayers have to deal with multiple tax agencies adding to their cost of doing business.
On March 12, 2020, according to Press release of Ministry of Finance, the National Tax Council [NTC] was established and its terms of reference (ToRs) approved. According to a Press report, “The harmonisation of GST is part of the World Bank’s budgetary support loan of US$750 to US$900 million”. It is mentioned in the report that as “suggested by International Monetary Fund (IMF), the centre and provinces have finally agreed to establish NTC “to resolve all tax-related issues, especially for the harmonisation of general sales tax (GST) across the country”. It confirms that our governments do nothing unless lenders/donors force them to do. It was decided that NTC would have technical level representations from the federation and federating units to resolve tax-related issues without amending the constitution.
The NTC has an executive committee, comprising federal finance secretary, Chairman of FBR, provincial finance secretaries and heads of the provincial revenue authorities, namely, Punjab Revenue Authority (PRA), Sindh Revenue Board (SRB), Khyber Pakhtunkhwa Revenue Authority (KPRA) and Balochistan Revenue Authority (BRA).
The executive committee of NTC, despite repeated requests by these scribes in various articles and books mentioned above, has failed to recommend the establishment of National Revenue of Board (NRB) to Monitoring Committee of the National Finance Commission (NFC). It could have been done by amending the Federal Board of Revenue Act, 2007 and passing of resolutions by all the provincial assemblies under the Constitution. Now it is not possible unless all the provincial assemblies come into existence after general elections, which under the normal circumstances were due not later than October 12, 2023.
The NTC should seriously consider the models of Swedish revenue authority [Skatteverket] and Canadian Revenue Authority (CRA) that not only collect taxes at all tiers of government but also extend benefits like social security, food stamps, universal pension and income support etc. The linkage of database of various bodies with NRB (complete digitisation) can be a great step towards an e-government model for the country that is presently non-existent.
The complete roadmap for achieving this goal is discussed in Time up for fiscal integration—I, Business Recorder, December 21, 2018, Time up for fiscal integration—II, Business Recorder, December 23, 2018, Overcoming fragmented tax system, Business Recorder, October 19, 2018, Doing business under scattered taxation, Business Recorder, September 7, 2018 and Case for All-Pakistan Unified Tax Service: PTI & innovative tax reforms, Business Recorder, August 31, 2018.
In the forthcoming federal budget 2023, expected on June 9, 2023, the policymakers and legislature need to restructure the tax system to tap the real tax potential at national level and at the same time provide quality social services to the citizens, drastically cut wasteful expenditures, get rid of mess in energy sector and stop further bleeding of public funds on loss-bearing state owned enterprises (SOEs). The real dilemma of Pakistan is outdated, colonial-style administrative and judicial structures, elitism, cronyism, greed and corruption on the part of predatory elites.
The exiting bureaucrats are parasites and since rent-seeking is accepted as a norm, even the private sector is neither growth catalyst nor ready for innovations. Ishaq Dar must give top priority to fundamental structural reforms to dismantle elitist and rent-seeking economic system as with this system inclusive growth for prosperity of all citizens is not possible.
Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate, media and cyber laws, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996. He established Huzaima & Ikram in 1996 and is presently its chief partner as well as partner in Huzaima Ikram & Ijaz. He studied journalism, English literature and law. He is Chief Editor of Taxation. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).
He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
He is author of Commentary on Avoidance of Double Taxation Agreements signed by Pakistan, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax.
He regularly writes columns/article/papers for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.
Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).
Over his career he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and have also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study driven scenarios and exams to insure knowledge transfer.
His notable publications are; Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan and Rauf’s Research on Labour Laws and Income Tax and others.
His articles include: Revenue collection: Contemporary targets vs. orthodox approach, It is time to say goodbye to our past, US double standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly grey listed Pakistan, Corruption is no excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge, Countering corrupt practices .
Twitter: Adbul Rauf Shakoori