Painfully slow reforms

There is fair consensus that the Federal Board of Revenue (FBR) has been unusually lethargic about the reform measures that were undertaken some time ago. The initiative, then as well as now, was supposed to rid the tax administration of revenue losses by plugging different loopholes. But judging from the pace of the measures it can be safely assumed that the broadening of the tax base has not exactly gone according to plan. One of the reasons perhaps is that the private sector’s representatives on the Tax Implementation Reform Committee (TIRC) were not taken too seriously by the tax authority. The FBR, in fact, was simply not interested in implementing the crucial reform measures as discussed. Some of these measures such as the introduction of a forensic audit for major companies, especially the telecom sector, have been delayed for several months. Little or no urgency has been shown by the FBR even though the TIRC has been pushing for a forensic edit for quite some time. Another reform proposal related to the devising of an electronic tracking system for the tobacco industry — which was supposed to be introduced from the start of the current fiscal year — has needlessly dragged on. Despite the TIRC’s endorsement, the measure for discouraging tax evasion in the tobacco industry has been left hanging fire. If some experts are to be believed, the move has already cost the tobacco industry more than Rs30 billion.

Slowness seems to be the hallmark of the tax administrative body. The effort to establish data connectivity with other departments is another case in point. Of course there are, however, numerous examples. Both the central bank and the Pakistan Banking Association are more than willing to share valuable data with the FBR but since the whims of the tax authority are one too many the possibility of that happening remain remote. Only adhoc measures seem to hold the interest of the FBR in the long run. For as long as that is the case, the pace of reform will continue to suffer. 

Published in The Express Tribune, January 4th, 2018.

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