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Restructuring the CBR

It is important to minimise the discretionary powers while improving the efficiency of the revenue collection machinery

From SHAMIM AHMED RIZVI, Islamabad
Jan 01 - 14, 2001

The much touted plan of the present government for the restructuring of the Central Board of Revenue has runs into snags as the Task Force constituted for this purpose has failed to present its final report by the stipulated time i.e. the second week of Dec.2000. The implementation of the plan which was to be effective with the beginning of the year 2001 has now been delayed for a period of 3 months.

According to an insider, the recommendations could not be finalized by the Task Force because of the differences of opinion between Chairman Task Force and the Chairman CBR on many aspects of restructuring plan. There are rumours that the present Chairman CBR Mr. Riaz Hussain Naqvi, may be removed from his position to evolve a consensus.

The Chief Executive Gen. Pervez Musharraf was briefed in the pre-scheduled meeting in the 3rd week of December, by Chairman Task Force for restructuring (TFR), Shahid Hussain, and other members of the TFR. Also present at the briefing were Chairman CBR, Riaz Hussain Naqvi and other top tax officials. The CE was informed that though the restructuring of CBR was to be based on a report, which was to be finalized by December 31, 2000, the work so far done by the TFR in this respect, has run into snags.

The TFR has engaged consultants about eight months ago, who launched a study into tax procedures and operations for listing the distortions and corrupt practices in implementation of the tax policy. These consultants presented a report, which was examined by the finance minister last week, before it was to be presented to the CE. The finance minister and the CBR officials had found that the report was based on certain studies, which had drawn wrong conclusions and a restructuring based on these conclusions would be counterproductive.

The briefing given to the CE was based on a formula for removing corruption in the tax machinery. A presentation in this regard was made by Dr. Ahsanul Haq. His formula was based on two pronged strategy to remove corruption from CBR. This included procedural re-engineering of the tax policy and methodology and reduction in tax collection staff. Ironically the formula lacked any proposals on Customs, Sales Tax and Central Excise. It only touched upon the tax operations of Income Tax Department.

The Chairman TFR, however, argued that the refund payment system of the Sales Tax Department was faulty and the amendments made through SRO 417 were proving inconsistent with the government's policy of export promotion. He said exporters were not accepting the harsh conditions of the SRO and were not filling their refund claims in protest to the procedure envisaged therein. The refund procedures needed a review at the earliest. He also recommended introduction of new export invoice data gathering system created by the Pakistan Revenue Automation Limited which was based on a programme to link all the Customs Collectorate through networks for detecting the under and mis-statement of export goods for refund claims.

Officials said that the new report on CBR restructuring would now be presented to the CE on March 1 and after the CE's approval the work on ground would be carried out in this direction. While appreciating the efforts of the task force the Chief Executive reiterated his resolve to make CBR a corruption free and business friendly organization. He stressed the need of focusing on the operational side of the organization. He opined that a corruption free tax machinery with a friendly approach towards the tax payer would be able to motivate the tax payers to contribute their due share for the development of the country. He also said that it was imperative to streamline the working of the CBR, which is a vital organization of the government. He said that it was important to minimise the discretionary powers while improving the efficiency of the revenue collection machinery. The CE directed the chairman of the task force and the CBR Chairman, to coordinate the preparation of a comprehensive restructuring plan at the earliest.

It will be noted that in so directing them the CE seems to voice the feelings of the taxpayers in general, and of the business community in particular. For, in so far as the present government's multi-directional strategy for retrieving the country's economy from the rock bottom it had touched, attention has remained focused on optimum increase in the collection of taxes. And since the pivotal role in such exercises has belonged to the CBR, much of the obstructions faced in the renewed efforts in that direction have been attributed to the manner in which the agency has been implementing these decisions.

An idea of the problems faced in this regard may be had from the general complaints about the mishandling of the vital issues, including the matters related to concessions and incentives to the business community, in general, and the manufacturers and exporters, in particular. This has reference to too many SROs issued too frequently by the CBR, often jeopardizing the whole effort centred on timely mobilisation of revenue resources from the business community. Viewed in the perspective of the poor reputation of the revenue collection departments, including income tax, excise and customs, the situation will appear to have remained dotted by the long associated irritants of red-tape and corruption. There can be no denying the fact that the taxation reforms so far introduced by the present government have been largely inspired by ideas of inculcation of enlightened self-interest among the taxpayers. However, the situation on the ground, as perceived for time to time by different sections of trade and industry, has remained messy for lack of needed change in the way of working of the concerned departments. The protracted delays in the refund of taxes and duties to the exporters, for instance. There can be no denying the adverse influence of such delays on the performance of different sets of exporters and others, leading ultimately to the slowdown of the process of tax recoveries.

It will be noted that the new government's ongoing exercises for improving the government business relations from reforms and restructuring stand generally hampered by the unreformed working at the CBR and the departments functioning under it. As already well-known, the taxation system that has remained in vogue for over half a century in this country has been largely responsible for massive avoidance of taxes, to the increasing benefits of those wielding indiscriminate power and authority in the tax-collecting organisation and the unscrupulous traders and other taxpayers. It is this unholy alliance that has been responsible for the menacing growth of the parallel economy which has overshadowed the regular economy. It will thus be seen that the emphasis laid by the Chief Executive on ensuring efficiency and honest functioning of the CBR has relevance to the effectiveness of the revolutionary changes being introduced for the economic revival of the country in all its dimensions. Now that the lead role in this task has been assigned to the private enterprise, it will be really in the fitness of things to transform the CBR into a vital corruption-free and business-friendly organisation.