The IMF is not satisfied with the pace of reforms in
the Central Board of Revenue, taxation system and collection of revenue
From SHAMIM AHMED
Jan-07- 13, 2002
Perhaps under pressure of the IMF the government is
planning to invite international experts for preparing a blueprint for
restructuring Pakistan tax machinery on Singaporian or Malaysian model.
Through international tendering worth 40 to 50 million US dollar,
experts companies would be invited to prepare blueprint for a highly
efficient and corruption-free organisation to maximise tax collection in
The IMF is not satisfied with the pace of reforms
being carried out in the Central Board of Revenue, taxation system and
collection of revenue in Pakistan. In its latest report on Pakistan
economy the IMF has emphasized the priority of reforms in this sector in
the overall programme of economic overhaul in the country.
The report has described the existing administration
of all CBR departments as inefficient and the procedures of tax
collection and assessment as archaic. This conclusion seems to have been
drawn by the IMF staff in the light of the continued failure of the CBR
to achieve the targets of tax collection. During the first quarter of
the current financial year, the shortfall in tax collections turned out
to be 9 per cent as compared with the target prescribed by the IMF
mission. The downward revision of tax collection targets has been found
to be a regular feature over the past couple of years indicating that
the performance of the taxation departments has remained far from
The average monthly collection during the past five
months worked out to Rs.26.74 billion showing a slackened pace as
compared to the projected target of Rs. 36 billion. The target for the
full year of 2001-2002 was recently reduced by the government to Rs.435
billion from the original target of Rs.457 billion. The reduced target
would work out to an average monthly collection of Rs.36.25 billion.
Thus the tax collecting machinery is lagging behind by about Rs.10
billion as reflected in the performance for the past five months, which
underscores the need for a handsome growth in the tax receipts for the
remaining seven months of the fiscal 2001- 2002. The task would appear
to be a stupendous one for the CBR to accomplish. The collections of Rs.
23 billion in the month of November in particular have turned out to be
markedly disappointing, which indicate a negative growth to the extent
of Rs.5.6 billion as compared to the figures of Rs.28.6 billion for the
corresponding month of last year.
The much touted plan of the present government for
the restructuring of the CBR ran into snags as the recommendations
framed by the Task Force constituted for this purpose because of the
difference of opinion between the Chairman CBR and the Task Force. At a
high level meeting chaired by the Chief Executive Gen. Pervez Musharraf,
the difference surfaced openly leading to a controversy. The Chairman
Task Force Dr Shahid Hussain had engaged consultants 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 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 proged 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.
Not satisfied with the ongoing efforts the IMF has
suggested to engage professional experts for restructuring of Pakistan
tax machinery on the two suggested model which have proved very
effective to detect tax evasion and highly improving tax collections in
Singapore and Malaysia. IMF has indicated to bear the cost of project.
The Finance Minister recently remarked that in Pakistan the rate of tax
evasion was highest in the world.
Sources in the Finance Ministry disclosed to this
correspondent that the plan is in final stages. The international
tenders are required to outsource the job of preparing a blueprint. The
most conversant with the Pakistan tax machinery are the international
companies like Price Water Cooper House and the Crown Agent. The former
has been active laying down the GST assessment accounts procedures in
Pakistan and the latter is busy finalising export subsidy system.
The blueprint for engineering tax machinery involves
simplification of rules and procedures of Income Tax, Customs, GST and
Central Excise. The work also entails automation of the tax and duty
assessment and payment records.
Besides, the successful company will also be required
to improve the online connection between all the tax offices in Pakistan
and the Central Board of Revenue and offer an online service to the
taxpayers to electronically deposit the tax and avail themselves of all
the services offered by the authorities from time to time.
The government plans restructuring of tax machinery
in order to do away with overstaffing, cumbersome procedures, tax
officials' discretionary powers and improve tax amounts generated by the
economy. Presently, as the tax reformists of the country suggest, the
over staffing, complicate procedures and discretionary powers breed
corruption and tell upon the final amounts received in terms of taxes
and duties. The restructuring programme is intended to be put on rails
from June 2002, and the international companies will be required to
furnish a blueprint for the purpose within the next two months or so.