THE TAX PAYERS AND TAX COLLECTORS

The situation calls for reforms in attitude and approach on both sides

By Syed M. Aslam
June 24 - 30, 2002

"We are mindful of the fact that there should be balance of power between the tax payers and tax collectors. This is also necessary for good governance. Tax reforms have been made policies of this government. In December 1999, President General Musharraf called for expanding the tax regime and one of the key ingredient of it was establishment of Federal Tax Ombudsman."

The words were part of the speech delivered by Federal Finance Minister Shaukat Aziz at the seminar "Impact of Federal Tax Ombudsman on Federal Tax Administration" at a Karachi hotel. PAGE attended the seminar which was organized by the Federal Tax Ombudsman Secretariat. The Institution of Federal Tax Ombudsman was established on September 19, 2000 through an Ordinance. The main objective of this institution is to investigate and inquire into allegations against Revenue Division or any tax employee to rectify any injustice to a tax-related grievance individual or corporate.

Hailing the establishment of the Institution to provide an easy, quick and impartial recourse to aggrieved tax payers the minister said that such a dispute mechanism helps eradicate civil litigations which help no one. "In addition, it also help create an environment of effective accountability."

Saying that the process of tax reforms is not just appointment of few people and a name change, the minister stressed that the key to tax reform is to the change the rules of the game, increased interaction between tax payers and tax collectors to avoid contradictions due to less interaction between the two in the past. "IT officials will still visit your offices, look at your records but there will be perimeters.

"For the first time we have a historic easy tax payment process of paying taxes as well as an effective recourse for any injustices. This remarkable and historic change will get going. But you better have facts because Ombudsman's investigation will be basically audit-based. We have prepared one million profiles of tax payers and feel that direct taxes have done better than any other tax. [It is most appropriate to mention here that in Budget 2002-03 the direct tax receipts are projected at Rs 148 billion compared to much higher share of indirect taxes projected at Rs 312.2 billion.] In addition, we have identified 258,000 potential tax payers and will be looking at tax opportunities wherever they are. Despite hiccups and blimps we will keep moving along to ensure that all of us should pay our due taxes as we simplify the tax process to make it further easier.

"Basic record keeping will be required and our goal is to set up a single window tax collecting operation in Karachi from July 1 as the government realizes that most of your problems are irritants and we intend to remove them. Taxes in Pakistan are the lowest in the world, perhaps one of the lowest in the world."

BANKING OMBUDSMAN

The minister also announced that the government will be establishing an institution of Banking shortly on the lines of Tax Ombudsman to serve as dispute mechanism pertaining to tax matters in the banking industry.

THE INSTITUTION

Tracing the 'dark history' of relationship between the taxpayers and tax collectors the Federal Tax Ombudsman, Mr Justice (Retd.) Saleem Akhtar, said that the concept of non-payment of tax has been passed down from generations without realizing that we no longer are under foreign domination. On the other hand, he added, the attitude and performance of the tax administrators have been bureaucratic, arrogant, non-cooperative, highly technical and complex. The situation, thus, calls for reforms in attitude and approach on both sides.

Describing the aims and objectives of his institution 'charged with the duty of independent oversight of tax administration' he said that 'accountability is the corner stone of a transparent administration and good governance. This is the point where Federal Tax Ombudsman steps in. Civilian oversight is no longer a myth but a reality."

Justice (Retd.) Saleem Akhtar said that the institution is developed not to replace the channels or forum of redress already provided, but to supplement and act in complement with the structure of the administration. He informed the participants of the seminar that 'during a period of more than one and a half years I have received cooperation more than opposition and tried to bring about stability, confidence, accountability, trust, systematic reforms in Tax administration and provided relief to aggrieved persons who had suffered due to mal-administration. A balance has been maintained in the rights and duties of the parties. And above all efforts have been made to act as a bridge to eliminate hostility and mistrust."

With the Institution of the Federal Tax Ombudsman already functioning for last year and a half and a creation of a similar institution to oversee related issue in the Banking sector shortly, the volume of costly civil litigations pertaining to tax matters are expected to save millions in legal fees and hundreds of hours which can used more productively elsewhere. As the minister said, "Litigations help no one."