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  • Nov 9th, 2018
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The story of "impressive" performance of Federal Board of Revenue (FBR) during the period 2013-18 needs a through probe. The jadoogar [magician] Ishaq Dar, we all know, is said to be master of figure fudging, for his shenanigans Pakistan was fined by the International Monetary Fund (IMF) way back in 1999. Huge refunds blocked during Dar's tenure have not been paid till today. Now, the crafty tax bureaucrats, hoodwinking the Government of Pakistan Tehreek-i-Insaf (PTI) lacking experience to deal with them, have acquired a new weapon to undo already created/paid refunds by amending the Sales Tax Rules through SRO 1320(I)/2018, issued on November 2, 2018.

The amendments made in Rule 26 and 36 of the Sale Tax Rules, 2006 on November 2, 2018 have empowered the Commissioner of Inland Revenue (CIR) to order manual post-refund scrutiny on the pretext of "suspicious" claims for which "he has reasons to believe" that the same were not allowable. Was it due to fraud on the part of taxpayers alone or connivance of official also involved? The same CIR, who earlier created and/or paid refunds, will now declare some of these as 'suspicious'. If earlier sanction/payment of refund was wrongly made, will the responsibility be fixed for lapse? Will there be punishments for those who failed to detect the fraud/irregularities? The amendments have given fresh bargaining power to officials. This is a sheer travesty of law and mockery of administration. But this is why people are not only critical of FBR but are also afraid of filing income tax returns/statements under the Income tax Ordinance, 2001 and get registered under the Sales Tax Act, 1990. There are numerous withholding provisions leading to overpayment and FBR hardly pays refunds (except where palm is greased).

The painful episode of blocking refunds started in 2013 when Dar assumed the portfolio of Finance Minister. It was narrated in great detail in a report ['Dar accused of delaying tax refunds', The Express Tribune, June 19, 2016], prepared by the chairman of a committee constituted by Federal Tax Ombudsman (FTO) on the complaint of Pakistan Apparel Forum. The report held Ishaq Dar directly responsible for withholding bona fide refunds of exporters and others to show higher collection figures to IMF and impress others of his "extraordinary performance: of achieving over 20% growth in tax revenues. On publication of this report at FTO's website, Ishaq Dar became furious. He ordered FTO to remove it immediately from its website and instructed FBR to dissociate itself from the report, which it endorsed when draft was circulated!! The details of this entire agonizing saga can be read at Blocked tax refunds: FTO comes under pressure, removes repot from website, The Express Tribune, July 5, 2016.

The culture of figure fudging in fiscal matters and cheating in financial affairs has been promoted not only during the three governments of Pakistan Muslim League (Nawaz) but also under Zardari and Musharraf rules. Shaukat Aziz, first as finance minister and then prime minister of Musharraf, admitted this fact as narrated by economist, Dr Pervez Tahir in his op-ed of July 28, 2011, A history of figure fudging, as under:

"Fudging began in late 1999...... when the IMF pointed towards discrepancies in the fiscal accounts. The coup-makers, who had just seized power, were quick to blame it on the ousted government... in particular on ... Ishaq Dar... The newly-imported finance minister, Shaukat Aziz, was too eager to pay the penalty to the IMF and bill himself as the country's maiden Mr Clean".

Shaukat Aziz, as 'Mr Clean", according to Dr Pervez, played havoc with figures to prove his dismal performance as the 'greatest feat' of Pakistan's economic history. Dr Pervez commented that Shaukat Aziz specifically targeted the Federal Bureau of Statistics and manipulated figures of poverty, growth, prices and employment. Instead of appointing full-time secretaries of statistics division, Shaukat Aziz assigned the work to additional secretaries in-charge "who had no shame in acting as director-general of the FBS, a junior position", wrote Dr Pervez.

During the Zardari era, Chairman FBR, in a hurriedly called Press conference during the late hours of June 30, 2011, announced that the revenue target was surpassed "by a comfortable margin of over Rs 2 billion and receipts are still flowing in". Later, he admitted the fact of figure fudging before the National Assembly Standing Committee on Finance, Revenue and Economic Affairs as then Governor State Bank refused to become part of FBR's fraud (of taking cheques from some banks and maneuvering clearance before June 30, 2011).

During the rule of PML-N from 2013-18, many statistical discrepancies were reported in budget documents by experts-these were in fact undesirable acts of window dressing through fudging of figures to show a healthy picture of the economy. The claim by Ishaq Dar that FBR met, rather exceeded, the targets for the fiscal year 2014-15 and 2015-16 were proved wrong. A report [Non-tax revenue: Rs 195 billion included in taxes to claim lofty collection, Business Recorder, July 3, 2016] revealed that Rs 195 billion collection on account of non-tax revenue (Gas Infrastructure Development Cess and Natural Gas Development Surcharge) was shown as "other taxes" to claim "higher tax collection". These were part of non-tax revenue till 2013-14.

In 2014-15, FBR failed to meet the third revised target. The original target of Rs 2810 billion was first reduced to Rs 2691 billion and then to Rs 2605 billion. On shortfall of over Rs 220 billion vis-à-vis original target, FBR stalwarts received kudos from Ishaq Dar, besides bonuses! On November 26, 2015, Ishaq Dar confessed ['Culture of cheat', The News, May 22, 2016] before the National Assembly's Standing Committee on Finance, Revenue, Economic Affairs, Statistics and Privatization that FBR withheld refunds of Rs 200 billion.

For 2016-17, FBR missed even the revised target of Rs 3521 billion by a margin of over Rs 200-original goal was Rs 3621 billion. As in past years, the collection figures of 2016-17 include blocked refunds of billions of rupees and advances taken from many large taxpayers. This aspect, as suggested earlier in these columns, needs a thorough probe by an independent commission. Public Accounts Committee in the past, even after admission of figure fudging by FBR bosses never punished them. Strangely, but expectedly, till today nobody has raised this issue in the National Assembly or Senate. Since elected members favour FBR bosses, they also protect them from probe and audits. The cases of many members of Parliament selected for audit for tax year 2016 have been hushed up as no proper inquiry has been conducted. It is known to all that majority of legislators are declaring meagre income as compared to their standard of living yet FBR is not willing to probe and impose tax. This marriage of convenience, rather unholy alliance, must end if we have to end the culture of cheat and deceit in society and collect taxes from all, wherever due.

For the fiscal year 2017-18, the target assigned to FBR was Rs Rs 4013 billion that was later reduced to Rs 3935 billion. FBR collected Rs 3842 billion. Every year, FBR fails to collect [see Table] downward revised target what to speak of originally assigned figure in the budget estimates. This widens fiscal deficit resulting in more borrowing and taking away large part of budget for debt servicing/payment of principal amount.

FBR has been single handedly destroying Pakistan's growth by anti-business actions, especially during Dar's era. Ishaq Dar, now a proclaimed offender of the Accountability Court and suspended senator, gave free hand to tax officials to block bona fide refunds, take undue advances from large business houses, use negative taxes like raising unjust demands and freeze bank accounts for recovery. Exporters and other taxpayers, still waiting for refunds, have been denied lawful right of payments/compensation within stipulated time. Had Ishaq Dar concentrated on growth above 6%, as done by China, India and even Bangladesh in the region, we could have avoided the present fiscal and economic mess. Tax is a byproduct of growth. Harsh taxation only hampers expansion and prevents investment in existing and new businesses.

(To be continued)

(The writers, lawyers and partners in HUZAIMA, IKRAM & IJAZ, are Adjunct Faculty at Lahore University of Management Sciences)


Copyright Business Recorder, 2018


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