ISLAMABAD, 13 August — Pakistan’s ailing, and corrupt, taxation system is slowing the economy and thwarting investment.
Who is minding the store at the Central Board of Revenue (CBR) the giant tax collector? Inspite of all its in-house medical doctors, what ails it? The Ministry of Finance and its subordinate organization, CBR are pointing accusatory fingers on each other.
The result: Despite hardships of the genuine taxpayers, the nation’s tax collection is in a mess. Taxpayers had always thought that CBR is the boss. But its officials are now pretending that instead of the proverbial ruthless tax collectors, they are nothing more than innocent babs. All orders, they claim, descend from the Ministry of Finance (MOF). The MoF, in turn, says the CBR hardly does its job besides creating a lot of hullabaloo, be it the survey of tax evaders or imposition of the new, VAT-like sales tax, that brought to the government — bad name. Not much taxes. In fact, corruption in tax department, harsh measures to net new taxpayers, and political uncertainty have already slowed down the economy and domestic and foreign investment.
As the tax muddle goes on, even before the ink of the June 18 Budget Book-2002 was dry, the CBR has gone into a mourning mode. “We cannot collect Rs.457 billion taxes in fiscal 2002. Its an impossible target. No one consulted us,” CBR officials say.
It means the first downward revision of the tax target on the cards will down to be Rs.440 billion but CBR wants it to be Rs.433 billion. There were four last year. Half a dozen till June 2002? In between, Islamabad will have to offer a thousand apologies to the IMF for not meeting the tax target, and face threats of termination of its assistance program.
The tax target in the budget for 2001, the last fiscal, was set at Rs.437 billion.
However, inspite of CBR’s tall claims to bring every single tax-evader into the tax net, and imposing the sales tax on dozens of goods and services, the actual collection crawled only to Rs. 375 billion.
The budget-2002 calls for a 16.2 percent growth. It projects the collection at Rs.457.7 billion — Rs.82.7 billion more than last year — resulting in tax collectors throwing up their hands in despair.
Which numbers are right, and which one are wrong? In this controversy of numbers, the CBR is not alone. The Ministry of Commerce (MoC) is keeping it company. Commerce Minister Abdul Razzak Dawood claimed last month, exports in 2001 reached “a historic level of $9.14 billion. The target itself was earlier revised downward from $10 billion. The $9.14 billion claim is based on “shipment documents” and not the more authentic State Bank export forex receipts. Exporters in Karachi allege that in order to inflate the numbers, the MoC has padded the July 2001 exports into the total for fiscal 2001 that ended in June.
The actual exports in 2001 were only $8.8 billion. Is the numbers infectious disease spreading from CBR to Commerce and rest of the government, business planners and decision-makers ask?
Ironically, the proposed tax target of Rs.457 billion includes Rs.150 billion from income tax. The question: While the 2001 growth rate was officially stated to be 2.5 percent, how can this much be collected from income tax? However, it was not the level of growth, but the 2001 CBR campaign to bring-in new taxpayers into the net that it had claimed will bring in more money. Where is that net? How many people were brought into it? So for the MoF and the CBR have given divergent figures. Does it mean that the campaign largely failed and the CBR has nothing to boast about? People want to know as to how much additional revenues, the government is getting to cover its growing budget deficit? And, the still bigger question is: How far, and when, will the back breaking direct and indirect taxes imposed on the already tax-paying people will be reduced?
The existing range and rate of taxes, specially indirect ones, and horrendous prices of utilities, have left the low-income and the middle class totally emaciated.
