It appears that top bureaucracy of Federal Board of Revenue (FBR) has decided to openly confront the Prime Minister over the appointment Shabir Zaidi as new chairman of this organisation. The incumbent chairman Jehanzeb Khan was transferred for his failure to improve the efficiency of field formations of Inland Revenue Service to expand the tax base and achieve the tax collection targets. The revenue shortfall over the past 10 months has reached well over Rs. 350 billion.
The federal cabinet had approved the appointment of new FBR chairman but the Establishment Division did not issue notification till Wednesday. Throwing his weight behind the arrogant, inefficient and sluggish top bureaucrats, who has the responsibility of tax collection, Secretary Establishment Division has moved a summary cautioning the Prime Minister against the appointment new chairman from the private sector citing the possibility of legal and administrative snags. Before the sending of this summary, a feeler was released to the media that certain senior FBR officials are contemplating to challenge the appointment of new chairman in the court of law. Previously the Establishment Division did not dare to send this sort of summary to the chief executive of country when AhadYousaf was appointed as chairman FBR in the government of President Musharraf. He was instrumental in increasing the number of active taxpayers to 2.4 million which dropped to less than 1.2 million in the tenures of previous two governments. A report in a leading English daily newspaper states that 14 BS 22 and 21officials from the Custom and Inland Revenue Service Group met the Advisor to the Prime Minister on Establishment and expressed reservations about the decision of appointing new chairman from the private sector.
ShabirZaidi whose appointment as chairman FBR has been approved by the federal cabinet has the reputation to have contributed in a big way towards the development of taxation and fiscal laws. He has made it known that his first priority would be to bring administrative reforms in the FBR and change the tax regime by taxing the real income of rich people while moving away from the regressive tax regime and restore the trust of the taxpayers to broaden the tax base.
The Inland Revenue Service Department of the FBR is virtually redundant. Bulk of the income tax revenue is collected by the Custom Department, government departments and public utility organizations. Although the Inland Revenue Service has a zero contribution in this regard yet the revenue figures are shown on its credit. Income tax at the import and export stage of goods is collected in advance by the custom officials. It is deducted from the amount of bills of suppliers and contractors by the concerned government departments and from the salaried class it is collected by the AGPR and its provincial offices.
At present tax-to-GDP ratio is less than 15 percent. A recent report of the World Bank suggests that if tax authorities in Pakistan make sustained and honest efforts that tax compliance rate can go up to 75 percent which will increase the tax revenue potential to 26 percent of the GDP. It reveals about the grim state of affairs on part of tax collectors, particularly the one who belong to Inland Revenue Service. An affiliate organisation of the World Bank, International Development Association is willing to provide soft credit of $400 million for the revenue mobalisation project to be implemented by the FBR. But the ground reality is that this cumbersome tax collecting organisation has its own internal challenges. It has more than 21,000 staff with nationwide presence. Two third of the total staff strength belong to Inland Revenue Service and one third to Pakistan Custom. But the latter collects entire amount of duties and taxes. Hopefully the decision about the appointment of new FBR chairman will not be reversed by not succumbing to bureaucratic pressure.
