Matrix Report
Shabbar Zaidi, the FBR Chairman, says the current taxation regime – if not radically reformed – is doomed. During his address at the All Pakistan Chambers Presidents Conclave, organised by the Islamabad Chamber of Commerce and Industry (Jan 21, 2019), Zaidi delivered a stinging warning on inadequacies of the current system and said automation was the only key to fix issues such tax evasion, arbitrary taxation, collection of advance taxes, under-invoicing. The human interaction – taxman and the taxpayer – must be minimised to encourage honest tax appraisal and payment by all and sundry.
# Existing taxation system is primarily extortionist and unworkable
# The voluntary tax system has failed and such system cannot run on sustained basis.
# FBR collects 90 percent taxes indirectly i.e. through withholding taxes and deduction at source. Only up to 10 percent comes through voluntary compliance.
# Total wholesale and retail traders across Pakistan contribute only Rs9 billion
# Shabbar Zaidi said the existing system is heading towards failure instead of bringing any success.
# FBR collects about 45 percent on imports.
# Tax collection in the first half (July-Dec) of the current fiscal year stands at Rs2,085 billion
# In the last financial year (2018-19) out of Rs3,850 billion, the FBR had collected Rs70 to 80 billion as advance taxes
# Under-invoicing, which once stood in the range of $6 billion per annum, continues to hurt the economy
# Four major sectors – manufacturing, agriculture, services and retail trade and wholesale – contribute to the country’s GDP growth and economy. Major burden is borne by the manufacturing sector with 70 percent contribution to the national kitty.
This massive tax burden on one sector resulting into de-industrialisation.
# The FBR cannot be fixed with sacking and transfers of officers. It will have to be automated to minimise human interaction. It is not possible for any human to check 8,000 containers on a daily basis so the solution lies in installation of scanners and automation of procesess.
A big question staring Shabbar Zaidi in the face; will he be able to prevail on the massive status quo and minimise the human contact in the taxation system? Will he be able to simplify the intricate imposition, collection and verification system that discourages honest tax payments and best suits the FBR-Customs bureaucrats to extort money for personal pockets instead of the national kitty?
