Tax me if you can

Aggression is hardly the word used to describe the activity of the revenue generation unit of the government. The Federal Board of Revenue has for the past couple of months pursued a stance indicating its desire to actualize the dream to plug in the loopholes caused by the tax evaders besides a longer term goal of widening the tax net.
Pressure from the IMF and World Bank to increase the tax-to-GDP ratio is the key impetus in this flurry of advertising campaigns. Shaukat Tarin had envisioned the key ratio to be raised to 20 percent of GDP, from its current 9.2 percent, in the next ten years. The scheme in plan to penalize tax evaders is a stepping stone in the fulfillment of realizing the dream of having the desired tax-to-GDP ratio.
FBR has beefed up its enforcement planning, which is a good first step in the right direction. Unfortunately, most of the field work conducted by RTOs is still manual. Computer based databases are still a futuristic idea for tax collectors in the country.Enforcement planners have made use of the databases from outfits such as NADRA, Excise and Taxation department and property transfer offices to track down information on potential suspects. Coordination of this extent among various public offices has not been witnessed before.
Confidential directives from the Ministry of Finance to make token arrests to serve as examples were believed to deter other defaulters from tax evasion. Pressure tactics have resulted in positive results for KESC to curb in its recent campaign against electricity theft.
Fear of public humiliation is hoped to bear the fruit for tax collection purposes as well. Decisions were made at the highest levels that arrests would be made where individuals were ignoring tax collection calls even upon completion of all legal procedures by the FBR.
As a pilot effort, a hundred such individuals whose default amounts exceeded Rs50,000 were identified. A notification was issued to arrest these individuals and directives were passed onto concerned enforcement officials.
The notification was withdrawn exactly a day after it was issued. Ones first hunch to such a retraction is political pressure. However, increased litigation costs and negligible revenue gain were cited as official reasons for the withdrawal. Sources contend that a danger of records being tampered in collusion with the tax officials might have also played a role.
Recent developments suggest renewed activity; this time directed at larger defaulters. In order to make the collection efforts more cost effective, defaulters in excess of Rs1 million; the influential elite are the target this time around.
The revised strategy involves performing all legal procedures before arrests are made. Sealed records are being issued to prevent the menace of tampering. Officials are proceeding with utmost caution trying to leave no stones unturned.
Timelines for the new strategy have not yet been defined. It remains to be seen whether the second round of strategy will prove effective given the high probability of many of the large defaulters having strong political influences.
FBR must stand its ground in the face of intense pressure if it is going to establish itself as the formidable collector, it aims to become. And if the power politics win again and the status-quo remains, this will become a classic case of a battle lost without firing a single bullet.