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The present team of Federal Board of Revenue (FBR) deserves appreciation for showing noteworthy performance during challenging times faced by the economy due to Covid-19 pandemic, complete and partial lockdowns, sluggish economy, lack of adequate facilities and shortage of trained human resource. In the very first month of 2021, FBR collected Rs. 364 billion, not only exceeding the target (107%) fixed at Rs. 340 billion, but also registering increase of 12.3% over the same month of the preceding year (2020). This by all means is a commendable feat when many so-called experts (sic) were predicting huge shortfalls due to contraction in imports and overall low growth. On the contrary, in the first seven months of the current fiscal year (FY) 2020-21, the overall growth, according to provisional figures released by FBR, was 6.4% over the corresponding period of FY 2019-20 [collection of Rs. Rs. 2550 billion]. It also busted the myth that FBR’s top team lacks leadership capacity to run the organisation effectively.

What makes the FBR’s performance more praiseworthy is not taking advances, yet not due, or blocking of refunds, high sales tax of petroleum products, as was done under former Finance Minister, Ishaq Dar, (now a fugitive) during 2013-2018. All this was documented in the rule of Pakistan Muslim League (Nawaz)—PMLN—in Exorbitant taxes on POL products, The News, January 5, 2014, Dar misses reforms again, Business Recorder, June 13, 2014, The FBR figures, Business Recorder, July 4, 2014, FBR’s Year Book 2013-14: Concealing the truth, Business Recorder, November 7, 2014, Tax, lies and red tape, The News, December 3, 2014, Regressive taxes, Business Recorder, January 2, 2015, Oppressive taxes & unabated outflows, Business Recorder, February 20, 2015, FBR: tax collection performance, Business Recorder, March 6, 2015, FBR reforms—I, Business Recorder, July 31 and August 2, 2015, Misusing taxpayers’ money, Business Recorder, October 23, 2015, FBR’s circular debt, Business Recorder, December 4, 2015, FBR collection: startling facts, Business Recorder, December 18, 2015, Hunting permit to FBR, Business Recorder, January 15, 2016, Maligning taxpayers, Business Recorder, February 19, 2016, Woes of withholding agents, Business Recorder, March 4, 2016, Self-praise, Business Recorder, March 25, 2016, Fiscal gerrymandering, Business Recorder, July 15, 2016, SC landmark judgement: no taxation by executive, Business Recorder, September 16, 2016, The sugar barons, Business Recorder, October 21, 2016, Shaming the shameless, Business Recorder, February 24, 2017, Finance Act 2017: blatant constitutional violation, Business Recorder, June 23, 2017, Oppressive taxes, brutal spending, The News, July 2, 2017, The FBR and revenue losses, The News, February 25, 2018, Finance Act, 2018: flagrant constitutional violations, Business Recorder, May 25, 2018 and Of unpaid refunds and figure fudging, Business Recorder, November 9 & 14, 2018.

The Press release of FBR issued on January 30, 2021 further reveals:

“On the other hand, the gross collections increased from Rs.2464 billion to Rs.2699 billion, showing an increase of nearly 10%. The amount of refunds was Rs.129 billion compared to Rs.69 billion paid last year, showing an increase of 87%. This is reflective of FBR’s resolve to fast-track refunds to prevent liquidity issues of the industry.

“The improved revenue performance is a reflection of growing economic activities in the country despite the challenge of second wave of COVID-19. Going forward, it is expected that this revenue performance would be further strengthened as economic recovery gains more momentum.

“FBR is expending serious efforts to broaden the tax base in the country. Early signs suggest such efforts are bearing fruit. As on 30-1-2021, income tax returns filed numbered 2.52 million compared to 2.31 million last year, showing an increase of 9%. The tax deposited with returns was Rs.48.3 billion compared to only Rs.29.6 billion, showing an increase of 63%.

“Besides, FBR has issued notices to nearly 1.4 million taxpayers, who were supposed to file return, or filed nil return, or mis-declared their assets to comply with their legal obligations. The exercise is eliciting encouraging response. However, those who are not complying would be pursued diligently until compliance is achieved”.

Indeed, the Chairman of FBR, who is also Secretary Revenue Division, and his entire team, particularly the Members (Inland Revenue—Operations) and Member (Customs—Operations) deserve kudos, as well as other members.

It is about time the coalition Government of Pakistan Tehreek-i-Insaf (PTI) provided necessary tools to Customs and IRS wings of FBR and undertook in its remaining term much-needed and long-overdue structural reforms as suggested in the following:

  1. Tax Reforms in Pakistan: Historic & Critical View, published by Pakistan Institute of Development (PIDE) (available free at:

  2. Towards flat, low-rate broad and predictable taxes-revised and expanded edition (2020). It is available free at:

  3. Two recent studies of Pakistan Institute of Development Economics (PIDE), Doing Taxes Better: Simplify, Open & Grow Economy and Growth inclusive tax policy: A reform proposal

  4. Fair Taxation for Poverty Reduction & Equality (Huzaima & Ikram 2015)—available at

For implementing meaningful tax reforms, the PTI Government must concentrate on fundamental structural reforms as discussed in the above books and studies. It was mentioned in Achievements & challenges on fiscal front, Business Recorder, November 13, 2020 as under:

No outsider can run FBR efficiently for lack of firsthand knowledge of difficulties faced by field formation due to lack of facilities and proper training. It is advisable to select a person from within FBR as Chairman/Chairperson and Secretary Revenue Division. The present Chairman FBR and his team have so far performed excellently. FBR’s collection matters for the entire country. If it fails to opitimise collection, the provinces also suffer having larger piece of cake—57.5% share under 7th National Finance Commission (NFC) Award.

According to a report: “The 95% of the total tax collection is not because of the FBR people, said Syed Shabbar Zaidi, former FBR chairman while speaking at the Express News show on economy—The Review, on Saturday. He said that 95% tax collection was automatic and the FBR did not need a large workforce to perform the remaining 5% task”.

It is strange that during his tenure as Chairman FBR, from 10.05.2019 to 06-01-2020, he failed to carry out any meaningful reforms leading to better revenue collection and/or providing ease of doing business for growth. In fact, the tax measures in the Finance Act, 2019, prepared under his command of FBR, was the worst one could ever imagine. A flagrant violation of the Constitution and judgement of the Supreme Court in the Elahi Cotton Mills & others v Federation of Pakistan & others [PLD 1997 Supreme Court 582] was made by combining net income taxation with minimum taxation. The Supreme Court in the said case held that the National Assembly, through a Money Bill can impose taxes on income under Entry 47, Part I, Fourth Schedule to the Constitution or impose the same under Entry 52 on the basis of capacity to earn, but “it cannot adopt both the methods in respect of one particular tax”. The violation was not corrected in Finance Act 2020. This must be corrected by opting either net income taxation or presumptive taxation in the coming budget.

Although, Prime Minister Imran Khan, before coming into power made a pledge to reopen the cases of beneficiaries of asset whitening scheme of Pakistan Muslim League (Nawaz), his government bypassed Parliament and notified asset/income/expenditure whitening scheme—Assets Declaration Ordinance, 2019—through a Presidential Ordinance on May 14, 2019. It was later made part of Finance Act, 2019 that was unconstitutional in view of judgement of Supreme Court in the Workers Welfare Funds m/o Human Resources Development, Islamabad through Secretary and others v East Pakistan Chrome Tannery (Pvt.) Ltd through its GM (Finance), Lahore etc. and others [(2016) 114 TAX 385 (S.C. Pak.)] holding that such laws cannot be made part of Money Bill (as envisaged under Article 73(2) of the Constitution).

This scheme also caused a huge loss of revenue to the national exchequer. About 56 people, named in the Organisation for Economic Co-operation and Development (OECD) database, availed the PTI scheme and declared Rs. 31.8 billion worth of assets paying only Rs. 1.7 billion. The total tax collection in 325 cases against $5.5 billion worth of foreign assets, caught in the OECD web, was only Rs. 5.6 billion or 0.64% of the traced assets. This startling revelation was made on November 7, 2019 before the Standing Committee of National Assembly on Finance & Revenue by then Chairman FBR, Shabbar Zaidi and Muhammad Ashfaq, Director General of Directorate of International Taxes at that time and now Member Operations Internal Revenue Service (IRS). It was conceded by then Chairman FBR that they could have recovered 70% [as per provisions of Income Tax Ordinance 2001 on a concealed asset, there is a maximum income tax of 35% along with 100% penalty, bringing the total tax liability to 70%].

Asad Umar, former Finance Minister of the PTI and then Chairman of the Standing Committee as he was at that time—now the Minister for Planning, Development Reforms and Special Initiatives, said: “This tells why all political parties love to give tax amnesty schemes and also shows the elite capture of Pakistan’s economy and politics”.

During the hearing, members of the Standing Committee of National Assembly were of the view that the beneficiaries of the schemes illegally took funds abroad. However, the then Chairman FBR defended them claiming that “$7.5 billion went out through legal channels under the Foreign Currency Accounts Ordinance of 2001 that at the material time allowed dollar buying from the market and their remittance abroad through bank accounts”. This contention of Shabbar Zaidi was contested by Asad Umar, who said: “No individual can buy assets abroad without obtaining permission of SBP or ECC, as the case may be” and added: “I am not talking about your former clients of AF Ferguson, whom you had facilitated for placement of funds abroad with the help of legal lacunas”.

Asad Umar claimed [191 Pakistani billionaires given tax relief of Rs61.4b, The Express Tribune, November 8, 2019.] that the stance of State Bank of Pakistan on remitting money abroad without seeking permission was different from that of the FBR historically. He was referring to a statement [SBP denies giving go-ahead for $75 million investment, The Express Tribune, November 25, 2015] given by Irfan Ali, Director Banking of the State Bank of Pakistan before the Senate’s Standing Committee on Finance and Revenue, November 24, 2015 that the central Bank neither gave any permission nor initiated a case for approval of the Economic Coordination Committee (ECC) to a billionaire for remitting $75 million for the purchase of Saint James’s Hotel in London.

It is also worth mentioning that in the third quarter of Fiscal Year 2019, due to wrong tax policies of the coalition Government of PTI in Finance Act 2019, according to a report, the construction sector witnessed a sharp contraction of 7.6% in fiscal year (FY) 19 from 8.2% growth during FY18”. This forced the PTI Government to announce yet another amnesty for developers and builders and buyers through another Presidential Ordinance [The Tax Laws (Amendment) Ordinance No. 1 of 2020] promulgated on April 17, 2020 and then made part of Finance Bill 2020, passed by the Parliament in violation of Article 73(2) of the Constitution as elaborated by the Supreme Court in [(2016) 114 TAX 385 (S.C. Pak.)]. It received the assent of President on June 30, 2020 as Act No. XIX or 2020. The scheme was extended by yet another Presidential Ordinance [The Income Tax (Amendment) Ordinance, 2021] issued on January 19, 2021 with retrospective effect (January 1, 2021).

The Finance Division (Economic Adviser’s Wing) in its monthly Economic Update & Outlook January 2021 released on Janaury 26, 2021, notes: “Fiscal performance remained satisfactory. Currently, the fiscal policy actions are primarily concentrated on relief measures to support businesses to stay afloat and to protect vulnerable segments of society. At the same time, the government is focused on containing the fiscal deficit at a manageable level and keeping the primary balance at a sustainable level. According to latest fiscal numbers, healthy growth in non-tax revenues, satisfactory performance of FBR tax collection despite issuance of higher number of refunds and controlling of expenditures other than mark-up payments and COVID related would pave the way to maintain the fiscal deficit within the reasonable limits in coming months”.

The data released by the Ministry of Finance for First Quarter of the current fiscal year (July 2020 to September 2020) also showed that under the extraordinary circumstances of sluggish economy due to Covid-19 pandemic, the main challenge was on expenditure front and not revenue side. The expenditure of Rs. 743 billion on debt servicing (domestic Rs. 685 billion and foreign Rs. 57 billion) was 74 percent of total tax revenues of FBR.

According to a report, “the federal budget deficit shot up to Rs. 1.4 trillion during first half of current fiscal year despite a tight control over expenditures…Gross federal receipts stood at Rs. 3.1 trillion, which increased 3.4% or Rs. 103 billion over the same period of previous year. After paying Rs. 1.3 trillion to the provinces, the net federal revenue amounted to Rs. 1.8 trillion, which was higher by 9%. The net federal revenue fell short of the expenditure incurred on the two largest heads—debt servicing at Rs. 1.5 trillion and defence at Rs. 505 billion. Defence spending has remained less than the previous year”.

The way forward suggested in Economic Update & Outlook January 2021 is: “The restoration and acceleration of Pakistan’s productive capacity is a necessity to ensure a high and sustainable growth in the near and longer term. In the near future, the economic recovery is expected to translate into more productive investment expenditures. The Government is committed to motivating investments in crucial sectors of the economy to enhance productive capacities and to stimulate economic growth”.

The Ministry of Finance, in the coming budget, should seriously consider imposition of harmonised sales tax on goods and services, and all incomes, from whatever source, be taxed at a low-rate and that too on a broad-base with strong enforcement—withdrawal of all unnecessary burdensome withholding provisions. In these difficult circumstances, we need to take concrete measures for ease of doing business, reduce taxes, but collect the same firmly and fairly, and cut wasteful expenses drastically. This will help both the federal and provincial governments to reduce, even eliminate fiscal deficit, increase development outlays and boost growth in the challenging times of Covid-19 endemic.

The inclusive and sustainable growth of at least 6% for a decade in all sectors, especially in agriculture to meet local needs of all commodities and create exportable surplus, and target of value-added diversified exports, especially in much-ignored IT sector, are not possible with excessive taxes and high cost of doing business, especially with exorbitant fuel/energy prices. This paradigm shift suggested in Taxation hindering investment, Business Recorder, August 21, 2020 and in above cited books and studies is still missing in the above quoted narrative of Finance Ministry, whereas it alone can reduce fiscal deficit significantly to free the nation of the debt quagmire and put Pakistan back to road to prosperity.

(The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS))

Copyright Business Recorder, 2021

Dr Ikramul Haq

The writer is a lawyer and author of many books, and Adjunct Faculty at Lahore University of management Sciences (LUMS) as well as member of Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE). He can be reached at [email protected]

Huzaima Bukhari

The writer is a lawyer and author of many books, and Adjunct Faculty at Lahore University of management Sciences (LUMS), member of Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE). She can be reached at [email protected]


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