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EDITORIAL: It seems we can’t go even a few days without receiving some sort of bad news from the tax and revenue front. Now it turns out that the track and trace system, so hyped once upon a time, has been an abject failure in all four major sectors – sugar, cement, fertiliser, tobacco.

Also, this botched experiment has blown yet another multi-million-rupee hole in the state’s finances at a time when the FBR’s inability to do its basic job – collect taxes and identify tax evaders – is at the heart of the country’s fiscal problems.

The main reason, as always, was that nobody did even the most basic sort of due diligence before imposing the one-size-fit-all model across sectors.

And even then they employed decades-old technology, as if somebody at the top was bent upon ensuring failure. This, according to an inquiry committee constituted by the then prime minister, Shehbaz Sharif, made it very easy to produce counterfeit stamps and exploit loopholes; so the old story of tax evaders comfortably continuing with their evasion goes on, and on.

Much of this could have been avoided by doing the simplest research. Among other things, the committee found that nobody considered that dusty environment in cement factories would make the stamps non-adhesive, or that they wouldn’t properly stick on sacks to begin with. Or, for that matter, the use of old and redundant technology would break down every now and then. And now we have an initiative that gobbled millions, from advertising all the way to execution, but has nothing to show for all the trouble and money spent.

It may be recalled that the award of the Track and Trace contract had been challenged in the courts by some of the other bidders.

The outcome of this legal challenge is not in the public domain. It would be worthwhile to see if the use of outdated technology was an issue in the dispute and also why did the project consultant fail to identify the use of outdated technology in the award of the contract.

It’s also troubling that FBR doesn’t seem in the mood to learn any lessons from all this. It hasn’t yet offered an explanation, much less take responsibility. This particular habit, of ignoring all failures and going ahead with business as usual, is the main reason that it keeps making mistakes.

This, once again, brings us back to the old debate about FBR reforms. The way successive administrations get frustrated and promise reforms early in the cycle, and then give up on it entirely, has also become routine.

But this pattern has run its course now. There is no way around raising tax revenue anymore, which means FBR reforms must be pushed to the top of the priority list. Recent chatter from Islamabad suggests that such things are within the jurisdiction of the caretaker setup, which is encouraging.

Perhaps it could, in the few months it has in office, at least sign all the necessary papers to get the ball rolling on long overdue reforms, forcing whoever forms the next government to carry them forward. It would also win us precious brownie points with the IMF, which also cites the government’s failure to implement reforms as one of the main reasons for its harsh “upfront conditions”.

The only thing that is needed is political will. Indeed, reforms will eventually require all the protected and comfortably cocooned big fish to be forced into the tax net as well. That’s where politicians usually let down their taxpaying voters.

And that’s why the reforms process never gets to see the light of day. Everybody understands that things need to change, although the question whether or not the political elite is willing to recognise this glaring fact has no easy answer.

Copyright Business Recorder, 2023


Comments are closed.

Builder Sep 09, 2023 12:53pm
In my personal opinion, the magnitude of indirect taxes is to the extent that people are not willing to pay direct taxes. The only exception is salaried class who have their taxes deducted at source. So, salaried is under immense pressure right now - pay direct taxes as well as indirect taxes plus the burden of inflation!
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KU Sep 09, 2023 01:00pm
During the early days, after the birth of an elephant called FBR, it came across a life-changing moment and at a crossroads. It was faced with a dilemma put forth by Oscar Wilde, ‘’The only way to get rid of a temptation is to yield to it’’, and the elephant readily agreed with Mr. Wilde. So onwards it said, and the department, like many others, set down to harvest benefits of corruption and aid the crimes against the economy of Pakistan, including treason, but no one has ever dared to come in its way (for mutual benefits) to stop its destructive spree.
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Builder Sep 09, 2023 02:45pm
@KU, well said. There are untold stories of corruption in FBR beyond imagination. I always say that potential of revenues in Pakistan is twice rather thrice current and projected figure if this department was fixed.
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Johnny Walker Sep 09, 2023 03:14pm
Stamps. Dusty environment. Track and trace. Whatever. Nothing will work. What will work is to start publicly hanging the top guys of every department of the FBR. Results will be dramatic.
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Retired Sep 09, 2023 04:55pm
Now there is another multimillion dollar loan being acquired from ADB (a USD loan at 6% interest rate), for FBR reform!! The basic issue as identified in the article is the will to implement! FBR staff is incompetent at best, corrupt at worst. No amount of technology can fix this lack of will and integrity! The entire department is corrupt to the core, a culture and legacy built over decades. They only solution is to disband FBR, create a new department from bottom up and keep it outside of the legacy beauraucracy/public service!
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TidBit Sep 09, 2023 11:53pm
@Retired, Exactly....6% is too high an interest rate for a country to pay. This is what is killing Pakistan. Even i get a lower interest rate than a Pakistan.
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kaleem Sep 11, 2023 12:49am
Shabbar Zaidi showed us that FBR big wigs are the biggest hurdle in tax collection.
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So much for track and trace

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