EDITORIAL: Auditor General of Pakistan (AGP) report on the performance of the Federal Board of Revenue (FBR) field formations has been extremely disappointing in several counts, including the massive scale of the irregularities estimated at 418.4376 billion rupees – an amount more than the 360 billion rupees budgeted for Benazir Income Support Programme for the current year, and more than the 225 billion rupees earmarked for inter-disco tariff differential.
The audit report observed that 322.662 billion rupees was accounted for under direct taxes and 66.619 billion rupees under indirect taxes.
The AGP report further identified with audit covering no more than between 8 to 10 percent of total operations including: (i) recovering over 2 billion rupees from certain categories of taxpayers who were earlier operating under the FTR sand who were shifted to minimum tax regime that indicates fraud in FTR and MTR – ironically a scheme introduced purportedly to raise revenue not decrease it; and (ii) describes 13 customs concessionary/exemption notifications as ‘high risk statutory regulatory orders’ which require an urgent field audit.
This is in spite of a pledge to the International Monetary Fund (IMF) under the ongoing programme that SROs will not be issued while existing ones will be eased out as they represent elite capture in the country’s tax structure that remains unfair, inequitable and anomalous – elements that administration after administration pledged to international donors as conditions again and again but failed to implement.
These irregularities have been repeatedly identified by AGP in all previous audits but instead of learning from past mistakes and widening the tax base instead of taxing the already taxed FBR focus has remained on revenue generation targets as set by the Ministry of Finance.
While the FBR has defended itself by arguing that it is not empowered to change the tax structure for that remains within the ambit of the cabinet and parliament yet the extent of irregularities within the FBR remain a source of concern to all which sadly do not appear to be its focus.
What began during the previous PML-N tenure (2013-18) and which was pointed out repeatedly by Business Recorder as a dishonest practice was the then government’s decision to impose withholding taxes on various services/items in the sales tax mode, which rendered them as indirect taxes which are regressive in nature and whose incidence on the poor is greater than on the rich, while placing them with direct taxes which are based on the ability to pay principle.
It is therefore appropriated that the AGP report has issued the appropriate policy guideline to the FBR to add the collections that are imposed in the sales tax mode under indirect taxes, which would reveal the extent of regressive versus progressive taxes collected by the FBR – a refinement that would reveal the extent of elite capture in our tax system.
And finally, the AGP has also issued yet another disturbing policy guideline notably to deal with blacklisted companies, including suspension of those who failed to file their sales tax returns for six consecutive months.
The AGP report is perhaps one of the few if not the only report that has sustained its non-partisan approach. It is neither challenged by the government of the day nor the opposition though departments/ministries on occasion challenge it but only if it is taken up by the media.
One can only hope that our parliamentarians take up the report for debate and insist that lessons be learned by those audited instead of their continuing to ignore the audit’s findings year after year and simply not improving their performance which, over time, has led to unsustainably high budget deficits.
Copyright Business Recorder, 2022