Fundamental tax reforms – Dr Ikramul Haq

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The Pakistan Tehreek-i-Insaf(PTI) after came into power has failed to fulfil its election promise of rationalisation of the tax system even with $400 million loan from the World Bank, which has been reportedly downgraded “due to slower-than-expected progress”. Voluntary tax compliance cannot be improved unless there is substantial improvement in the efficiency, technical competence, integrity and ability of the tax authorities to relentlessly pursue and punish tax evaders without any political and other interference. The present structure of Federal Board of Revenue (FBR) has failed to achieve these objectives. While there is always talk of “market” wages to officials, nobody has ever emphasised improving the overall working conditions and professional skills of officers and staff. Does it really need enormous money or loan from the World Bank?

The fundamental element of tax reforms is providing a simple and fair tax system that is manned by an efficient and competent administration. Tax administrations, both at federal and provincial levels, lack the requisite level of digitization, professionalism and human skills. Tax reforms do not mean merely altering tax laws or suggesting cosmetic changes here and there. Reforms can be successful only if comprehensive analysis is made of the whole system, that is, tax structure, tax administration, state of economy, taxpayers’ attitude, revenue needs of the country and many other allied aspects like benefits to citizens, as elaborated in ‘Reciprocity of taxes’, Daily Times, April 21, 2019.