Daily Times

Prime Minister Imran Khan’s warning that he may abolish the Federal Board of Revenue (FBR) is timely, but not necessarily the answer to the dismal tax collection and massive evasion.

Even otherwise, abolition or suspension is no panacea for structural issues rooted in obsolete tax collection in other governance regimes.  Even if FBR were to be replaced with a new organization, it would not guarantee success unless the laws governing the financial system are changed – a shift from an extractive to a prospective regime based on trust – free of witch hunts by the taxmen.

One must not forget; the entire FBR machinery – comprising of at least 20,000 – is a strong workforce of the Inland Revenue Service and Customs Service, it blatantly colludes with private businesses such as import-export houses, private hospitals, clinics, wedding halls, industry to deprive the national exchequer of revenues and fatten their own accounts. They cheat their own institutions by acting as consultants to exploit existing systemic lacunas. Over- and under-invoicing is their invention, not of businessmen.

What happens to these 20,000 odd employees if the FBR is disbanded? Fired? Wouldn’t it mean adding to the army of unemployed? Or either reemploy or adjust them somewhere else within the government? Wouldn’t it amount to only relocating the vultures to further flesh off the system from inside – regardless where you place them.

This is no answer to deep-seated problems; Pakistan, like many other economies, needs smart, IT-based solutions for encouraging voluntary tax payments, minimizing FBR-client contact, and thus increasing its revenues.

We need softwares – and they are available world over – that canindex all businesses to the national ID cards/Passports. As well as connect all private, and businesses to the FBR database and mandate all unusual, big business transactions through banks. And lastly to integrate them with the FBR and the State Bank of Pakistan.

The Financial Monitoring Unit (FMU) is supposed to be the fulcrum of tracking suspicious or unusual, unexplained big transactions. It can and must be granted autonomy under professional technocrats. Under the current circumstances this entity is largely useful. And the staggering amount of transactions via fake accounts, unearthed in recent months testifies to the incompetence and silence, if not collusion, of the FMU over issues involving mighty, influential political and business personalities.

Placing career bureaucratic baboos – who are mostly more concerned about pleasing their superiors and personal privileges – on top of such institutions is a self-defeating exercise.

the staggering amount of transactions via fake accounts, unearthed in recent months testifies to the incompetence and silence, if not collusion, of the FMU over issues involving mighty, influential political and business personalities

People who are hostage to a certain, though outdated, work-ethic, who are averse to at least correcting drafts on their own computers, people – many of whom even don’t operate their own emails, are alien to the concepts of progressive, open governance.

Very few officials take to writing themselves, though they love to decorate their tables with latest gadgetry including fancy laptops.

As many as 40 reservations, recommendations (segregated in 11 outcomes performance benchmarks) expressed by the Financial Action Task Force (FATF) also provide a worrisome context to the incompetence and ineffectiveness of institutions such as FMU.

The nine-member team of  FATF’s Asia-Pacific Group (APG) visited Pakistan in October and left behind 40 recommendations- to be included in an “Exit Report” to curb terror financing and money laundering in Pakistan, which could help in de-listing Islamabad from its grey list in September 2019.

Lets not forget; FATF demands have been looming over Pakistan since 2012. What were all the big-wigs in the ministry of finance, FBR, the State Bank and FMU doing to address it then?  What did it do to prevent dollar smuggling via our major airports or via the VVIP route? Former SBP governor Ashraf Wathra had pointed this out but then went into silent mode once Ishaq Dar, the then finance minister publicly snubbed him.

It is only a few names who MUST be held accountable for negligence. They not only include a couple of former and serving finance secretaries but also the incumbent governor of the State Bank, who headed the FBR and the Punjab finances before moving to Islamabad. Heads at FMU too bear responsibility for failures in detecting the massive money laundering that has been going on for years.

Sincere, proactive and task-oriented work would probably have saved Pakistan the embarrassment of being put back on the FATF grey list in June.

Secondly, the Joint Investigation Team (JIT) currently pouring over scores of documents with regard to the money laundering via fakebenami (nameless accounts) is likely to come up with dozens of recommendations on how to plug the leaking system.

The JIT findings thus far amply demonstrate at least a dozen serious  deficiencies in the country’s anti-money laundering and  counter-terror financing (AML/CTF) laws and mechanisms.

Thirdly, reforms will not come under DMG officers – most of whom are hostage to an obstructive governance regime. They may be good for regulation watch and institutional memory but usually unfit and too disinclined to embrace new proactive, progressive ideas.

The system needs management and financial professionals from the private sector to spearhead reforms through concepts such as mystery shopping, research-based strategies to identify flaws and propose remedies. Most of current DMG officers who are past the mid-career or those close to superannuation will not deliver.

The writer is Editor, Strategic Affairs, and also heads the independent Centre for Research and Security Studies, Islamabad and author of Pakistan: Pivot of Hizbu Tahrir’s Global Caliphate. Can be reached at Imtiaz@crss.pk

Published in Daily Times, November 17^th 2018.