Daily Times

The government has been criticizing the performance of its revenue collection agency for its failure to meet the assigned revenue targets. However, no voice has been heard, to date, about the why and how of the problem. The following paragraphs discuss the why part.

Advances from taxpayers:

This aspect of the taxation is covered under Section 147 of the Income Tax Ordinance, 2001. The tax collector is required by the law to collect advance tax for the quarter from the taxpayers. Given the low tax base and the high expectations from the government, this provision is misused by the tax collectors who beg the taxpayers for advances for future tax years. This is done in Income Tax, Sales tax and Federal Excise Duty.

Why does the prime minister not ask the PRAL to get hold of the list of such advances and fix the delinquent collectors?

Advances from banks:

This aspect is covered under Section 147 of the Income Tax Ordinance, 2001. Some collectors dealing with banking cases request the banks for advances in the month of June, to be refunded in the month of July along with payment of default surcharge.

Would the prime minister bother to ask the PRAL to provide lists of cases where payment for delayed refunds was made under Section 171 of the Income Tax Ordinance, 2001, to identify the collectors who hide their incompetence at the cost of the state?

The interest rate under Section 171 is higher than the regular bank rate.

Withholding of refunds:

An efficient and transparent refund system builds the confidence of the taxpayers in the revenue collection agency. Under this scheme, the tax collectors delay the deemed or determined refunds of the taxpayers to meet the assigned revenue targets. This not only shatters the confidence of the taxpayers but also entitles them to interest on delayed refunds under Section 171 of the Income Tax Ordinance, 2001. Would the prime minister bother to ask the PRAL for a list of such cases?

Advances from withholding agents:

To hide their inefficiency, collectors have started withholding agents like AG’s Office, the AGPR and other authorities (not taxpayers) for advance withholding taxes.

An efficient and transparent refund system builds the taxpayer’s confidence in the revenue collection agency

Concessions in exemptions:

Due to increased pressure from the government, the tax collectors are inclined towards advances and hence are compelled to take a lenient view at the time of processing and issuing exemption certificates to the taxpayers, resulting in a loss of revenue.

Agreed assessments:

An audit is the deterrent function of the taxation policy under the self-assessment scheme where a person selected for audit is confronted in case of a genuine discrepancy. Unfortunately, the tax collectors, due to the advance culture, cannot use this tool effectively. Resultantly, the quality of audits is compromised and the writ of the tax machinery is weakened.

Private practice by tax authorities:

Revenue collection is a primary function of the state. It needs to be performed religiously with utmost efficiency and effectiveness.

Unfortunately, many officers and officials in the tax machinery are on the payroll of the taxpayers for filing of their tax returns and processing their refunds and exemptions. Some are paid for keeping potential taxpayers outside the tax base.

Others use favours they grant to get their kin recruited in the organisations. Has the prime minister bothered to ask the intelligence agencies to identify such traitors and hand over their names and the evidence to the National Accountability Bureau for stern action?

These points are about the why part of the problem. For the how part, the prime minister is requested to consult an ordinary Pakistani citizen.

The writer is a former adviser to multinational companies