According to a press report, the International Monetary Fund (IMF) is looking forward to continuing discussions with the Pakistani authorities on the set of policies and reforms that could form the basis for completion of the sixth review under the $6-billion Extended Fund Facility (EFF). This was stated by the IMF resident representative, Ms. Teresa Dabán Sanchez in response to a query by an English daily. She further stated that “we welcome the strong and constructive engagement with the Pakistani authorities and we stand ready to continue supporting Pakistan to achieve the objectives of debt sustainability and strong and sustainable growth, through the implementation of the policies, structural reforms and social spending enhancement envisaged in the EFF-supporting program.” The report claims that “when contacted, officials in the finance ministry expressed ignorance of any date set for discussions on the sixth review and contended that no decision has so far been taken by the government to approach the IMF with the request to club the sixth and seventh review”. An official has reportedly told that the power sector with specific reference to arresting the flow of the rising circular debt and revenue generation remain challenges for Pakistani authorities. Pakistan has so far not submitted the circular debt management plan to the World Bank, the lead agency in this sector, the official added. Sources in the Finance Ministry further revealed the IMF is fully on board with the unexpectedly favourable macroeconomic data for the past year, particularly with reference to 3.94 percent growth rate, almost double what was projected by the Fund and what formed the basis for the policy matrix in the second to fifth review dated April 2021 and therefore a policy revision is on the cards. However, that would have to be negotiated and the Finance Minister Shaukat Tarin is in the process of finalizing what that matrix may realistically contain. The bold initiatives and innovative measures are requires to rethink our growth strategy in totality under the prevalent exceptional circumstances, while remaining in the programme of International Monetary Fund (IMF). The gloomy predictions of rate of growth by all from our State Bank to IMF, World Bank and others can be proved wrong through fundamental structural reforms and taking concrete steps for higher and sustainable growth. In his op-ed of April 25, 2021, Ali Khizer mentioned: “Prime minister Imran Khan has started the second innings of his 5-year term with a new zest. A clear message has been sent to the new economic team in the first meeting of Economic Advisory Council (EAC). Only out of the box solutions are warranted. PM’s message is clear and loud – he has had enough of the stabilization measures, now is the time to focus not only on growth but sustainable growth”. According to a report, the PTI Government for the revival of programme, “finally conceded to slap Rs. 140 billion in taxes” that “was a prior condition by the IMF”. It says: “The government also increased electricity prices by 16% in February and a commitment to further increase tariffs by 36% in six months (April-October 2021)”. The Federal Cabinet on March 16, 2021 “approved the promulgation of an Ordinance aimed at preparing a legal path to increase power tariff by a minimum of Rs5.65 per unit from now till October to collect a whopping Rs884 billion from consumers”. Our rulers since 1960s have developed addiction for intake of foreign loans, especially IMF bailouts—many call these death-blows. With every loan comes a host of conditions—ostensibly meant for economic revival and reforms but every time leaving us in deeper economic quagmire and miseries for the common citizens. Musharraf-Shaukat duo hoodwinked the nation by claiming that they were not borrowing from IMF, whereas in reality loans were taken even for reforming (sic) the tax, banking and justice systems—just to mention a few. Fresh loans were negotiated with renewed enthusiasm by all the successive governments. This undesirable trend continued unabated with repeated vigour during the Decade of Democracy [2008-18] under the regimes of Pakistan Peoples Party [PPP] and Pakistan Muslim League-Nawaz [PML-N] and one was negotiated by the incumbent Finance Minister, Mr. Shaukat Tarin. On November 25, 2008, the International Monetary Fund (IMF) approved the $7.6 billion standby arrangement for Pakistan to be delivered over 23-month, which was later enhanced to %11.3 billion in July 2009. As expected, a number of conditions were imposed by the IMF for this “generous” lending! One of the demands of the lender was introduction of Value Added Tax (VAT) from July 1, 2010. In the past bureaucratic idiosyncrasies destroyed many investment policies. These policies were subjected to inconsistent interpretations and arbitrary changes by the bureaucrats who were running the show as there was no system of checks and balances to monitor their attitude and working. Even today, FBR seldom accepts what is announced by the Board of Investment. The private sector is highly critical of the FBR, which they consider to be corrupt and inefficient, with too much discretion. The business environment will never improve if this situation continues. The FBR and its field formations suffer from attitude problem besides being undoubtedly corrupt and inefficient. The honest ones in the FBR are even the worst. They being sadists are bent upon to destroy everything around. They create such huge demands against the taxpayers that it is no more possible for them to run the business. This attitude can be verified from the various decisions of the Tax Tribunal where their arbitrary tax assessments are quashed, but the taxpayers pay a heavy price for it both in monetary terms and mental torture and agony they suffer. It is strange that the FBR takes no action against them even after their orders are held to be unlawful, excessive, arbitrary and unreasonable. The zeal and enthusiasm of the tax machinery in collecting taxes is motivated mainly by self-interest as they are more interested in meeting their individual targets than those fixed for the State. Therefore, their conduct and working is always viewed with suspicion and distrust by the general public. There are a number of reasons for this reaction. The highhanded and corrupt tax officials have created a general atmosphere of distrust between the taxpayers and the State. The successive governments have failed to utilise the taxpayers’ money in a transparent manner. The ruthless misutilisation of public money by the corrupt rulers has forced the people to openly defy the tax laws. The main reason for decrease in Foreign Direct Investment (FDI) is this prevailing situation in Pakistan. The foreign investors are reluctant to come to a place where tax officials demand their share for not participating in any productive process of the business. Over the last many years, the need for tax reforms is stressed and reiterated by all quarters including the Government itself. However, each attempt in this direction during the last several years proved to be a complete failure—the case of Tax Administration Reforms Programme testifies to it. The main reason for this failure is that search for rationalisation and simplification of our tax laws is misdirected as we are living in an era of complex and intricate economic environment. Neither the official policymakers nor the professionals hired on behalf of IMF/World Bank possess the vision for this gigantic exercise, as they lack the understanding of mundane realities of Pakistan—stress for introduction of VAT is a classical example. The most neglected area is dispensation of justice to taxpayers. Our tax justice system is the worst in the entire world. The tax machinery is becoming ruthless by every passing day and almost every taxpayer has now become a victim of abuse of powers (arbitrary as well as unlimited!) at the hands of tax officials. Those who do not pay taxes in connivance with tax collectors are satisfied and safe. For them not paying to State is better than paying the tax collector for his self-aggrandisement. This is a pathetic state of affairs we are facing these days. The tax collectors want to achieve their unreasonable (sic) targets from them without bringing into tax net those (presumably their “friends”) who do not pay. In these circumstances, the existing taxpayers get arbitrary tax demands and there is no effective justice system to come to their. It is a mockery of justice that in the hierarchy of tax judicial system, first appellate authorities are directly subordinate to the FBR. Everybody knows the problems of these so-called appellate authorities, who are nothing but part and parcel of revenue collection machinery. The judicial system under the tax codes, or for that matter under any statute, should be completely and truly independent of administrative interference or control. It is an essential prerequisite for ensuring proper tax compliance and confidence of taxpayer in the system. The present tax culture is based on “bad faith” between the taxpayers and the tax collectors. Both are victim of self-interest and their main aim is to cheat each other. This culture can only be changed if an effective judicial system is introduced and properly implemented. All appellate authorities should be part of judicial service working under the administrative control of the Honourable High Court. The present working of Tax Tribunal under the Ministry of Law is against the principle of “independence of judiciary”. The Tribunal as well as first appellate forum (commissioner/collector appeals) should work under the High Court of their territorial jurisdiction. The same system is presently in vogue for civil judges/magistrates. It is the need of the hour to free the tax judicial system from the administrative clutches of Ministry of Law and FBR. The business growth cannot be achieved by just announcing policies and concessions. The system must work and there should be realities on the ground to ensure the confidence of investors, who is always shy and shrewd. No system can work unless it has effective check and balance mechanism. An independent tax judicial system alone can guarantee the business expansion and investment introduction as well as the proper collection of revenue in Pakistan. On March 12, 2020, according to Press release of Ministry of Finance, the National Tax Council [NTC] was established and its terms of reference (ToRs) approved. According to a Press report, “The harmonisation of GST is part of the World Bank’s budgetary support loan of US$750 to US$900 million”. It is mentioned in the report that as “suggested by IMF, the centre and provinces have finally agreed to establish NTC “to resolve all tax-related issues, especially for the harmonisation of general sales tax (GST) across the country”. It confirms that our governments do nothing unless lenders/donors force them to do and also give more loans. It was decided that NTC would have technical level representations from the federation and federating units to resolve tax-related issues without amending the constitution. The NTC has an executive committee, comprising federal finance secretary, Chairman of FBR, provincial finance secretaries and heads of the provincial revenue authorities, namely, Punjab Revenue Authority (PRA), Sindh Revenue Board (SRB), Khyber Pakhtunkhwa Revenue Authority (KPRA) and Balochistan Revenue Authority (BRA). The executive committee of NTC is to forward its suggestions/proposals for approval by the NTC. The NTC recommendations will be finalised in terms of majority to be presented before Monitoring Committee of the National Finance Commission (NFC). The path given to NTC is faulty. It confirms that the IMF/World Bank and even our own officers do not have knowledge how to move towards harmonisation of taxes and consolidation of fragmented tax administration. It was explained in Case for All-Pakistan Unified Tax Service: PTI & innovative tax reforms, Business Recorder, August 31, 2018, as under: “Now that the PTI-led government is in power with a singular vision which may better be termed as “New Pakistan”, it is high time to address the administrative issues of tax collection necessary for optimizing revenue collection as per the country’s potential. In this regard, the formation of All Pakistan Unified Tax Service (APUTS) is the first major step towards harmonizing the tax system and integration of taxes in Pakistan. The proposed APUTS will function similar to All Pakistan Unified Group (APUG) services such as Pakistan Administrative Service (PAS) and Police Service of Pakistan (PSP). The proposed APUTS will initially harmonize three main tax agencies: (1) FBR, (2) provincial tax authorities such as SRB & PRA, and (3) provincial Excise and Taxation departments. At a later stage, after the successful formation of APUTS, all other tax agencies such as Pakistan Customs Service and BOR may also be given an option to join APUTS. A similar option may also be extended to Military Lands and Cantonment Group (ML&CG) who are currently the custodians of tax collection in cantonment areas. It may be highlighted that there is no intention or scope of any kind of inter-occupational service groups’ rivalry here; it is a win-win situation for everyone. The officers will be posted anywhere in Pakistan, both at federal and provincial levels, directly from the FBR Headquarters. An officer of the rank of Joint Secretary from Establishment Division may also be posted in FBR who would keep liaison with FBR over administrative issues of posting and transfers of officers. The officers performing better may be given station of their choice while the corrupt and inefficient may be posted outside the province as punishment. The provinces will continue to enjoy the benefits and powers under the 18th Amendment as is the case of working of the PAS and PSP officers. As an immediate measure, the Directorate General of Training and Research Inland Revenue (DOT) in Allama Iqbal Town Lahore can be transformed into National Tax Academy (NTA) on the lines of National Police Academy in Islamabad. At a later stage, a state of the art NTA may be established in Islamabad, for achieving the long run strategic objectives of APUTS, where all federal and provincial taxes such as income tax, sales tax, federal excise, customs, taxes administered by cantonment boards, property tax, agricultural tax, land revenue, capital value tax, registration fees, professional tax, infrastructure cess, registration fee and all other miscellaneous taxes could be taught in a strategically conceived national tax framework. Such a framework can be devised, for example, by expanding Kenny and Winer’s above mentioned research in Pakistan’s context, though it is not the only option. Methodologically, the entire project needs to be treated as a megaproject where the break-fix model approach has the scope to be applied. It is because of multiple legal, administrative and constitutional issues among the federal and provincial governments, states and regions. This model suggests initiating a project, breaking it, identifying the shortcomings, fixing them and continuing. It is also important to highlight some administrative misunderstandings that the PTI-led government may face in forming APUTS. The PAS and provincial services may raise objections on the formation of APUTS because they are predominantly dealing with the provincial E&T, BOR and other revenue collection departments. Similar objections may be raised by the cantonment boards. The provincial revenue authorities formed after the 18th Amendment are also functioning under the respective Chief Secretaries and Chairmen who mainly belong to PAS. However, such misunderstandings may easily be overcome by highlighting the fact that the purpose APUTS is to discipline and harmonize tax collection in the country and it is not targeted at grabbing the powers of provincial governments or cantonment boards. Its working will be just like the working of PAS and PSP where the services of federal officers can be placed at the disposal of provincial governments, other departments and institutions. Furthermore, the officers from provincial services may also be posted in the tax agencies of the provinces. In this regard, the Establishment Division may issue an Office Memorandum (O.M) in terms of Civil Servants (Appointment, Promotion and Transfer) Rules, 1973. A similar O.M. was issued by the Establishment Division when the erstwhile Income Tax Group was successfully transformed into IRS back in 2010. The formation of APUTS will usher in a new era of reformed taxation in Pakistan. It will be a beginning of an end to the British era scattered tax system that was meant to subjugate the masses. It will be a first serious step towards eliminating multiple tax authorities, and integrating taxes thus paving way for one window tax operations in Pakistan. As a strong and accountable service, the APUTS will have the courage to say no to illegal orders and political interference as envisioned by the Premier Imran Khan. Through better data coordination among federal and provincial tax authorities, the APUTS will not only be better equipped with information for broadening the tax base but also a step forward towards integrating taxes through national level long term strategic planning”. In the light of above, the draft roadmap for harmonisation of fragmented taxes and consolidations of national tax agency is as under for public debate and NTC as well as for the national and provincial legislators as well as senators: In NTC, the very first step should be establishing All Pakistan Tax Services (APTS) and once consensus is reached all the tax agencies should be merged through amendment in the Federal Board of Revenue Act, 2007 as amended, renaming it as National Revenue Board [NRB] Act, 2021 after consultation and approval from National Economic Council in terms of Article 156(2). The mode and working of NRB can be discussed and finalised under Council of Common Interest [Article 153 of the Constitution] and its control can be placed under National Economic Council [Article 156 of the Constitution]. All serving CSS officers of FBR, PRA, KPRA and BRA will become part of APTS working under National Revenue Board [NRB] Act, 2021. They will have their seniority and other terms of condition as before. Those joined through provincial public service commissions or recruited or transferred/promoted by some other means will only be made part of APTS as done recently by Pakistan Administrative Service (PAS) through a mechanism absorbing the Provincial Civil Services (PCS) and Provincial Management Service (PMS) Officers into the PAS through a competitive examination taken by the FPSC for which advertisement has already been given in the newspaper. If PAS can do it, Inland Revenue Service (IRS) within FBR should adopt the same mechanism. For collection of harmonised sales tax on goods and services, new law will have to be passed in federal budget 2021, after resolutions by provincial assemblies under Article 144 of the Constitution. In the same manner, right to enact a uniform law for agricultural income tax (AIT) for all provinces and its collection by NRB. In the Income Tax Rules, 2002, one page for declaration of AIT will be added in the income tax return and all the provisions of Income Tax Ordinance, 2001 relating to assuagement, recovery, appeals etc can apply Mutatis mutandis. The collection of AIT will be by NRB but shares will be transferred to provinces directly. As regards, sales tax on goods and services, the transfer of sales tax on services will be directly to provinces to which it belongs and distribution of sales tax on goods will be strictly under NFC Award. Alternately, if and when agreement is reached by all political parties, harmonised sales tax (HST) on goods and services can be given to provinces and agricultural income tax should be with the under Article 142(a) of the Constitution by amending Entry 47 and omitting Entry 49, from Part I of the Fourth Schedule to the Constitution. For each tax payment, there will be distinct number so transfer and distribution, as the case may be, will be transparent. At a later stage, after successful merger of FBR, PRA, SRB, KPRA and BAR, those serving in provincial boards of revenue, provincial departments of excise and taxation and Military Lands and Cantonment Group (ML&CG) can also be made part of National Revenue Board [NRB] Act, 2021 and can join NRB. The principle of CSS and non-CSS cadre will remain the same as explained in Sr. No. 2 above. Fresh batches, if come through CSS exams having posts for All Pakistan Tax Service instead of IRS. The above can be further fine-tuned after input from all stakeholders, experts. However, it is imperative that before establishing NRB as an efficient and integrated tax administration, major information technology and human resource improvements in tax collection methods as well as effective audit techniques should be developed along with development-oriented tax policy. Tax reforms are meaningless without an effective tax administration and rational tax policy that can ultimately provide funds for social services to all citizens at grass root level as envisaged under Article 140A of the Constitution. Without wasting further time all the provincial governments must concentrate on devolution of political, administrative, financial responsibility and authority to the elected representatives of the local governments, after training candidates (preferably fresh graduates) with millions near home getting jobs for secretarial support of local governments, achieving the Prime Minister’s target for employment. Apart from fixing the fragmented tax laws and tax agencies, the federal and provincial governments must earmark revenues for specific purposes placing the same in funds created for debt retirement, training of youth in various vocational disciplines, especially in Information and communications technology (ICT) and Artificial intelligence (AI), innovations, creation of employment zones and provision of social services, such as free education and health, affordable housing, transport, all civic amenities, like clean drinking water, sewerage, waste, roads, designate areas for small/street vendors, modern mosques with qualified teachers to have primary schooling there as between fajar and zuhar prayers space can be utilised without any commuting by children as every community has more than one mosques, street lights, entrainment, sport and community hall facilities etc. This will inspire the people to contribute to the national exchequer. This is the only way that revenues can be generated through voluntary compliance and at the lowest possible cost. Simultaneously, the federal and provincial governments must drastically reduce the wasteful expenses, right-sizing the governmental machinery to bring efficiency and monetize all the perquisites of government servants. The root cause of our many problems is inefficient and corrupt government apparatus and huge spending on luxuries enjoyed by the elites. The elitist control over State apparatus needs to be dismantled through empowerment of masses at grass root level by implementing Article 140A in letter and spirit. Once this is done, the process of true democratization of society and economic prosperity for all will begin. The above may be considered while remain in the programme of IMF and after undertaking fundamental structural reforms, we can even exceed the targets required by the lender of last resort with higher and accelerated growth. The growth path as suggested in PIDE Reform Agenda for Accelerated and Sustained Growth, (April 2021) will induce investment and revenue mobilisation to achieve fiscal consolidation, inclusive development and prosperity for all the citizens. The prerequisites are administrative reforms, drastic cutting of wasteful expenses on monstrous state machinery that is costly as well as inefficient and corrupt—see detail in Reflection on 81st Pakistan Day, Surkhyian, March 23, 2021, Civil governments, ‘Ordinance’ factories, Surkhyian, March 15, 2021 and Welfare laws and role of State, Surkhyian, December 11, 2020. ___________________________________________________________________ Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate, media, IT, intellectual property, arbitration and international tax laws. He established Huzaima & Ikram in 1996 and is presently its chief partner as well as partner in Huzaima Ikram & Ijaz. He studied journalism, English literature and law. He is Chief Editor of Taxation. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE). He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis). The recent publication, co-authored with Abdul Rauf Shakoori and Huzaima Bukhari is Pakistan Tackling FATF: Challenges & Solutions available at: https://www.amazon.com/dp/B08RXH8W46 He is author of Commentary on Avoidance of Double Taxation Agreements signed by Pakistan, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. He regularly writes columns for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.