Tax purposes – Newspaper – DAWN.COM

AFTER setting a huge revenue target for the Federal Board of Revenue for the next fiscal year, the government appears to be putting pressure on the tax agency to act. The good news is that it could tighten the net around those who have managed to avoid the taxman so far.

A day after another massive FBR shake-up that reportedly led to the transfer of dozens of officers from the Inland Revenue Service and Customs Groups, and with more transfers and postings of senior officers expected over the weekend, the tax authority has been directed to immediately deal with some 4.5 million citizens it has identified who it believes are liable to pay taxes but are not. The prime minister is also reportedly overseeing an accelerated action plan to digitise and reform the FBR, along with a review of existing and required resources. These are all positive signs.

Prime Minister Shehbaz Sharif is said to be serious about cracking down on corruption in the FBR, introducing a merit-based culture and reforming the institution. What is disturbing, however, is that he has roped in two intelligence agencies, according to local media reports, to “help” him in his task of identifying and punishing FBR officials.

Time will tell how effective this strategy will be. The FBR has generally proved to be a tough nut to crack for most previous governments and efforts to reform it have invariably met with resistance once certain thresholds have been crossed. That said, it is clear to one and all that Pakistan’s economic viability depends on the Board’s ability to raise revenue in line with government policies and that there is no room for failure any more. In the face of the ongoing economic crisis, the need for an urgent tax authority has become an existential necessity for Islamabad.

Leaving aside the operational powers of the FBR, the fiscal policy, as outlined in the budget, has prepared it for another formidable challenge. One can expect it to be reminded soon that taxation is as much a political as a fiscal issue. The FBR may start executing tax directives with more urgency than before, but how will the government react when various ‘protected’ classes start agitating against its taxes again?

Not only that, the wage-earning classes, who are usually much easier to control, also seem to be in a bad mood. Discussions on various social media forums these days increasingly turn to the questions of why they should pay such high taxes and whether it is not wiser to operate off the books. This is a dangerous sign for a government struggling with a crisis of legitimacy. How delicately and firmly it deals with the discontent will decide the success or failure of its tax plans.

Published in Dawn, July 8, 2024