Punjab govt’s efforts help increase tax collection: IGC

LAHORE: The Punjab government efforts to motivate its tax collectors in collaboration with the International Growth Center showed encouraging growth of 30 to 40 percent in collection of taxes, a study by IGC revealed.
The IGC researchers said the people around the world generally do not pay taxes willingly. It is a prudent tax policy that helps collect levied taxes.
It underlined the need to carry out a research with the assistance of experts to evolve a system that increases the tax-to-GDP ratio from dismal nine percent of the GDP to a reasonable level.
The report also said the tax-to-GDP ratio in developing countries averages 15 percent and in developed economies it is 40 percent of the GDP.
Tax offices in various parts of Punjab were randomly selected to receive three different treatments on the basis of pay for performance. In the first instance, the reward was promised on the basis of increased tax collection in the same way a salesman is rewarded for higher sales. Under this mode, the tax collector pocketed more amounts the more tax he collected.
In the second instance, the reward was granted on the basis of revenue collection plus the measure of quality of service. In this regard, feedback was gathered from the people provided the service.
In the third case, the payment was not solely based on tax collected, but on efficiency of service delivery and customer satisfaction.
This experiment was conducted in 500 tax offices of the province for two years. The results, according to IGC, would not only help Pakistan increase taxes, but could also be replicated in other developing countries.
A senior revenue officer of the Punjab government Ahmad Aziz Tarar said in regions where the pay packages were linked with tax collection, the tax collectors were able to generate incomes ranging from Rs300,000 to Rs400,000, which many times higher their regular salaries.
He said this also resulted in additional tax collection of 30 to 40 percent. The revenue generation was much higher even after accounting for the higher payments made to the tax collectors.
An economist Ijaz Nabi said the experiment carried out on incentives provided to the tax collectors can be repeated in other services.
The taxes do matter, but more important is the way you use the resources generated for development and wellbeing of the people, he said.
Asim Khawaja of ICG said the experiment has shown that performance of bureaucracy could be improved by treating it well. In case of tax collection in Punjab, the same bureaucracy termed corrupt and incompetent has performed well when provided with incentives, he said.
Adnan Khan from IGC said Pakistan is mired in a difficult position, as when people do not get services they do not pay taxes and the state cannot provide services if it lacks resources to provide these services.
The low tax collection in Pakistan was mainly due to low motivation of the tax collectors that are only required to register their presence in the office, he added.
“There is no accountability or reward on performance,” he said, adding, this culture promotes lethargy.
A Punjab government official Shumail Khawaja said there have been complaints of excesses by the employees and pilferages in revenues at various levels.
Even the best tax reforms would not work when this culture is in vogue. The complaints by the taxpayers remained unaddressed and even the most dedicated employees lose the urge to perform.
An excise inspector Arif Raza said the incentive policy of higher pay for performance is the best. It has improved the performance of the tax collectors who have seen their quality of life improving from the additional income generated through honest efforts.
The IGC representative wondered as to why an employee would work when he is paid simply for showing up in the office. He said there has to be a system of accountability and reward.
Benjemin Olken from IGC said property tax collection in the United States is fully automated; however, the tax collectors document new residences and properties so that they could be incorporated in the system.
A low level employee of the Punjab government said collection of property tax from poor localities is very hard, as there is stiff resistance to documenting the premises.
He said the employees should be provided incentives on their performance in such difficult avenues.