3. Growth of officers in hierarchy
For any successful taxation system to be in place on ground the most critical factor is an organised well trained, dedicated, honest and hardworking officers/officials. For all the above to happen, motivation is one big critical factor and works like fuel for the engine. Motivation will only come when officers are convinced of the protection of their rights, posting, growth in the hierarchy, and recognition of performance. The hybrid system which has been discussed at length automatically cares and fits into all the pits.
The system of taxation will not only consolidate the grounds of previous reforms but also cater to its weakness for more revenues. In the centre of this thought there is an inbuilt hierarchy of officers of the inland revenue, which is essential to give force and impart efficiency and effectiveness to the system of taxation which so emerges. The young officers from the training school will join in a salary setup as beginners to start testing skills and knowledge that they learnt in the training school.
The application of their initial knowhow will make them suitable to be moved to the minor commercial and major commercial units, one after the other.
In around five six years of such exposure, the officers will then be fit to be moved to the corporate sector in the corporate RTO and later on to LTUs. This will establish a system of merit as well as a grooming on the job of the officers.
The same round will be repeated when they go to the senior grades like additional commissioner and commissioner. The officer having completed the round from salary to LTU will be a qualified resource for being posted as DTO and to be tested on ground for future leadership.
4. Integrity and performance management
Integrity of the FBR and its officers is measured every day and at every place. It is essential to place systematically organised, methodical and scientific measures for integrity management in place.
The already available mechanism like internal audit and directorate general I&I, both are virtually dysfunctional. The functional overlap of I&I and field formations and audit directorate needs to be carefully studied and removed for clarity of work and efficiency.
Collective responsibility is nobody’s responsibility at all. Any of these setups needs to be geared and mandated with sweeping powers, to take action against any departmental functionary on account of corruption, tax losses etc on the pattern of NAB. The present PER measurement is out dated therefore needs to replaced by third party performance audit through universally accepted parameters.
5. Mending the legal framework
To do the least, we need to immediately enforce the system of value-added taxation in the sales tax to document and tap the wholesalers and retailers.
The general sales tax has not delivered over a period of more than 20 years of its life in practice.
It is the real need of the hour and true test of the government’s resolve if they are serious and sincere in going for a change. There will be resistance from the market consisting of these two very important and crucial components of the value/supply chain, as they have successful experienced in the past on this account.
The reason to argue in favour of value-added tax vs GST is that it is levied at the level of manufacturing and imports as its starting point. It trickles down along the supply chain/value, but at the level of wholesaler/retailer the chain is broken.
The consumer, who actually is the taxpayer, pays the tax but it does not reach the treasury and is stuck in one of these two places.
The government will have to take all the provincial governments and trade bodies into confidence for the change, and collect data of all businesses across the country by compulsory registration.
Unfortunately, there is no shortcut to this mode of taxation, and its successful implementation will document trade, broaden the base, and also enable the government to reduce the rate of taxation to even single digit. After sometime, this job will be well done by the DTOs.
The present tax system is based on the universal self-assessment scheme primarily designed to facilitate the taxpayer, believing him as honest and removing discretionary powers of the tax officers, allegedly corrupt.
Regrettably, this assumption did not prove by the experiment. Immediately after the enforcement of this doctrine, the taxpayer started declaring less and less by each passing year, to the extent that his income as per his statement fell below the taxable level, resultantly being a BLT, he stopped filing a return as he thought it was not required.
The logical conclusion of this exercise was reduction in the number of tax filers, creating a gigantic challenge for the government to tackle this monster.
The writer is a former FBR chairman