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April 15, 2015

FBR’s technology initiatives: Solution or confusion? (Part-I)


April 15, 2015

Federal Board of Revenue (FBR) sprang surprises when I went for e-filing of income tax return for 2014, complained a tax consultant to me. The software installed for facilitating the taxpayers, he went on, rather complicated the e-filing system further leaving me clueless how to do.
Filing a tax return is a gigantic task. You need to hire a consultant for paying tax. However, newly-introduced changes made it harder even for a consultant to file tax returns of their clients. The experiences of getting NTN or sales-tax registration are not different either.
It should be worrisome for an organization posing to be progressive through haphazard launch of new information technology initiatives. This was done at the cost of clarity and propriety. That is one of the factors shrinking revenue-base as potential tax payers shy away from complicated system of filing tax returns.
FBR is one of the public sector institutions boasting of doing business by using technology. It claims of undertaking a lot such initiatives over the years. In order to ascertain the veracity of such claims, one has to quantify growth in revenue, simplification of the registration and e-filing of tax returns. There is also a need to evaluate the transparency in the process of refund payments. Equally important is to determine whether the customs, sales tax and direct taxes are linked with each other to thwart any wrong declaration.
Have reforms brought changes in the mindset of FBR’s bureaucracy as it is central for switching over to digitalisation? Government invested more than $100 million under World Bank’s reform projects for FBR that was to be IT driven. It is also appropriate to look into whether such huge money was validly spent. To begin with, IT is 80% business intelligence and 20% in automating business processes. Was this 80% input from domains people captured in FBR soft-wares?
The sales tax wing of FBR has been employing IT way back in late 80’ through rudimentary

technology. This experience worked well as there was impressive growth in sales tax in 90s. In early 2000s, reformer’s era set in under the auspices of World Bank and International Monetary Fund. The then CBR took first initiative in processing Sales Tax refund electronically though STARR soft-ware. During same period FBR introduced electronic application for the registration of sales tax.
The FBR took major initiative in 2007 by making mandatory the electronic filing of sales tax declaration every month. Even international consultants were pleasantly surprised to find out 100% filing of returns electronically. It will be unfair if credit is not given to the then Member Sales Tax Ms Mussarat Jabeen who was very instrumental in enforcing this measure.
In 2009 the sales tax returns filers were required to provide detail of their purchases, imports, exports and local sales. This must have been tedious job for the tax payers to comply with.
Such information, it was thought, will help FBR in collecting tax which is due and issue refund to the tax-payer if payment exceeds his tax liability. Electronic filing was also extended to income tax returns in the corporate sector. In order to comply with these measures, even medium business owners had to hire Chartered Accountants at hefty cost. It’s surprising to note that FBR has been changing the software of sales tax returns every year since 2009.
On income tax side, standalone IT application “Mohasil” was introduced in early 2000s. In this software annual IT declarations used to be fed manually. It remained in field for years together.
The change in management brought the lady officer who was architect of the Mahasil as Member IT and CEO PRAL. In 2014, FBR discontinued capturing of IT returns from its web-portal and launched new software, IRIS. It has been employed to capture IT returns electronically. However most of IT returns received manually are punched into system. (FBR has not released data on returns received through IRIS.)
The IRIS without being cold tested has been rolled out. It apparently doesn’t offer any value addition or architectural improvement over the previous one. No mechanism has been built to verify IT data with corresponding Customs and Sales Tax. Tax payers found it difficult to file income tax returns as system was found frequently down. Quite a few IT consultants wondered what the need to experiment with a new system was.
When these problems were reported to IT management, the loud and standard response was: “No serious complaint has been lodged and it is only idle work force in the tax offices that are making noise”. A befitting comment on the new system was: “There is something wrong with any system if only few can understand.”
Pakistan Revenue Automation Authority (PRAL) handles IT development and operation of the FBR. It has been designing business model and also its automation. Generally the in-put from officers was lacking and there was nobody to take the ownership of such projects. This was noted by World Bank missions in its 2005’s report. Its report three-year later highlighted that the IT should be driven by the domain side. The tax administration must have the ownership IT initiatives. Later in its report for 2009, the Bank noted that when business units (Custom/IR officers) buy-into IT projects prevents a “they-us” mentality from developing. But then it dramatically reversed this instance and stated in its report in 2009 that “FBR should establish a policy that only PRAL can develop IT systems and application”.
The PRAL has done donkey load of developing IT application for accounting, payments, returns, data ware house and named it Integrated Tax Management System. However all these applications are not linked with each other. One wonders why? The PRAL problem was aptly described by the than Chairman Ali Arshad Hakim when he told PRAL management:
“Learn to say no if business side comes up with unworkable demands”. The FBR did hear this big “No” from new IT management which is virtually wrapping up even all good initiatives and the FBR appears to be trapped in new IT syndromes.
To be continued
Author is former Director General (Automation) FBR. Email: [email protected]
Twitter: @Chafqat

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