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Thursday March 28, 2024

Plugging the holes in the public purse

By Mansoor Ahmad
June 04, 2020

LAHORE: The Pakistan Tehreek-e-Insaf (PTI) has fixed an ambitious revenue target of Rs4,900 billion for next fiscal amid declining growth, given the fact that in the previous two years including this one, it failed to match even what was collected by the previous government its last year.

There is no doubt that Pakistan needs much higher revenues than its economic managers aim to achieve every year, but the sad reality is that in a corruption-plagued environment even those targets are widely missed. Next fiscal is a very difficult year as we might be needing abnormally high resources for health sector and food security. Even if we achieve the revenue target the pie from which we have to carve out these additional resources is less than what we collected in 2017-18.

Coronavirus has already overstretched our health system that would need massive investment and huge improvement in health management system. The locust attack has made Pakistan vulnerable to food shortages.

The rate of wheat flour has already registered 20 percent increase in one month. Up till now we have been lucky that even the poorest of the poor have not starved to death and they do have access to lower and inferior quality foods, but in case of shortages this segment would need food from the government stocks.

Theoretically, the tax collection could be doubled if the tax collecting machinery is competent and honest. But achieving even half of the existing tax potential would remain a dream under the current rent-seeking bureaucracy that instead of reforming has deformed in recent years.

The corrupt have no sense of national duty. They look for their share in pie even during national tragedies.

The documented economy reveals that our GDP is worth around $270 billion. However, if we look at the wealth parked openly but illegally only inside the country it is three to four times higher. Achieving a modest revenue target would remain elusive as long as this situation prevails. When a bureaucrat takes a bribe of one rupee from a businessman, he/she deprives the government of Rs50-100 in revenue. A container loaded with smuggled goods or wrongly declared goods may be allowed in Pakistani markets by taking a bribe of Rs100,000 but the duty evaded would be in the range of Rs5-10 million. For a mid-level bureaucrat Rs100,000 is higher than his/her monthly pay. If he/she is posted at the right place, he/she gets the opportunity to earn this amount many times every month. As long as these rent-seeking bureaucrats are spearheading revenue collection any efforts to bring transparency would fail. You cannot ask a thief to guard the treasure.

They have to be routed out of the system through ruthless accountability. It would have been much wiser had the government targeted the revenue collecting machinery in its accountability drive instead of political opponents, media persons or businessmen it hates or the bureaucrats that performed outstandingly during previous regime.

That vindictive accountability has failed to pay dividends. The conviction rate is almost negligible. We cannot move ahead without a very transparent and fair revenue collection system.

Some prudent manager with nerves of steel has to take charge to thwart the bureaucratic hurdles. These tax collectors do not go by the book. They approve tax returns, custom documents, and sales tax returns of those that grease their palms quickly. Now almost 90 percent of the filers go through this route. The honest, which are just 10 percent, are grilled mercilessly.

When any government starts monitoring the tax collectors vigilantly, they start going by the book. The cases pile up as a result of this. The monitors then soften their vigilance to ensure smooth clearance of cases as usual. This time around the government should first collect the statistics of average daily clearance of revenue related cases by each revenue collecting station.

After that it should go for strict monitoring of the way the cases are cleared. If delays occur the tax collectors should be asked to clear as many cases daily as they were clearing on average before the vigilance started. They should be asked not to leave their desk until the required number of cases are cleared every day. The system would become orderly in one week if strictness in transparency is maintained and the erring officials are first warned and then given marching orders if they do not reform.

This time around it is essential that the government keep a vigilant eye on tax collectors on daily basis. If documents, officially required by customs, are complete they be cleared promptly. If there is a dispute it should be resolved in 24 hours. The goods would have to be cleared against bank guarantee if dispute prolongs.

The grieved party should have the option to seek information of similar goods cleared of any other party to ensure they were treated fairly. If unfairness is proved the relevant officers should be immediately sacked to set an example for others to act responsibly.