Tax reform season?

Flogging the dead horse of tax reform has been the favourite pastime of the high and mighty in our country for well over a decade now, and every successive government indulges in this sport with added zeal. True to this tradition, the newly elected government is finding tax reform seasonable. Indeed, it seems to believe it has more of a right to indulge in the sport because it is buttressed by the Special Investment Facilitation Council (SIFC). To wit, the opening shot has been fired. And going by what we know of a briefing delivered by the dead horse called the Federal Board of Revenue (FBR) to the SIFC headed by Prime Minister Shehbaz Sharif, the said horse is itself keen on being reformed and is trying all in its power to be thoroughly reformed. Curiously, however, the vaunted fruits of the putative reform have always failed to materialize, and it is difficult to see why the exercise will meet a different end this time around.

The side deck of the briefing is a curiosity of rare provenance, obviously put together by a fresh mind with vestigial reason and unfettered imagination. Not only is it rich in omissions of the most blatant kind ever seen in an official document even going by the standards of the land of the pure, it also exhibits unparalleled disregard for common sense. It enlightens us that the federal government gobbles up a hefty 12.9 per cent of the nation’s revenue on an annual basis, leaving only about 6.1 per cent for the provinces and Azad Jammu and Kashmir (AJK) so that the total expenditure totals to some 19 per cent of GDP. It also tells us revenue 'not collected' comes to a healthy 6.9 per cent of our GDP, but stops short of mentioning what part of it was to be collected by the provinces and what part by the federation. But probably most interesting of all is its estimates of revenue leakages. Mind-bogglingly, it points out that the IPP sector is a bigger sink of lost revenue (consuming Rs498 billion every year) than all the smuggling put together at Rs355 billion. Even more cryptically, it puts the POL sector as an even bigger blackhole of lost revenue, gobbling up no less than Rs1.67 trillion every year, even though every litre of POL imported into the country and retailed is documented. It seems nobody dared question putting the POL sector under its own head apart from smuggling, nor did it occur to anybody how such vast amounts of POL could sneak into the country.

The author of the slide deck seems to believe putting up a series of catchwords on the projector is all it takes for the FBR to increase revenue when it has been abolished giving way to two boards, one each watching over Customs and Inland Revenue. The SIFC must understand what a bonanza of privileges and perks the proposed tax reform will be with two boards instead of one to fill and so many more prize postings to hand all around. Beyond that, it is difficult to see how the exercise can yield any benefits unless it is accompanied by actual reform encompassing not only the whole of government but the very polity.