Weak writ responsible for country’s woes: Shabbar Zaidi

ISLAMABAD: Former chairman FBR Shabbar Zaidi has said that Pakistan’s taxation system could be fixed within half an hour through three steps including a Track and Trace System, access to banking data and bringing industrial and commercial power connections into the sales tax net. Essentially, he said “the writ of the state is weak” and added that if someone takes a stance, others gang up to remove him.

There is a need for a bottom up review of the existing fiscal framework as the fiscal framework cannot run under the existing ambit of the Constitution which makes the differentiation of goods and services complex. The agriculture income tax should be brought into the domain of the Centre. Collection of taxes of goods and services should also be the right of Centre and then the funds could be transferred to provinces.

Zaidi also said that he decided to quit from the position of chairman FBR due to multiple reasons, including his “internal fear” as sometimes he was made to sign on different files without comprehending the real motives behind those. The former chairman FBR, Shabbar Zaidi, said in an interview with The News on Monday that “I am ashamed for not being able to come up to the expectations of Prime Minister Imran Khan and Army Chief Qamar Javed Bajwa, who extended all-out support to me.”

He said the second reason was the $480 million World Bank loan for the Pakistan Raises Revenues project as he could not justify its correct utilization.

Thirdly, he cited the crude treatment from parliamentarians during the proceedings of the Public Accounts Committee (PAC) where the officers were humiliated without any justification. He cited an example whereby the PAC members treated him harshly over customs refunds of Rs400,000 dating back to 2009 and he had to give a reply in 2019. When he asked an FBR officer how he could bear such an embarrassment, the officer replied one has to learn to live with it. Shabbar Zaidi said he could not tolerate that kind of treatment.

He said then there was a malicious campaign against him. Some documents were stolen from the FBR headquarters and passed on to the media for malafide purposes. He said some adversaries through their frontmen challenged his appointment in the court. He said that he could justify his actions before the court. However, there is a limit to facing the odds, he maintained.

Shabbar Zaidi said that he was planning to pen his autobiography and would be declaring his stay in Islamabad as life in Kufa.

Asked how tax-to-GDP ratio could be increased, Zaidi said that the middlemen and retailers were the biggest mafia in Pakistan who could enforce shutter down strikes to hold the government to ransom. Citing the sugar and wheat flour crises, he said that the sugarcane growers were not the problem but the middlemen and retailers earned huge profits more than the millers.

When asked how the taxation system could be fixed, he said it is imperative to place the Track and Trace System for major sectors, access to banking data and bringing the evasive and large business establishments under the sales tax registration as only 50,000 were registered.

He said he found 300,000 business establishments were using industrial and commercial power connections but were evading payment of sales tax and devised a scheme to use their power connection data for registering them in the sales tax network. But, Zaidi said when he approached the LESCO chief for sharing the data, he counseled me to abandon the campaign as it would achieve nothing. Even to this day, that has not been achieved.

He said that he awarded the Track and Trace system contract on a war footing but it was struck down by the court. Regarding access to banking data, he said that first it was challenged in a court so he pushed them hard to withdraw their writ. But it could not be done effectively. To another query if his quick pace of reform and work led to his early resignation, he said that he brought real valuation of property, introduced CNICs condition on any purchase worth over Rs50,000, then the limit was increased and thirdly withdrew the zero rating regime for five export oriented sectors.

The former FBR chairman said that when he took charge, he along with Federal Minister Hammad Azhar held a meeting with the IMF and made all out efforts to convince them that the revenue target of Rs5.5 trillion for fiscal year 2019-20 could not be materialized and should be slashed to Rs5 trillion. The IMF Mission Chief for Pakistan, Middle East and Central Asia Department, Ernesto Ramirez Rigo, argued that Pakistanis do not want to take the right actions.

He said that the committees for reforms could not achieve the desired results. Registration of retailers is inevitable for any reforms to start with. He said that Islamabad cannot become the financial hub of the country. There are systemic discrepancies too like the stock market is in Karachi but the regulator sits in Islamabad and while the Customs clearance is done in Karachi, the Members Customs has office in Islamabad.

He said that he framed rules to correlate data of the amnesty scheme and the OECD data. The draft rules are lying with the Ministry of Law at the moment, he added. He said he had asked the former Governor SBP for allowing money from abroad as the money coming through Hawala should be treated as foreign exchange remittances. The FBR should be divided into a Customs Board, which should be placed under the Ministry of Interior. The FBR for internal taxes should be placed separately.