There is a consensus that the Federal Board of Revenue (FBR) is not only fraught with corruption but lacks professionalism and competence. The non-filing of returns by a number of politicians and civil-military bureaucrats and inaction of the FBR confirms beyond doubt that this agency is only meant to protect and serve the interests of rich and mighty in Pakistan.

The privileged classes have been getting enormous tax benefits through Statutory Regulatory Orders (SROs) that has created a fiscal mess and bad governance. Unfortunately, the government has decided to continue with it, though legislation through SROs is violative of Article 77 read with Article 162 of the Constitution. Since it affects the share of the provinces, they must take up the matter in the Council of Common Interest in the light of recent judgment of the Supreme Court, reported as Engineer Iqbal Zafar Jhagra and Senator Rukhsana Zuberi v Federation of Pakistan and Others (2013) 108 TAX 1 (S.C. Pak) declaring such legislation unconstitutional.

The worst example of protecting self-interest through SROs surfaced on 26 May 2012 when for officers in Grade 20 to 22, the rate of tax on monetised transport allowance was reduced to just 5 per cent through Notification 569(I)/2012. This benefit for bureaucracy, including the FBR officials, was secured by blatantly bypassing the Parliament. Obviously, Auditor General of Pakistan never raised any objection being a beneficiary! This proved how bureaucrats rob the nation. Private sector employees for the same allowance are taxed at normal rates applicable to taxable salary income!

Finance Minister Ishaq Dar did not rectify the situation so far, not even in the Finance Bill 2014. This tax concession available only to the federal employees of Grade 20-22 should be withdraw immediately. Strangely, the Parliament has yet not taken note of it. In return, the FBR has not prosecuted many members that failed to discharge their tax liabilities -- there seems to be a clear quid pro quo in this unholy alliance.

The perks and benefits to the elites and powerful business houses through SROs is the real issue faced by tax administration. This makes large workforce demotivated and irrelevant. The second issue is that of freehand given to tax evaders under section 111(4) of the Income Tax Ordinance, 2001 to get money whitened without paying any tax through fake remittances. This facility is available even to non-filers! An amendment proposed by the FBR to restrict it to only return filers in the Finance Bill 2014 was overruled by Ishaq Dar. This confirms how serious this government is to increase the number of tax filers and counter money-laundering. Had the FBR been an effective body, it could have compelled all the taxable persons -- not less than 20 million -- to file tax returns and pay due taxes.

Equally incompetent and ineffective are provincial revenue authorities that have miserably failed to collect agricultural income tax imposed since 2000 as well as other taxes and levies. On June 10, 2014, Finance Minister Ishaq Dar criticised provinces for "poor" tax collection from the agriculture sector which constitutes 21 per cent of the country’s gross domestic product (GDP). He revealed before the Senate that Punjab collected only Rs700 million and Sindh Rs300 million. The collection in Punjab alone under an independent and efficient revenue authority could have been around Rs100 billion.

The FBR mercilessly wasted borrowed funds of millions of dollars given by the World Bank and other donors for implementation of a comprehensive five-year-long Tax Administration Reform Project (TARP) that was extended for another year on the request of Pakistan. The FBR, since the inception of TARP, failed on all fronts -- in meeting revenue targets, broadening of tax base, countering corruption and leakages, implementing sales tax, increasing share of direct taxes and improving tax-to-GDP ratio. At the end of TARP, tax-to-GDP ratio nosedived to 8.8 per cent from 9.4 per cent in the year when the programme started! This is the sordid story of tax reforms in Pakistan.

Despite having both money and expertise, the FBR could not introduce an effective automated tax intelligence system to bridge the huge tax gap of over 200 per cent. The World Bank in its report, "Implementation, Completion and Result Report" issued on the completion of TARP, observed: "The current narrow-base of general sales tax (GST) in Pakistan remained almost entirely unchanged throughout 2005-2012, despite efforts to overhaul the indirect taxation structure by introducing a reformed GST featuring few exemptions and wide coverage of goods and services."

Over the years, legislators and tax collectors have jointly turned Pakistan into a tax haven -- a paradise for tax dodgers and plunderers of national wealth. Pakistan is perhaps the only country where 70 per cent legislators were found guilty of not filing tax returns and then shamelessly claimed since tax was deducted at source on emoluments received as holders of public office there was no need for it! Now the same position has emerged for majority of government officials that included about 1020 officers of the FBR.

Our Parliament encourages tax evaders by legitimising untaxed money "remitted" (sic) through normal banking channels -- reference section 111(4) of the Income Tax Ordinance, 2001. One just has to go to a money exchange company, give them local currency and fake remittance is fixed at a nominal commission! This facility, they claim, is necessary for "growth" of economy. Such lethal prescriptions for economic growth have actually destroyed the entire social fabric of the society -- we have no tax culture because of these policies of appeasement having state patronage.

In the prevailing scenario, the only viable solution is to replace the FBR with a National Tax Authority [NTA], responsible for collection of taxes for centre, provinces and local governments. NTA must be run by an independent Board of Directors comprising professionals. The successful models of Canada Revenue Authority and Mauritius Revenge Authority can be followed. The government should discuss this idea and pass the necessary laws. The independence of NTA would certainly be respected by all the governments being a national and independent body and not a useless government department. After meeting its expenses, NTA would distribute taxes to the respective governments to which these relate.

At present, both the centre and provinces are not collecting taxes diligently and same will happen to local governments once elected. Our tax potential at federal level alone is Rs8 trillion. If agricultural income tax and other provincial and local taxes are also collected efficiently, the total figure would be around Rs12 trillion. For harnessing the full tax potential at federal, provincial and local government levels, NTA is the need of the hour. After all the provinces’ share in federal taxes under National Finance Commission is dependent on how efficiently taxes are collected. If the size of cake will be bigger, both the centre and provinces will flourish as sufficient funds will be available to meet the needs to run the governments and fulfill the needs of the people.

Through consensus and democratic process, all the parliaments can enact laws for establishing autonomous National Tax Agency that will facilitate people to deal with a single revenue authority rather than multiple agencies at national, provincial and local levels. The mode and working of NTA can be discussed and finalised under Council of Common Interest [Article 153] and its control can be placed under National Economic Council [Article 156].