The finance minister, during a meeting of the chief commissioners held in Islamabad on July 24, 2015, while praising the efforts of Federal Board of Revenue (FBR) for showing "satisfactory" growth in collection, reportedly gave a hint for removing the dead wood. The FBR, despite imposing additional taxes of Rs360 billion, allegedly blocking over Rs220 billion taxpayers’ refunds and taking advances of many billions, failed to meet the third-time revised target for fiscal year 2014-15, showing shortfall of Rs222 billion vis-à-vis original target of Rs2810 billion, which was first reduced to Rs2691 billion and then to Rs2605 billion.

According to the FBR, net collection is Rs2588 billion, whereas independent sources say that State Bank of Pakistan (SBP) has confirmed collection of only Rs2581 billion. According to a senior official of the FBR, this difference of Rs9 billion is on account of book adjustments that SBP had not taken into account. Even if the FBR’s claim is correct, the huge shortfall of Rs222 billion -- budgeted target was Rs2810 billion--has increased fiscal deficit beyond 4.9 per cent of GDP breaching the agreed limit with the International Monetary Fund (IMF). However, as in the past, there will be no difficulty in getting waiver to qualify for the next tranche! The IMF only wants its money back, we are borrowing more to retire old debts -- yet our economic managers are jubilant over what they call ‘wonderful turnaround of economy’!

This is not the first time that the government has hoodwinked the IMF and the public at large by showing inflated tax collection. The FBR has a long history of overstating revenue collections by manipulating the figures, blocking bona fide refunds and taking advance payments from banks and other large taxpayers.

Way back in 1999, tax bureaucrats inflicted shame on the country by gross misreporting of data to the IMF. Subsequently, a commitment was made to the IMF to review fiscal data from financial year 1989-90 onwards. The data compiled for financial years 1994 to 2000 confirmed that tax revenues were inflated by billions of rupees. The tax collectors -- data manipulators is a more appropriate term for them -- showed higher tax collections through fudging of figures and the nation had to pay a heavy cost for it (not only in terms of fine paid to the IMF) but further tarnishing the image of the country in the international community that nothing is transparent here.

The persistent manipulation of revenue collection figures by the FBR is a serious, but neglected matter. Time and again independent analysts and foreign institutions have expressed their indignation over this malpractice, but the successive governments have never ordered any inquiry into the matter. Never ever has the FBR disclosed in its collection statements how much undisputed and established refunds remained unpaid on the closing date of the fiscal year, which must be subtracted from the gross revenue receipts to portray the correct net revenue collection. It only mentions the actual refunds issued, whereas accrued and ascertainable liability of refunds should also be taken into account to reflect the true picture of net revenue realised during a financial year.

It is strange that Ishaq Dar, being a foreign qualified chartered accountant, has been ignoring this established norm of accounting. Thus, the acts of deceit, manipulation, fraud and highhandedness by the FBR testify to the criminal culpability of political masters as well. They want to show higher collection figures to foreign lenders. The FBR on its own cannot indulge in this undesirable act unless backed by the government of the day. And if it is doing this at its own behest, the matter is even more serious -- it proves failure of the government and Public Accounts Committee.

Blocking of income tax and sales tax refunds of various sectors to meet targets is an undeniable reality. The FBR never presents the true state of affairs. This fact has been admitted before the Standing Committees of National Assembly and Senate as well as Public Accounts Committee by many Chairmen of the FBR on various occasions. Unfortunately, no action was ever taken against the data manipulators, which encouraged them to keep on showing what the man on the top calls "brilliant performance." It is worth mentioning that even after acts of highhandedness and failure to meet targets, revised downwards many a times, the FBR stalwarts get awards and rewards in addition to ‘double salary’ package!

It is shocking that all this has been happening right under the noses of IMF and the World Bank. This is a serious situation as such malpractice has distorted the image of the entire tax machinery -- those who genuinely achieved their budget targets have also lost their importance. The collection reporting by the FBR is no longer credible. Time has come that the FBR should be run by an independent Board of Professionals rather than by bureaucrats.

In tax year 2014, only 3,663 persons admitted tax liability exceeding ten million rupees, out of a population of 195 million. Five million rich individuals of Pakistan -- comprising about 2.5 per cent of total population -- alone should be paying income tax of at least Rs2 trillion. The FBR received only 856,229 returns in 2014 whereas this figure was 1,443,414 in 2011!

The FBR’s failure is evident from the fact that less than 600,000 business returns were received, whereas total number of commercial and industrial connections alone is four million, and all of them are subjected to compulsory withholding taxes along with electricity bills.

The main fault lies with the FBR that, during the last many years, has been headed by "political favourites" -- incompetent men lacking leadership qualities and knowledge of running revenue administration. The result is persistent failure to meet assigned targets, what to talk of tapping the real tax potential which is not less than Rs. 8 trillion.

In 2012, the government of India facing the same problem with civil services issued a letter to its Central Board of Direct Taxes (CBDT) by which a detailed scheme for removal of "dead wood" was formulated. The letter pointed out that a few members of the All-India Services had become mere passengers in their post. They became either stale or listless lacking creativity and thus failed to achieve results. The letter said that this situation resulted in the operation of the "Peter Principle" -- every man rises to the level of his incompetence from where he can go no higher. The scheme provided for the identification and compulsory retirement of such employees so that the cost to the exchequer was saved. It is high time that Ishaq Dar should also apply Peter Principle and remove the dead wood from the FBR.

Removal of ‘dead wood" in the FBR and elsewhere in bureaucracy has become inevitable if we have to achieve growth and efficiency. The main reason of low revenue collection is weak fiscal management, corruption, inefficiency and policies of appeasement towards tax evaders. It is thus, imperative to remove ‘dead wood’ and make the FBR an efficient body, headed by competent and professional managers.