After renaming the Central Board of Revenue as Pakistan Revenue Service, its newly appointed chairman held a meeting with his senior staff where he is reported to have warned them that they would lose their jobs if tax collection did not improve. While the much talked about restructuring of the revenue collection department is yet to be implemented, these threats and warnings make little sense. After renaming the CBR and placing a private sector man at its helm, the real task is to put in place a new system and build institutions that deliver.
Taxmen have also talked about a legal cover for better collection and this is an aspect which also needs the government's attention. In any tax culture, it is axiomatic that people would like to pay as minimum as possible to the Treasury but recovery depends on how strong the system is and how serious the authorities are to collect tax dues. The unwillingness of the government to collect tax from certain sectors is evident from the fact that though agriculture contributes 25 per cent to GDP, its tax contribution this year is projected at just Rs two billion. Moreover, recovery so far is said to be insignificant - well short of even this modest target.
Then there are certain facts which cannot be ignored. Tariffs were significantly reduced this year. Income tax rate and corporate tax rates were lowered. So were sales tax rates. Tax exemptions were allowed in investment and petroleum policies. Imports have been low in the first seven months of the current financial year with an adverse impact on customs revenue collection. Similarly, low industrial productivity will affect excise duties. In view of all this, the target of tax collection is said to have been revised from Rs 324 billion to Rs 305 billion. It has now become quite obvious that tax collection can only improve after its base has been widened, PRS fully restructured and, above all, the economy has started bouncing back. Where a system is lacking, neither rewards nor reprimands can deliver the desired results.
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