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This blog is for students, managers and those lay people who are interested to contribute to, comment on or simply share their workplace problems and are keen to learn about issues relating to public finance, corporate finance and macro-economic management affecting their lives.

Saturday, October 30, 2010

See how the burden of tax is shifted from rich on the poor....

Pakistan has always been in the eye of the storm but this time is a lot different; it is in such a grave crisis that its solidarity and integrity are in danger. It has the crisis of confidence abroad, it has the crisis of confidence at home but what is worrying for those who can see in the future is the fact that its rulers are bent upon destroying whatever is left of the institutions. No great effort is needed to achieve that objective. Put a wrong person in the right place and there you are. Pakistan’s public sector corporations were destroyed with putting cronies to head these cash cows and you can see that where is the economy heading. Similarly, if the qualification for running the institution like FBR is the experience of running a district and presiding over land revenue system, then you forget about a vision. And who needs vision when mediocrity is the order of the day?

It was reported in these pages that Pakistan’s tax system can trigger a public revolt and just taxation system can make the country a lot richer without fleecing the poor. Unfortunately the government has not paid any attention to saner voices and the country has almost drowned in the debt which is quite unsustainable. An article by Huzaima Bukhari and Dr Ikramul Haq has appeared in daily Business Recorder  which says that the Federal Board of Revenue symbolizes an institution wrought with sleaze, wastefulness, inefficiency and corruption.

The continuous episodes of fake tax refunds, flying sales tax invoices, excessive payments of export rebates, smuggling of goods, tax evasion and revenue leakages, confirm the existence of an unholy alliance between corrupt tax officials and unscrupulous businessmen that is depriving the nation of billions of rupees and criminally shifting the incidence of taxes on the poor.

It is typical of the FBR to shift the blame on others for its own wrongdoing. The latest attempt in this direction is to target the Supreme Court and the high courts for "delays" in deciding tax cases. The Chairman of the FBR, while briefing the Public Accounts Committee (PAC) of the National Assembly on the Audit Report of the FBR for the year 2008-09, claimed that 617 cases involving tax disputes of over Rs 100 billion were pending in different courts including Rs 37 billion in the Supreme Court of Pakistan, for which the apex court had been requested to constitute special benches for early disposal of cases.

Chairman FBR, however, did not disclose the veracity of demands in these disputed cases. Everybody knows how excessive-rather fictitious-demands are created and taxpayers are forced into unnecessary and long drawn litigation. They are dragged for years in the courts and finally 90 percent of the cases are decided against the FBR. But no action is taken against the negligent officers for their highhandedness and arbitrary orders. A law should be passed to award costs and compensation to taxpayers, where the orders of the tax officials are found to be capricious and arbitrary. Complete article makes and interesting reading and can be accessed at the website of the newspaper by clicking Business Recorder.

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