Reviving Pakistan’s economy: Open letter to PM Imran
By: Syed Fawad Ali Shah
In the early twentieth century agricultural economy was at zenith in the Indo Pak sub-continent and the erstwhile Indian Civil Service was created by the colonial powers for the collection of revenue called at that time land revenue.
For that purpose, the Indian Civil service was vested with magisterial powers to rule the colony. However, with the passage of time, the agricultural economy and revenue went into the background and supply of goods and services came to the forefront as a major contributor to the revenue of the country and consequently, its share in GDP increased vis a vis the agricultural revenue.
It is pertinent to mention here that no system of district magistracy was implemented in the United Kingdom itself. It was exclusively designed for a subject nation to rule it with an iron hand. Much water has flown down the bridges and we are an independent nation now. We need to seriously think that still, we need administrative paraphernalia designed for us by a colonial power? This question has been taken up by the successive governments in the country initially in 1973 administrative reforms by Zulfikar Ali Bhutto who created District Management Group instead of the colonial Civil Service of Pakistan (CSP). During the Musharraf regime, the executive magistracy regime was abolished and a sincere effort was made to devolve powers to the local bodies, which rendered the DMG rudderless for quite some time, however, sooner they resorted to grabbing the other governmental functions exercised by other services by hook or by crook.
It is since that day we find the DMG running from pillar to post for the sake of regaining its lost legacy. At times it would be at daggers drawn with the provincial management services who think that after the eighteenth amendment, the federation has no authority to recruit and post officers for the provincial or district setups and compelled the DMG to change its name from District Management Group to Pakistan Administrative Service or at other times would be issuing orders from the Establishment Division closing the doors of the federal secretariat on other occupational groups particularly the Office Management cadre. The group till date has not been able to declare its sanctioned strength as its year wise inducted batches are promoted in bulk even in the high powered boards.
Several provincial and federal services feeling aggrieved with the domination of the DMG at the expense of national interest were compelled to knock the doors of the judiciary. The DMG (now PAS) was influential enough to post its officers as registrars in the superior judiciary who ensured that no case shall be fixed for hearing against their occupational group.
In the election campaign of the Pakistan Tehreek Insaf, the PAS was branded as Patwaris and it vowed to cut it to its size. This slogan was a beacon of hope for all the services of the federal and provincial governments that the PTI government would create an enabling atmosphere for effective public service delivery by choosing the right man for the right job. It was also hoped that the main facilitators in the loot and plunder of national exchequer by the previous regimes will be brought to book.
However, immediately after coming to power, the same old faces were back with all the important assignments. They surrounded the PM and diverted his attention towards other occupational groups to cover their association and involvement in the loot and plunder of the country by the previous regimes of Nawaz and Zardari. The hopes of the occupational groups and the Provincial Civil Service for true reforms were dashed when the Shahzad Arbab and Dr Ishrat Hussain of the erstwhile DMG were tasked by the PTI government for reforms without realizing that the root cause of poor public service delivery is the DMG (PAS) itself. The course of functional specialization has yielded dividends in the world but we in the twenty-first century still believe in tasking a generalist for bringing reforms in specialized services. This act of the present government has not only demoralized the workforce of specialized services but has also affected their performance.
The Federal Board of Revenue the only organization tasked with collection of revenue was singled out as the main demon in the bureaucracy, and all the attention of the present government was diverted towards this organization. This organization has been doing its job as unsung heroes and has been able to bring revenue collection to the level of four trillion plus in spite of numerous challenges like shortage of offices, officers, staff, operational vehicles, outdated I.T solutions and budget constraints. Despite systemic and structural problems in the revenue system, FBR has been able to achieve average growth of 15% per annum in the five years (2013-2018), whereby tax collection doubled from Rs.1900 billion in 2013 to Rs. 3800 billion in 2018, (though still low compared to the tax potential of the country) the tax to GDP ratio also increased from 8.7% to 11.2% during the corresponding period. This growth in tax collection was in an economy marred by low growth, declining exports, war on terror, political instability, the weak political economy of taxation and poor tax culture. Being civil servants FBR implements tax policies and is not the initiator, but somehow all the guns have been turned against them as the shortfall started appearing in the assigned revenue targets this year little realizing that it was the previous outgoing government which slashed the tax rates and increased the tax exemption limit from 400,000 to 1,200,000. The current government was warned that budget so announced was a trap to discredit the coming government with economic failure and the changes need to be reversed if the target assigned has to be achieved. But unfortunately such warnings were not heeded to; rather the following factors further compounded the issue:
The outgoing Chief Justice of Pakistan abolished the sales tax on telecom companies due to which the IRS on a monthly basis faced a shortfall of Rs5 billion. Why the government is not intervening in the matter at the Supreme Court level to get the issue resolved instead of terming IRS corrupt and inefficient?
The government in order to avoid passing on the burden of increased POL prices in the international market reduced Sales Tax on POL sector due which the revenue streams suffered. Was the Sales Tax on POL sector reduced by IRS or through an act of Cabinet/Parliament?
The government has reduced or frozen almost all PSDP and ADP schemes in the current financial year. Revenue collection has a direct proportion of economic activity. Without economic activity dip in revenue collection is inevitable.
Offshore assets data held by Pakistanis was shared with the IRS for retrieval of the tax due on it. This was one of the salient features of the PTI government manifesto. How would that amount be retrieved if the organ in IRS responsible for taking cognizance of this data is not provided adequate human resource, budgetary support, logistics and other paraphernalia? The above mentioned facts justify the shortfall faced by the IRS and despite all odds, the revenue collected by the IRS speaks volume of their professionalism, hard work and dedication to their job. Unfortunately,
these dedicated officers are facing criticism at the hands of a generalist who fear that if the true worth of IRS is realized by the government then their entitlement to the status enjoyed by the PAS since the colonial era would be in danger as the Prime Minister was heard earlier that his service in the
Naya Pakistan would be the Inland Revenue Service.
In view of the above, it is prayed that the strength of the modern economies is determined on the basis of their economy`s health to sustain wars and not on the basis of presentations made to the premier by the generalist baboos whose motive is to serve the interest of their group only and not the people of Pakistan, they are the main hindrance in devolution of power to the grass root .i.e. local governments. The only thing the PAS(DMG) people are interested is to get early promotions and grab lucrative posts, this can easily be judged from the fact that during the short span of 9 months (June 2018-March 2019) they were able to prevail and hold three high powered boards, which is unprecedented. The future of Naya Pakistan lies in strengthening FBR run by a specialist rather and reforms if any required, should be from the IRS itself as they understand the ground realities in which the revenue is collected for the state of Pakistan. Economically viable Pakistan is connected to a resourceful, independent and honoured Inland Revenue Service.
For optimizing tax revenue, the government needs to attend to the following problems/issues on priority: 1. It has to overcome the weak political economy of taxation or lack of will among the political leaders for developing a strong, autonomous and credible tax system. Emphasis should be on improving the poor tax culture & non- compliance with tax laws in the public & society as well as developing role models in the society especially among the elite classes.
- Granting adequate financial & administrative autonomy to FBR, so that it can attend to the current acute shortage of human resources in FBR, and provide necessary infrastructure, logistics & financial resources for taping the full potential of revenue collection. There is no need for further reforms at the FBR level rather there is a need to strengthen its outreach, for taxpayer facilitation as well as expanding the tax base. Needless to say that there should be zero tolerance for corruption, not only in FBR but all the government departments.
- More important than anything else, for increasing tax revenue, the government has to focus more on increasing & generating business activity through financial support, infrastructure improvement, facilitation etc. At the same time, it should try to win the taxpayer trust and confidence by embarking on adequate development & welfare interventions so that there is no justification & excuse for tax evasion. 4. Unless the government attends to these issues on an urgency basis, no new FBR/parallel FBR, sermon or talk of reform or restructuring would do anything meaningful.
The writer is a Senior Pakistani Journalist in Malaysia. firstname.lastname@example.org