February 3, 2003	Monday	Zilhaj 1,1423

“Collection of tax where it is not due is as detestable as its non-payment when it is due,” Nasim Sikander, J.

The Income Tax Department has been, invariably treating the withholding agents as “defaulters” and imposing huge tax obligations on them. In a civilized society the government is always grateful to those citizens who not only pay their own taxes but also act as the withholding agent on the state’s behalf and collect taxes for the well-being of their fellow countrymen.

The state not only recognizes their services but also authorizes them to hold back a certain percentage of collection as their charges to compensate expenses incurred by them in the performance of the official function.

In Pakistan the converse is happening. These withholding agents are the most insulted and the humiliated. They are considered “servants” of the state, no financial compensation is given to them for man-hours and other expenses they spend to collect taxes on behalf of the CBR and on top of that they are subjected to penal actions.

This shows the real face of our tax machinery that collects hardly 10 per cent of the total revenue with its own efforts and for the rest not only uses the citizens of Pakistan as the withholding agent, but also humiliates them. One does not need any other indicator to gauge the attitude that prevails in the CBR.

On the one hand, the services of the citizens are being utilized to collect the taxes on state’s behalf without any reward,on the other they are subjected to prosecutions and penalties.Taxes are a price one pays to live in a civilized society, and not in a place where even the basic protection of life and property is non-existent.

Common citizens are even assigned a job for which the government maintains a huge force of tax officials receiving salaries and perquisites. It is a sad reflection on our fiscal management. The most disturbing aspect of the entire episode is that the CBR is now mainly relying on withholding taxes, and its performance in terms of its own efforts is decreasing every day.

In the financial year 2000-2001, the total income tax collection through withholding agents was Rs103 billion, whereas the total revenue collected was Rs117 billion.

The break-up,according to the CBR Year Book 2000-01 (Page34),is: tax on demand collected by officers 12.6 per cent, tax paid voluntarily by taxpayers without any effort of the CBR 26.8 per cent, and the collection made through withholding agents 60.6 per cent.

These figures speak for themselves and hardly need any comments.

It is an established fact that despite resorting to all kinds of highhandedness, data manipulation, harsh tax policies and unjust withholding taxes, the CBR has failed miserably to improve the tax-GDP ratio. It remains in the range of 10 to 12 per cent of the GDP for the last 10 years. The burden of ever-increasing presumptive taxes (which are nothing but a form of indirect taxes), levied under the income tax regime, has been shifted from the income earners to the consumers and clients.

These presumptive taxes have distorted the whole tax system, destroyed the economic growth, and made the consumer/client the ultimate sufferers. Moreover, these despotic measures have failed to bridge the fiscal deficit.

The presumptive taxes were imposed in the federal budget of 1991, when the fiscal deficit was just Rs80 billion. In FY 2000-2001, our fiscal deficit soared to Rs212.2 billion, proving beyond any doubt that irrational taxes did not solve our fiscal management.

The irrational tax measures have always played a decisive role in destroying the civic society and paving way for anarchy and chaos. This is exactly what the tax administrators have been perpetually doing in Pakistan.

Mr Justice Nasim Sikander, a judge of the Lahore High Court, in a case reported as the PTCL 2000 CL. 696, made the following radiant remarks:

“The collection of revenue even as an agent casts a number of duties upon the person required to do so. He is to maintain correct and faithful accounts of all the sums received and then to see their safe credit to the national coffer.

He may need the additional staff for this purpose and may even be liable if any of his staff members fumbles in accounts deliberately or misappropriate even the smallest amount of public money collected. An agent appointed by the law or deemed under a similar statute is also liable to a number of penalties if he fails or falters on any account.

This phenomenon in fact is a recent development in tax regimes that persons who are otherwise neither employed by the state nor they represent it in any manner are designated to collect the revenue of the state without any ostensible reward.

This is a duty cast upon them with no benefit and is coupled with a constant fear of prosecution, penalties and punishments. It is one of the several other prices that one has to pay to live in a society”.

These observations by the learned Judge have not attracted the attention of our governments and even today they are utilizing the services of the citizens of Pakistan to collect tax on their behalf without any reward.