The primary function of any tax levy is to raise resources in an efficient and equitable manner. It is well recognised in modern times that taxation policies of a country do not aim merely at enhancing revenue collection
, but serve to achieve the broader socio-economic objectives of the nation.
In Pakistan, there is a general realisation that the tax administration has yet not fulfilled the need for a changed role even after entering into the 21st century. Success of tax legislation depends not only on how it has been formulated but more importantly on how it is administered.
The administration of taxes in Pakistan leaves much to be desired. Numerous problems exist like tax evasion, arrears of assessment and collection, pendency of appeals, delay in issuance of refunds and above all, strain on public relations. There is therefore, an urgent need to reform the entire tax apparatus. Proper rationalization in administrative processes needs to be undertaken.
The tax system can be said to be functioning properly only if it settles assessments promptly i.e. within the tax year, collects the determined taxes in time without causing undue hardship to the taxpayers, provides for an independent and efficient appellate machinery to look into the grievances of taxpayers and quickly disposes cases in appeals and settles claims for refunds.
These goals are yet an unrealised dream of tax reforms initiated by the Central Board of Revenue (CBR). No programme of resource mobilization of tax can succeed unless a fair and efficient tax system is evolved.
On the one hand the taxpayers must change their attitude towards tax obligations through proper compliance and on the other the tax administrators must also assure that maximum facilitation is extended to them. While tax evaders must be dealt with strictly in accordance with law, the honest taxpayers should receive the treatment they deserve.
Unfortunately, there is a complete lack of the taxpayers' education and consequently they remain oblivious of their responsibilities towards the society. There is therefore a need for creating awareness amongst them about their rights and obligations.
The CBR is continuously imposing new obligations on the taxpayers without inserting corresponding rights in tax statutes. No effective mechanism is so far evolved by the government to effectively check any unfair treatment on the part of tax administrators.
They are not made liable to punitive actions and/or pecuniary damages even after the final fact-finding authority adjudges their actions arbitrary, excessive and beyond their assigned powers.
The federal tax ombudsman instead of emerging as a parallel appellate authority should be given the statutory role of awarding damages in such instances. Taxpayers must be given adequate rights before the State justifies strict actions for enforcing tax obligations.
Legitimate reduction of tax dues should be a part of tax education as is the case in all civilized societies where tax administrations post on their websites amendments proposed in their tax laws at least six months before their promulgation giving a chance to taxpayers to plan their tax matters.
In Pakistan, on the contrary, the CBR clarifies (sic!) 'retrospectivity' and 'prospectivity' of amendments after adoption of the Finance Act which is an unprecedented transgression of powers by an executive authority.
Every year we have an avalanche of amendments in the form of a Finance Bill. For the common man it is impossible to comprehend such frequent changes in the tax statutes. It is a great tragedy that millions of man-hours of tax collectors, taxpayers and tax advisers are squandered away in grappling with the torrential onslaught of such amendments. The fiscal policy must be consistent.
Simplification of tax laws means plugging of the loopholes in the legislation rather than experimenting unnecessarily with new but worthless ideas every year. Ambiguity in the enactment should be avoided to eliminate uncertainties and also to ensure uniform application of laws which ultimately leads to reduction in litigation. Increased litigation, because of ambiguity of legislation, is counter productive and defeats the very object of simplification of statutes.
The Income Tax Ordinance 2001 was promulgated with the tall claim of bringing simplification but it has turned out to be a more complex document vulnerable to increased litigation. Its Section 122 alone provides unbridled, unfettered and uncontrolled powers to the tax department which are violative of Article 4 of the Constitution.
Absolute powers are bound to corrupt absolutely. This is a classic piece of legislation showing how a faulty tax system increases tax burden of the existing taxpayers and leaves unaffected those who are non-filers.
Present tax laws and their administrators encourage tax evasion thus increasing tax burden on the honest taxpayers. In these circumstances, it is the duty of every citizen of Pakistan in general, and tax professionals in particular to help in minimizing tax evasion in public interest.
The prestige and confidence enjoyed by professionals depend upon the scrupulous manner in which they conduct themselves. Members of the profession should not only be competent and knowledgeable but they should also be straight-forward, honest and sincere in their approach to the professional work.
A professional should maintain an impartial attitude and conduct himself in a manner consistent with good reputation of the profession and refrain from any such conduct which might bring discredit to it.
A greater responsibility lies on the professional bodies, like Income Tax Bar Associations to maintain discipline amongst the members in their professional conduct. It needs to be ensured that the professionals maintain the highest standard of integrity so that the confidence of the public in them is retained.
The tax professionals have even a greater responsibility towards the society. It should be their endeavour to help the State to bring more people in the tax net and at the same time extend the best possible professional advice to their clients to reduce tax litigation.
Efforts of the tax professionals should not be focussed on finding loopholes in the statute but to protect harmonious construction of the provisions with the view to encouraging tax planning which is a legitimate right of every citizen.
