THE government has approved an expensive plan for FBR in the hope of tackling its deep-seated inefficiencies. The Rs25bn programme — a media report puts the total cost at Rs32.5bn — will be spent on the purchase of 1,087 cars, hefty ‘performance’ bonuses for FBR officials, hiring of over 1,700 retired army personnel for an anti-smuggling initiative, establishing a ‘model tax office’, recruiting AI/IT experts, and providing transit housing facilities to the taxmen. The package is part of FBR’s transformation plan to strengthen tax enforcement and compliance to plug an estimated tax gap of Rs7tr. The allocation has been made for six months, and the project’s continuation will depend on realisation of the tax collection goals.

The package has been approved at a time when the FBR is facing a shortfall of Rs190bn in its tax collection target in the first four months of the current fiscal. This has prompted the IMF to send its mission for talks with Pakistani authorities four months ahead of the scheduled first performance review of its $7bn bailout for discussions on critical missed targets. The project goes against the plan to cut the size of the cash-strapped government and reduce the number of its employees in the face of a severe resource crunch. Even if we put aside our doubts regarding the financial cost of the plan, past experience shows that similar measures financed by taxpayers failed to produce the desired results. This is because such actions do not tackle structural flaws in the taxation system: a very narrow base of taxpayers, and exemptions of nearly Rs4tr for powerful lobbies including retailers, large farmers, real estate, professionals such as doctors and lawyers, and various industries. Doing the same thing again and again, and expecting different results is insanity, and has not achieved anything in the past and will not get us anywhere in the future. Only the unwise would fall for such expensive projects.

Published in Dawn, November 14th, 2024