Identification and acknowledgement of a problem is the first step in resolving the same. Depending on the motivation and political will, next step then is working out a solution and getting the same implanted. Also, nothing is perfect in the first attempt, so some monitoring, evaluation and adjustments are also needed to ensure the implemented solution produces the desired results.
The bigger the problem is the more time and effort it may take to get the same addressed. Some problems are so big and complex that the relevant organization(s) may need a complete restructuring that may include huge reforms as well as paradigm shift and/or culture change.
All above is being discussed with reference to Federal Board of Revenue (FBR) and its tax collection mechanism. It’s a known fact that tax submission and collection in Pakistan is among the lowest in the world. Government is of the opinion, and the blogger does not disagree, that FBR needs massive reforms to become a well managed and efficient organization that is able to collect enough tax as deemed appropriate for the size of a country like Pakistan.
Task is big and complex. Big planning is needed. Big reforms are needed. Big changes are needed. More time is required. No one questions that. Everyone agrees. The issue is that in the momentum and enthusiasm of solving big problems the smaller problems are being overlooked, as far as the blogger knows. These smaller problems need smaller solutions, have quick turn around times but still add value to the coffer. In common business terminology these are low hanging fruits that are being neglected.
With all above context, lets talk about the much talked about and needed FBR reforms that are a make or break kind of an idea for sustainability of the country. Since the issue is very complex, its reforms are also a tough task and we have been hearing about the same almost for two years now. No one is questioning the sincerity of the government, the political will or is underestimating the complexity and sensitivity of the subject. However, can’t we at least start enjoying some low hanging fruits in the meantime?
Yes, the number of tax filers need to be increased, tax net need to be widened, tax collection system needs to be revamped, whole taxation system needs to be automated, corruption need to be reduced etc. etc. All good and valid plans. But why can’t we first ensure tax authorities do what they can with a minimal of effort, resources and loss of time i.e. ensuring collection of tax from those who are already known to them? It’s a low hanging fruit. While the big wigs are planning and bringing their big reforms why can’t we just use the above discussed project management techniques to increase tax revenues?
By the terms “known to CBR”, we mean individuals and or businesses that at some point in time had their National tax Number (NTN) issued and are not submitting their tax returns consistently or not submitting at all. The idea/project here is to go after those who are know to FBR and make them pay their due taxes, as applicable. As if FBR already have some individuals or business information that are not paying their due taxes what stops FBR contacting and following up with the individuals and/or businesses next year, and all subsequent years if no tax returns are filed? We are not talking about if the individual or business makes profit or not, we are just talking about filing tax returns. And what stops FBR in issuing a penalty notice if tax returns are not filed?
The steps/tasks would eb:
- Make two teams of 20 people each, led by one IT Commissioner each
- Team “I” one for individual tax filers and team “B” for business tax filers
- Update current individual’s database
- Pull up the list of individuals, and businesses, that had ever registered for Tax Number
- Approach NADRA/SECP or similar other organizations for getting contact info updated
- Get a commitment from NADRA to provide feedback on 300 individuals daily
- Daily updates need to be provided by NADARA
- All info received from NADRA need to be updated daily in FBR databases
- Give contract to an outside company (say, call centre) to validate all contact info and to fill gaps
- All updated info received from NADRA and updated in FBR databases to be passed on to the call centre
- Call centre need to validate all info on a daily basis
- Key information that need to be validated is contact person’s name, mailing address, telephone/cell number, email address, fax number, website
- Get the database updated with latest info
- Within a week of NADRA finishing responding on all individuals/businesses data all records at FBR would have been updated as it this task was happening in parallel
- Send letters, emails, faxes, text messages to all asking to call back CBR or file tax returns within 30 days
- After 30 days, send reminder letters, emails, faxes, text messages to all, who did not call back, asking to call back CBR or file tax returns within 15 days
- After 15 days, send fine/penalty notices as the law permits to comply within 15 days
- After 15 days take necessary legal action as the law permits, no exceptions across the board
Above is not a big project. Led by a smart project manager the above can be completed in few weeks, positively less than 6 months. Not many resources or lots of finances needed. But if implemented correctly it may generate good and long-lasting stream of additional tax revenue for FBR.
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September 14, 2020