Huzaima Bukhari and Dr Ikramul Haq
The picture that emerges is of gross inefficiency, maladministration and corruption in an organization that is geared to further principally individual and communal self-inertest of a few individuals at the cost of Pakistan and her people—Report on ISAF Container Scam by Office of Federal Tax Ombudsman (January 10, 2011)
The dismal state of affairs prevailing in Federal Board of Revenue (FBR), highlighted way back in 2011 by Dr Shoaib Suddle, a retired senior police officer and ex-Federal Tax Ombudsman (FTO), unfortunately persists even in 2018—many believe that it has, in fact, further deteriorated. The situation will remain the same, even under the new government of Pakistan Tehreek-e-Insaf (PTI) ostensibly committed to reform the FBR, as the culprits have not been brought to books even after a lapse of 7 years though clear instructions to this effect were given by the Supreme Court of Pakistan in the Suo Moto Case No.16 of 2010.
It is a matter of great regret that at the cost of the country’s interests, massive tax evasion continues unabated and many tax advisers, even though being instrumental in it, are now advising the PTI government how to improve things! The repeated vow by the Prime Minister, Imran Khan, of collecting Rs 8 trillion (he took this figure from our articles), as taxes is now hijacked as “our agenda” by these advisers. In the past, when PTI was not in power, these very advisers were making fun of claim of collecting Rs 8 trillion and were eulogizing the then finance minister, Ishaq Dar, now fugitive. They were part of committees and commissions constituted by Ishaq Dar, but now audaciously criticising his policies!! Tax evasion, loot and plunder of national wealth continue unabated due to unholy alliance amongst unscrupulous tax advisers, greedy businessmen and corrupt tax officials. The evasion and corruption of billions of rupees to the national exchequer is not possible without the connivance of this trio.
The Supreme Court in the Suo Motu Case No. 16 of 2010 after considering Report on ISAF Container Scam by Office of Federal Tax Ombudsman and One-man Commission Report of Ramzan Bhatti, ex-Member Customs, passed strictures and highlighted recommendations of Commissions it formulated but till today no action has been taken.
The Supreme Court of Pakistan in its order of March 4, 2013 in CMA No.2243 & 3683 of 2012 in SMC No.16 of 2010 held: “The performance of the FBR, as indicated by the report, now submitted is far from satisfactory. Despite a lapse of almost one and a half year since the Report was compiled by the Federal Tax Ombudsman, no progress worth mentioning has been made for the recovery of the loss identified, which is regrettable”. Now five years have lapsed since this order but it appears that Supreme Court has also lost track of it.
The Supreme Court takes suo motu actions, passes orders and thereafter, no effective follow-up is made available. It raises a serious question of solving problems through court intervention. Politicians and government officials get rough time at the hands of Supreme Court and High Courts where issues of fundamental rights are involved. It is the duty of the higher courts to safeguard and enforce fundamental rights of the people under the Constitution. However, non-compliance on the part of the Executive will continue unless there is a paradigm shift in their thinking and reforms in the outmoded systems. For example, the Supreme Court, while dealing with the case of missing containers never ordered installing equipment to x-ray and scan incoming and outgoing containers. This is where the actual problem lies. Corruption can be minimized through the use of technology and better monitoring system but neither the Court nor the government has ever seriously pondered about this solution.
Way back in 2012, in an op-ed we observed: “It is a disturbing reality that containers—both inbound and outbound—are not scanned in Pakistan. In importation, the collector-businessman mafia deprives the nation of billions of rupees in the form of evaded duties—Customs, Sales Tax and Federal Excise Duty, wherever applicable. These goods then remain outside the purview of income taxation as well. This is the main cause of generation of underground economy. Customs mafia is not ready to accept simple technological reforms of scanning of all the containers and baggage. The new Chairman has worked in Customs (17th CTP, earlier entered in Civil Services in Accounts Group through 15th CTP) and has also reportedly sold software to FBR for Customs Wing. Expectations are high that he would increase collection of Custom duties—these would automatically lead to better collection of GST, FED and income tax—through the use of modern IT technology that he employed as Chairman NADRA and which was his business after resigning from FBR”.
As expected, no response to our above mentioned proposal came from FBR and their favourite tax practitioners. The exit of Chairman mentioned in above articles was followed by six chairmen but till today no effort whatsoever has been made to plug the main hole from where colossal loss of revenue is occurring on daily basis. In its order of August 30, 2013 in SMC No.16 of 2010, Supreme Court noted that “In order to further ascertain the correct position about the smuggling of arms and ammunition as well as evasion of the duty on different items at the Ports of Karachi and Bin Qasim, we are of the opinion that there must be a strict check and full duty should be recovered because on account of evasion of custom duty, black money is also generated, which allegedly flows inside the country particularly in the city of Karachi and is used by the accused persons in order to promote their criminal activities throughout the country”.
Though the Supreme Court passed the above order for strict check on ports but no action was taken as it could have dried the speed money that goes into so-called common pool for all the officers. These instructions came during the tenure of Ishaq Dar, who paid no heed to it for reasons best known to him.
The viable solution to counter tax evasion at the importation stage is installing of radiographic scanners that use x-rays or gamma rays to provide an image of the internal contents of containers. This not only increases detection rate of contraband hidden in containers but they also help to detect any secret compartments within containers. These scanners are working successfully at the two busiest ports of the world, Rotterdam and Singapore—we must install the same without wasting any further time. Many companies can be contacted to provide this service and they can recover the cost/profit from our revenue. The plea by FBR that it requires huge investment in buying equipment and training personnel is nothing but a flimsy excuse (in fact motivated by ulterior motives as it would end their notorious era of corruption). The use of radiographic scanners is necessary to counter precious revenue leakages. One hopes that the Finance Minister, Asad Umar, will take up this matter on priority basis.
(The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences)
