Taxpayers’ Bill of Rights The strict implementation of constitutional guarantee of treatment and protection in accordance with law. The strict implementation of constitutional guarantee that no tax will be levied except as provided under Article 77 of the Constitution of Pakistan and delegation of taxing powers to Federal Government and the Federal Board of Revenue being violative of Article 162 will not be provided and wherever available are to be withdrawn at once. The implementation of constitutional right of protection of life and property as State’s prerogative to levy and collect taxes is conditional to performance of this duty. The guarantee through a law passed by the parliament that taxes collected would be utilized in a transparent manner and would not be subject to unpitying waste and plundering by the rulers. The right to have protection from higher/unjust/unreasonable taxes without voters’ approval. The guarantee from the government through a law passed by the parliament of restricting state expenditure of revenue above and beyond inflation and population growth. The guarantee of earmarking of revenue through a parliamentary process for employment generation and socio-economic development of the society as a whole. The right to fair and consistent application of the tax laws of the state by the Department of Revenue. The right to pay only the amount of tax due under the law and to have the law applied as consistently and equitably as possible. The right of protection from abuse and excessive use of discretionary powers available to Tax Officials under tax codes. Such discretionary powers should be structured through open plans, open policy statements, open rules, open findings, open reasons, open precedents and fair formal procedure.” The right to be trusted and treated as honest law abiding persons unless proved otherwise. The right to be protected against perverse, arbitrary or unreasonable, unjust, biased, oppressive and discriminatory decisions, recommendations processes, acts of omission and commission of the Tax Officials. The right to be protected against practices of tax collector involving the exercise of powers, or the failure or refusal to do so, for corrupt or improper motives, such as bribery, jobbery, favouritism, nepotism and administrative excesses. The right to be saved from neglect, inattention, delay, incompetence, inefficiency and ineptitude, in the administration or discharge of duties and responsibilities by tax collectors. The right to be saved from harassment through repeated notices, unnecessary attendances or prolonged hearings while deciding cases involving: – a) assessment of personal taxes; b) determination of liability of any tax or duty; c) classification or valuation of goods; d) settlement of claims of refund, rebate or duty drawback; or e) determination of fiscal and tax concessions or exemptions; The right to seek assistance from the Tax Collector who should act as facilitator and not as Tax grabber. His office should be a walk in clinic especially for the old taxpayer, low income taxpayer or senior citizens who can not afford services of the consultant. The right to obtain information and prompt, accurate responses to questions and request for tax assistance. The right to request assistance from an expert of the department, who shall be responsible for facilitating the resolution of taxpayer complaints and problems not resolved through the normal administrative channels within the department, including any taxpayer complaints regarding unsatisfactory treatment by department employees. The expert must issue a stay order if a taxpayer has suffered or is about to suffer irreparable loss as a result of an action by the department. The right to have proper service of notices of any kind and application of all possible modes of service before passing exparte order/ assessment. The right to have prompt refund of additional duty, return of Bank Guarantee or security in the cases of provisional assessments of duty where final assessment is not completed within the period specify under the law. The right to be represented or advised by counsel or other qualified representative at any time in administrative interactions with the department. The right to procedural safeguards with respect to recording of interviews during tax determination or collection processes conducted by the department. The right to be treated in a judicious manner by department personnel. The right to have audits, inspections of records, and interviews conducted at a reasonable time and place except in criminal and internal investigations. The right to freedom from penalty attributable to any taxes administered by the Department of Revenue; and to abatement of interest attributable to any taxes administered by the Department of Revenue, when taxpayer reasonably relies upon binding written advice furnished to the taxpayer by the department through authorized representatives in response to the taxpayer’s specific written request which provided adequate and accurate information. The right to obtain simple, non-technical statements which explains the reason for audit selection and the procedures, remedies, and rights available during audit, appeals, and collection proceedings, including, but not limited to, the rights pursuant to this Taxpayer’s bill of rights and the right to be provided with a narrative description which explains the basis of audit changes, proposed assessments, assessment, and denials of refunds; identifies any amount of tax, interest, or penalty due; and states the consequences of the taxpayer’s failure to comply with notice. The right to be informed of impending collection actions which require sale or seizure of property or freezing of assets, except jeopardy assessments, and the right to at least 30 days’ notice in which to pay the liability or seek further review. The right to have all other collection actions attempted before a jeopardy assessment unless delay will endanger collection and, after a jeopardy assessment, the right to have an immediate review of the jeopardy assessment. The right to seek review, through formal or informal proceedings, of any adverse decisions relating to determinations in the audit or collections processes and the right to seek a reasonable administrative stay of enforcement actions while the taxpayer pursues other administrative remedies available under tax law. The right of access to his tax information/record kept confidential unless otherwise specified by law. The right to procedures for retirement of tax obligations by installment payment agreements which recognize both the taxpayer’s financial condition and the best interests of the state, provided that the taxpayer gives accurate, current information and meets all other tax obligations on schedule. The right to procedures for requesting cancellation, release, or modification of liens filed by the department and for requesting that any lien which is filed in error be so noted on the lien cancellation filed by the department, in public notice, and in notice to any credit agency at the taxpayer’s request. The right to procedures which assure that the individual employees of the department are not paid, evaluated, or promoted on the basis of the amount of assessments or collections from taxpayers. The right to an action at law within the limitations to recover pecuniary damages against the state or the Department of Revenue for injury caused by the wrongful or negligent act or omission of a department officer or employee. The right to settle claims through Alternative Dispute Resolution (ADR). The right to have the department begins and completes its audits in a timely and expeditious manner after notification of intent to audit. The selection of case for audit should conform to the provisions of section 24A of General Clauses Act of 1897. The right to have the department actively investigates and, where appropriate, implement automated or electric business methods that enable the department to more efficiently and effectively administer the revenue sources of the state taxpayers. The right of waiver of interest that accrues as the result of errors or delays caused by a department employee. The right of free educational activities/services to be arranged by the State helping the taxpayer for satisfactory/succesful compliance of the revenue laws. The right to pay a reasonable fine or percentage of tax, whichever is less, to reinstate an exemption from any tax which a taxpayer would have been entitled or received but which was lost because the taxpayer failed to properly register as a tax dealer or obtain the necessary certificates entitling the taxpayer to the exemption. The right to be treated courteously and professionally by Department employees and to be answered as promptly as available resources permit. The right to receive a simple, non-technical explanation rights and the Department’s obligations in all proceedings and activities involving taxpayers. The right to have personal and financial information kept confidential and to know why the Department is asking for information, how that information will be used, and what might happen if it is not provided. The Department may share information with certain federal, state, and local government agencies under strict legal guidelines. The right to obtain basic information concerning the basis for and amount of any tax, interest, and penalties owed or refunded when sent a tax due, deficiency, or refund notice. The right to obtain information about tax exemptions for which a taxpayer legally qualifies. The Department will make every effort to inform those eligible for such exemptions. The right to have penalties abated for under payment of tax due to erroneous Department advice in written response to a specific written inquiry, provided that the taxpayer gives the Department complete and accurate information. The right to enter into installment agreements in case of hardship at the Department’s discretion in order to facilitate collection of payments due. The Department may require financial statements prior to and during the administration of such agreements and may cancel such agreements in the event of default or change in the taxpayer’s financial condition. The right to online and telephone assistance through a website and tool-free telephone net work, responsive to answer any query by a taxpayer. The right to have honest, competent, efficient, well behaved and trust worthy tax officials. The unfettered right of appeal or review through an independent judicial tax appellate system and guarantee of disposal of appeal and revision within six months from the date of filing such appeal or revision as the case may be.
Fair Taxation For PovertyReduction And EqualityDr Ikram-ul-HaqAdvocate Supreme Court of Pakistan Author of over 1500 articles and 19 Books onTaxes and Also a member of International Fiscal Association (IFA)Huzaima BukhariAdvocate of High Court and Editor ‘Taxation and Adjunct Faculty Lahore Universityof Management Sciences (LUMS)SummaryThe total number of Pakistanis deprived ofbasic facilities like health and education is not lessthan 30 million. It is disclosed in the latest reportof the Word Bank, Addressing inequality in SouthAsia, that of 1,000 children born in Pakistan’spoorest population quintile, 94 will die within 12months and 120 within five years. The reportfurther claims that tax avoidance and evasion arepervasive in Pakistan while a major share of thetax revenue is spent on regressive subsidies. Anunusually large fraction of the typically lowgovernment revenue is often devoted to reducingthe final price of food, fertilizer, gas, andelectricity which benefits the rich more than thepoor. The Federal Government in 2013‐14collected Rs. 2254.5 billion, as against official1claim of Rs. 2266 billion, and transferred Rs. 1264billion to the provinces that are now responsibleto provide health and education after the 18thConstitutional Amendment passed in April 2010.The allocations of provinces for these sectors areinsufficient as they lack commitment, if not,money, to meet the basic needs of the people.Moreover, there exist large income and wealthinequalities in Pakistan and these have social andeconomic costs, causing violence and politicalinstability. Fairer politics that provides moreequal opportunities can advance society bybringing peace, social cohesion and use ofcollective wisdom.Better tax policy is essential to increasegovernment revenues and to improve the lives ofthe poor. When taxes are fair and governmentspending prioritizes essential public services,both poverty and inequality can be reduced. This2is well described by Dreze & Sen: ‘the impact ofeconomic growth on the lives of people is partly amatter of income distribution, but it also dependsgreatly on the use that is made of the publicrevenue generated by economic expansion’.Progressive and fair taxation on all kinds ofincome and wealth are an effective way of3redistribution. Delivering essential publicservices, such as universal access to education,health, drinking water and sanitation for thepoor, will reduce disparities in the society.Unfortunately, the tax system in Pakistan isunfair. It inflicts fiscal injustices by providingprivileges to a select group and places adisproportionate burden on the majority ofpeople. This system is not only creating a largedebt burden for the government but alsoincreasing the fiscal deficit and fueling poverty.It is a skewed system in which the poor mansubsidizes the rich man. The problem starts at thetop. The average worth of Pakistani members ofParliament is $900,000, with its richest membertopping $37 million, according to a study(December 2014) by the Pakistan Institute ofLegislative Development and Transparency inIslamabad. A report released by the Center forInvestigative Reporting in Pakistan revealed thatin 2011, about 70% of legislators did not file taxreturns, but no action was taken against themunder the law. Resultantly, in 2013, many of themagain entered the national and provincialparliaments. Although many of them enjoy a veryhigh standard of living, none of 1,072 legislators ‐members of Senate, national and provincialassemblies ‐ qualified among top 100 taxpayersto whom FBR rewarded on the basis of taxdeclarations for tax year 2013. It is shocking toknow that all the legislators cumulatively paid Rs.251 million that is just 0.03% of total direct taxcollection. They and other rich segments ofsociety get exemption through the delegatedpowers given to the Executive to issue StatutoryRegulatory Orders (SROs) without bringing thesame for discussion in the Parliament and publicdomain. This is unconstitutional and against thenorms of democratic disposition. There is urgentneed to end the issuance of SROs, exemption orconcession if necessary must be given by theParliament.Pakistan needs a paradigm shift in tax policy1Full text is available at https://openknowledge.worldbank.org/handle/10986/203952The figure in Budget 2013‐14 was estimated at Rs. 1590 billion vis‐à‐vistax target of Rs. 2475 billion3An uncertain glory‐ India and its contradictions by Amartya Sen and Jean Dreze (2013)2and revamping of entire tax administration ‐establishment of a National Tax Agency, capableof generating sufficient resources for the federaland provincial governments must be the toppriority. Through consensus and democraticprocess, all the parliaments can enact laws forestablishing autonomous National Tax Agency,comprising specialists, rather than bureaucratsthat would facilitate people to deal with a singlebody rather than multiple agencies at national,provincial and local levels. The mode and workingof National Tax Agency can be discussed andfinalised under Council of Common Interest[Article 153] and its control can be placed underNational Economic Council [Article 156].Taxation, a potent instrument to shape andinfluence the socio‐economic policies of acountry, has not received due attention inPakistan. A rational tax policy discourages, evenpenalises those who possess assets that areeconomically unproductive. Heavy taxationdiscourages accumulation of such idle assets. Insocial democracy, the most important objectiveof taxation is to provide economic justice, whichrelates to distribution of tax burden and benefitsof public expenditure while maintaining verticaland horizontal equity. Taxation of the rich for thebenefit of the poor is at the core of sociald e m o c r a c y. I t e n c o m p a s s e s , b e s i d e sredistribution of wealth, such questions astreatment of weaker sections of society e.g.women and children, minorities, the disabled andunemployed. All these elements are missing inour polity and tax policy.Unfortunately in Pakistan, successive rulers,both military and civilian, used taxes as a tool toextort from the masses as much as possible fortheir own comforts and luxuries. By resorting torepressive tax laws, they make the rich, richer andthe poor, poorer. Our financial managers arecaught up in a dilemma. On the one hand there isa mounting pressure to reduce fiscal deficitthrough improved collections and on the other,they are not ready to abolish innumerable taxexemptions and concessions available to the richand mighty. They have no will to plug revenueleakages. Therefore we urgently call for thefollowing.∙ The federal government must increaseallocation and increase spending oneducation, primary health care, water andsanitation services to ensure universal access.∙ The federal government must introduceimmediate structural reforms in tax policy,based on the principles of equity, to expandthe domestic revenue base to finance theessential services mentioned above.Required reforms include:‐ Eliminating unnecessary concessions tothe affluent class and discretionary lawsto issue Statutory Regulatory Orders(SROs)‐ Shifting to progressive direct taxation ofi n c o m e , w e a l t h , a n d p r o p e r t ytransactions‐ Gradually reducing indirect tax, especiallysales tax which puts an undue burden onthe poor‐ Fairly taxing all economic sectors, alsosectors like agriculture, wholesalers, andreal estate that are currently notcontributing towards the tax revenue inproportion to their share in economy.Human development must be enhancedPakistan has a poor performance on humandevelopment indicators. In this situation,responsive democratic government must protectbasic rights of people on priority basis. ‘Diffusionof knowledge’ and skills is the powerful forceagainst inequality and positive force for upwardsocial mobility ‐ so is the access to quality healthcare services including safe drinking water andsanitation. Effective social protectionmechanisms have also worked well to reducedisparities. All these require additional4There is some previous research on the evaluation of tax progressivity in Pakistan. For example, see Ilyas (2004), Alauddin et al. (1981),Ahmed et al. (1986), Azfar (1972), Jeetun (1978), Malik et al. (1985, 1989) and Vaqar & Cathal (2009). However, there is no comprehensivestudy offering decomposition analysis of personal income tax system. In the developing countries like Pakistan, this area of research has inthe past received less importance, given that income tax constitutes relatively smaller portion of the overall revenue collections.3resources, targeting poor areas and people andused more effectively. In the light of abovesituation we call upon democratic government toimmediately take the following measures tonarrow down inequalities:Key facts on human development