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CBR: Synonymous with mismanagement

By Dr. Ikramul Haq

Dr. Ikramul Haq, a leading international tax counsel, is a well-known author specialising in international tax, press, intellectual property, corporate and constitutional law. Dr. Ikram is Chief Partner of Lahore Law Associates (fax: +92 42 7226953, e-mail: irm@brain.net.pk; website: http://www.paktax.com.pk). He is also a member of the visiting faculty of the Institute of Direct Taxes in Lahore. He served for 12 years as Deputy Commissioner of Income Tax. He studied literature, journalism and law, for his Masters and Doctorate degrees. He has written many books on various aspects of Pakistani law, some of which are co-authored with his wife, Mrs. Huzaima Bukhari, Additional Commissioner of Income Tax. He has been awarded Doctorate of Law for his research: Tax Reform in Quasi-Constitutional Perspective.

“The Ad-hoc Public Accounts Committee has taken a serious notice of the budget management by the Central Board of Revenue, and asked its administrators to improve it and monitor the expenditure more closely.” Business Recorder, 13 November, 2000.

The Central Board of Revenue (CBR) as apex body for management (sic) of federal taxes has been mismanaging its own affairs! It is a tragic situation. How can CBR be trusted with collection of taxes when its own house is in shambles?

In recent years, the public dissatisfaction with CBR has increased in alarming proportions. It’s shenanigans in designing new return forms, inordinate delay in announcing Self-Assessment Scheme for assessment year 2000-2001 and inconsistency in extending the date of filing of returns prove beyond any doubt how badly the CBR wizards (sic) are conducting routine affairs. There is documented evidence available to confirm the transgressions of power by CBR in recent years in matters of exercising its delegated authority under various fiscal laws (See my article CBR Flouting Laws and Judicial Verdicts, Business Recorder, 30 & 31 October 1997).


It is a matter of great concern that on the one hand, the CBR’s own affairs are a subject matter of serious criticism from the Ad-hoc Public Accounts Committee, and on the other it has been perpetually creating a situation of tax revolt in the country. At this critical juncture of our history where the economic survival is at stake, the collection of taxes has become a matter of life and death. The nation as a whole must strive to come out of this crisis. The taxes should be paid by all the people under the law, including the mighty civil-military bureaucrats, judges, professionals, politicians and wealthy businessmen and agriculturists. If these segments of society pay their taxes honestly and diligently others will certainly follow suit. It is a natural law that in a society if the powerful do not obey the rule of law, the other strata of society automatically resort to lawlessness.

The rule of law should be for everybody and not for the weaker ones. the worst aspect of our tax system is its inequality. The Income Tax Ordinance, 1979 taxes the profit earned by a widow on her bank account @ 10% without any exemption or basic tax limit, but grants tax exemption of millions of rupees to Hubco Power Company, with which it is presently engaged in a bitter legal battle. This is a mockery of law.

The CBR was brutally politicized by the successive civilian governments in Pakistan. The high-ranking postings in CBR were made to serve as handmaid of the political masters. In return, CBR’s high-ups served the “interests” of their political masters even beyond their expectations! They proved more loyal than the King. The case of awarding contracts to Cotecna, (a Swiss company) for kickbacks using the Chairman CBR’s office, during the Benazir government, presents a classic study of “close connections” between the political rulers and tax administrators. It shows how CBR’s high-ups deprived the nation of billions of rupees to please their political masters. In the process they made a “fortune” for themselves as well.

It is a matter of record that one ex-Chairman CBR has been declared a proclaimed offender in a criminal case. Yet another Chairman joined hands with the rulers of the day. He issued numerous beneficial notifications for the benefit of the industrial units of his mentors. He himself owns (through family) a number of steel re-rolling mills. During his tenure as Chairman CBR his mills supplied defective products to a foreign investors’ power plant. Due to this criminal act, the image of the country was badly tarnished in the eyes of foreign investors. There are numerous cases to confirm the fact that due to CBR’s policies of favouratism under the command of ex-Chairman, national exchequer suffered losses of billions of rupees, yet the mighty NAB just released him. The so-called process of accountability proved yet another farce in Pakistan vis-à-vis the episode of the arrest and release of ex-chairman CBR, who was equally popular with both Benazir Bhutto and Nawaz Sharif! He loyally served both the regimes.

This is the story of CBR in a nutshell. This body is nothing but synonymous of mismanagement, corruption and inefficiency. A political connection was the name of the game in this organization during the civilian rule. The purpose was dual; one to get lucrative postings and second to make “huge money” in the process of pleasing the rulers of the day.

It is a sad reflection on our fiscal management. The corrupt and resourceful are still holding key posts in the CBR. They have even managed to hoodwink the present military government by shifting the blame of low revenues and massive tax evasion to the traders and businessmen. In fact, they are the real culprits. They were encouraging the profit-hungry traders and businessmen not to pay taxes but just give them their due “share”. The mass scale evasion of taxes was not possible without the connivance of tax administrators (who are actually national traitors).

The tax-evaders and tax administrators together constitute a mafia that has made Pakistan a haven for tax dodgers and plunderers of national wealth. The tax administrators have been encouraging drug traffickers and criminals to bring as much money as they want to Pakistan through normal banking channels and no question about their “source” would be asked. This facility, they claim, is necessary to revive the economy. Such a lethal prescription for revival of economy has destroyed the entire social fabric of the society. The inner story is that the mafia-like operations and collaborations exist between the tax administrators and the drug barons, criminals and tax evaders. The CBR’s high-ups are directly connected with these people and policies designed and implemented by them are to protect such elements. The outcome is total destruction of our socio-economic system. The rich comprising tax evaders, drug barons and corrupt officials in civil-military bureaucracy are ruling Pakistan while the rest of the people are a helpless lot. The policies of appeasement towards traders and businessmen in the past were not without any personal interest. The policy-makers in CBR were properly “compensated” for this kindness.

Things have not changed even under the present regime. A well-designed conspiracy was hatched to distort the image of the present regime in the eyes of people through harsh, illogical and unfriendly tax measures. Behind the scene, unprecedented benefits were secured for the tax dodgers, criminals, plunderers of national wealth and drug barons in the form of Tax Amnesty Schemes. The honest taxpayers were discriminated when these undesirable elements were allowed to pay just 10% and get away.

The CBR has been instrumental in encouraging black money (including proceeds of drug trade) in Pakistan. It has been a tool in the hands of corrupt politicians to get enormous tax benefits through the infamous SRO system. It has been an organization of the corrupt and the inefficient.

 There is an urgent need to revamp the CBR. It should be an autonomous body free of any outside interference/pressures. Professionals to ensure that taxes wherever due are collected without any exception must run it. The Government should scrupulously respect its autonomy and the Board should be insulated from political pressures. Delegation of full financial powers to the CBR on the lines of the State Bank of Pakistan is the need of the hour. Such powers are absolutely necessary if the Board is to discharge adequately its responsibility of running the tax apparatus efficiently. The time is now ripe for making CBR as autonomous and independent body free from its secretarial workings. The Government while scrupulously respecting its autonomy and independence may enjoy powers to issue directions of a general nature in writing, wherever necessary. Our economic survival now depends upon forming efficient tax collection machinery, manned by skilled personnel, professionals and headed by thoroughly scrupulous persons. The process of depolitisation should be a simultaneous exercise making CBR a truly independent and financially autonomous organization.

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