The avoidable confusions of Pakistan’s new tax portal
In a bid to introduce greater transparency in income and asset information and the tax records of all citizens, the government of Pakistan has launched two online portals which hold the income, expenditure, assets and other financial information of 53 million Pakistanis, accessible to the citizen concerned for a fee.
There are clear objectives in the minds of Pakistan’s new economic team as to what it wishes to achieve through this initiative. As per reports from Pakistan’s tax collecting body, the Federal Board of Revenue (FBR), it seems they only wish to signal to the tax non-filers that the government is aware of their financial inflows and outflows and that it can reach them through tax or punitive measures as per law. Overtime, it is expected that this measure will help in greater documentation and the formalization of the economy.
Recently, a rapid survey of 250 people was conducted by the Sustainable Development Policy Institute that asked questions about their experience of using the online portal. The results were enlightening and respondents pointed towards critical issues which need a response or remedial action from the government’s side.
First, the common person on the street is simply unclear about why they are being asked for a fee to access information that is their own, and that is already available with the National Database Registration Authority, the Pakistan Telecommunication Authority, banks, and several other institutions. Many of those accessing the portal are tax payers who are irked by the preposition that the FBR is made richer when they access their information.
Most of the respondents said there were gaps in the information available online. Assets sold in the past were still being shown under their ownership. Sponsored or business travels were listed as personal travel for leisure. These errors make many uncomfortable, with the risk of possible audit notices in the future due to factual mistakes.
If the government is really serious about getting the public to come forward and expedite its information reconciliation, it will need to introduce a greater degree of coherency into its initiative to win the the people’s trust and support.
Dr. Vaqar Ahmed
The FBR chairman stated in his press conference that the information contained in the portals would not be the basis for a tax assessment. But it is vague what the FBR then wishes to achieve by dedicating a huge workforce to manage the portal and to update it regularly.
That this information will come under active use by FBR officials seems the natural assumption to make. It is also elementary to expect that the information now in the hands of the tax-man, will match one’s lifestyle with actual taxes paid. As the portal does not automatically correct itself unless somebody reports errors, it is therefore likely that in the short to medium term, the frequency of misinformed audits by the FBR will ultimately increase and lead to an increase in compliance costs faced by tax payers.
Respondents to the survey were concerned regarding a lack of clarity on measures undertaken to protect the data and privacy of millions. Clearly there will be instances when a human interface will be required to update the portal or undertake maintenance. It is critical that in such instances, in-built systems prevent those handling the portal from hacking into profiles and possibly misusing sensitive financial data.
Likewise, the correction of discrepancies is not in real-time. For example, people who have now declared incomes and assets under the Asset Declaration Scheme 2019 need to see that their profiles stand updated as early as possible so that no federal or provincial tax authority uses the older profiles for the assessment of tax liability or the identification of benami assets, i.e. assets that belong on paper to intentionally misidentified beneficiaries.
Accessing the portal is also a frustrating exercise criticised by survey-takers, with some respondents unable to answer their secret questions or present the national identification numbers of members of their families. In cases where the portal does not allow one to move ahead to the next steps, an FBR helpline should send an automated call to the user and provide support. If the government is really serious about getting the public to come forward and expedite its information reconciliation, it will need to introduce a greater degree of coherency into its initiative to win the the people’s trust and support. For this, the user fee should be done away with and less technologically savvy people provided alternative access to their information. Alongside this, privacy and data protection is key and the most sophisticated cyber security protocols should be in place.
After all, in a bid to increase the tax-to-GDP ratio, a potential IT error with huge consequences should not be allowed to forever hurt business and investor sentiments in Pakistan.
Dr. Vaqar Ahmed is an Economist and author of ‘Pakistan’s Agenda for Economic Reforms’ published by the Oxford University Press. Twitter: @vaqarahmed