Strategic Fiscal Policy

One wonders about the news item appearing in the newspapers in which World Bank issued a report stating the fact that corruption has increased in last eight years. However, people were surprised about the good governance bang during the same tenure. I reiterate my earlier year’s submission whereby I suggested that Government should be bound to present Financial Statements in line with International Public Sector Accounting Standard Board’s exposure draft 27 – Presentation of Budget Information in Financial Statements. It was suggested that Financial Statements of the Government issued on the event of budget speech must include the following.

1. Macro economic assumptions including the estimates of following
• Aggregate Growth
• Inflation
• Exchange Rate
2. Fiscal Deficit or Surplus
3. Deficit Financing describing anticipated composition
4. Debt Stock including details at least for the beginning of the current year
5. Financial Assets including details at least for the beginning of the current year
6. Prior year budget out turn presented in the same format as the budget proposal
7. Current Year Budget either the revised budget or the estimated out turn
8. Summarized budget data for both revenue and expenditure according to the main head classification including data from current and previous year
9. Explanation of Budget Implication of new policy initiatives with estimates of the budget of all major revenue policy change or some major changes in expenditure programs

Financial statements possessing the above referred details would serve as a barometer for the citizens against which the performance of any government can be measured and judged while people need not wait for eight years for the revelation of World Bank. However, one still wonders about the earlier statements made by the World Bank and waiting for the reasons of contrary earlier reports.

On the contrary, FBR’s image had been over shadowed with the enthusiasm to collect targets, internal HRM improvement, IT infrastructure development and image development. Consequently, contrary to its performance remarks are almost absent owing to its continual improvement policy.

The continual improvement policy were experienced by the taxpayer themselves with little deviation owing to non-standardization of behavior. It is also felt that deviation on the straight path is within tolerable limits and FBR is self adjusting itself by incorporating the suggestions. However, this article is an endeavor to suggest a strategic policy instead of operational and tactical policies.

LEGAL AND FINANCIAL REPORTING BY FBR
We cannot wait for another eight year, Allah Forbid, to issue a report in respect of FBR by World Bank. Consequently, it is suggested that FBR should file monthly and annual statement to Auditor General of Pakistan on 10 of following month and on or before 31 August every year. This will increase the transparency in the transactions of FBR and high ups will be able to view the expenses of their field offices.

Moreover, it is also suggested that FBR should also present a Financial Statement in line with the standards issued by the International Public Sector Accounting Standard Board and specifically include the revenues bifurcation, apart from others, as follows.

• Quantum appealed before Quasi Judicial Forum
• Quantum appealed before Judicial Forums
• Quantum collected as Advance Tax of Direct Taxes
• Quantum collected as Final Tax of Direct Taxes
• Quantum collected but refundable
• Quantum collected as Final Tax of Indirect Taxes – Other tan Sales and Excise
• Quantum collected from Indirect Taxes
• Quantum collected from Indirect Taxes but refundable because of Section 8B

The Liabilities section of Financial Statement should be duly segregated into two parts – Liabilities taken directly from Donor Agencies and Liabilities taken through Ministry of Finance. On the expense sideSuch a statement would be truly representative of actual performance of FBR.

AGRICULTURE INCOME
Prior to jumping over the conclusion of taxability of agriculture income, let us first grasp the ground realities. Firstly, agriculture land is owned either by feudalist or farmers. Secondly, the land ownership data is now almost computerized.

It is suggested that small farmers can easily be segregated either through land ownership data or through PIU exemption basis. It is worthwhile here to note that Taxability of agriculture income is the domain of provincial governments as was the services sales tax. Consequently, agriculture income can also be taxed in the similar fashion as was dealt by FBR in case of harmonization of Provincial Sales Tax Ordinances and Sales Tax Act, 1990 – services and goods sales tax.

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