Why does the choice of FBR chairman matter for Pakistan?

For one of the most important positions in Pakistan, especially during the ongoing economic crisis, the office of the Federal Board of Revenue’s (FBR) chairman has been faced with much turmoil. In the past four years, there have been seven chairmen, and now, the government must decide on yet another candidate as incumbent chairman Asim Ahmad will retire on July 30. 

Unlike the posts of federal secretaries, there is much more organisational politics involved in the choice of the FBR chairman, and more potential damage to the state if it turns out to be wrong. 

Whenever a chairman of the country’s premier revenue body retires, is dismissed or removed, infighting intensifies between the officers of the Customs Department and the Inland Revenue Department to capture the post. At times, the government prefers to choose a man from the Pakistan Administrative Service (PAS) or the private sector to head the revenue body instead. 

These choices have significant consequences for Pakistan’s economy, which is in a perennial fiscal deficit and a tax-to-GDP ratio that is one of the lowest in the world. 

Customs versus IRS

What difference does it make whether the country’s top tax official is from Customs, Inland Revenue Service (IRS), PAS or the private sector? Let’s look at the empirical evidence. 

The tenure of Asim Ahmad, the current FBR chairman and an IRS officer amply illustrates that choosing an IRS man to head the FBR has far-reaching and devastating consequences for the economy.

Under an IRS chairman, the FBR’s customs sector where typical mega frauds recur with regular frequency largely becomes an autonomous and unaccountable body for two reasons. The IRS chairman, largely unaware of Customs laws and procedures and least interested to learn the dynamics of Customs matters at this stage of his career, practically frees the member Customs Operations from monitoring and oversight.

The member Customs Operations, therefore, finds himself accountable to none. This de facto sovereignty of action as well as inaction conferred by default on any member Customs Operations by a chairman has prompted and promoted massive and large-scale maladministration and some of the most daring mega scams in the department which caused revenue losses worth hundreds of billions of rupees.

The recent Customs scam in Karachi perpetrated by senior officers is a case in point. Insider officials within FBR are of firm conviction that fish rots from the head and all Customs revenue loss scams are planned in FBR and then chosen Customs officers having criminal orientations are posted at places where these plans need to be executed.

All this happens under the nose of a chairman appointed from the IRS who practically parts with his monitoring and supervisory oversight on member Customs Operations leaving him alone to exercise arbitrariness, indulge in maladministration and plan and execute massive revenue loss scams in the Customs collectorates.

Under the current IRS chairman who is retiring within a week’s time, Mukaram Jah Ansari, the member Customs Operations, is stated to have done many things, including massively misusing Section 5 of the Customs Act under which a junior officer can be authorised to exercise certain specified powers of a senior officer if the senior is not available.

Under the nose of the current IRS chairman, the member Customs systematically sidelined many senior officers and entrusted their offices to more pliable and obedient junior officers resulting in criminal offences by those junior officers causing revenue losses worth billions.

He created scores of ghost and paper organisations just to expedite promotions in the Customs department.

He dished out massive rewards to his favourites for their routine office work and encouraged the protection of Customs officials conniving in frauds from FIRs and criminal prosecutions. He suppressed whistle-blowers and harassed them after they pointed out Customs frauds. He kept disciplinary proceedings against officers pending for a year and set them into motion only after an officer accused in such proceedings blew the whistle on Customs frauds under his administrative control.

The activation of dormant disciplinary proceedings against Director Reforms and Automation Ashraf Ali after he reported a $ 1.4 billion scam in Karachi is a case in point.

However, choosing a chairman from the Customs service can be no less lethal. Only the roles are reversed. The Customs service chairman reduces the role of the member Customs Operations into insignificance and takes in his own hand all the arbitrariness and the planning and execution of frauds and revenue loss scams in the Customs collectorates.  

The period of Nisar Mohammad Khan and Javed Ghani, two chairmen from Customs, and late Zahid Khokhar and Tariq Huda, their member Customs Operations, illustrates this relationship.

It is pertinent to note what happens in the IRS under a Customs chairman. A chairman appointed from Customs, largely unaware of the intricate Inland Revenue matters and least interested to learn these intricacies at this stage of his career, practically frees the IRS from his oversight and control.

In practical terms, an IRS chairman is chairman of the IRS part of the FBR and a Customs chairman is chairman of the Customs part of the FBR.

This explains the rampant maladministration, fiscal frauds and massive revenue loss scams under the IRS and Customs chairmen of FBR in the past.

PAS and private sector

Sometimes, the government appreciates the risks and dangers involved in choosing the FBR chairman from the taxation services and chooses one from the officers of the Pakistan Administrative Service instead. 

For one thing, PAS officers have better administrative and managerial exposure, much-needed attributes in an FBR chairman.

Unlike taxation service officers, PAS officers are alien to the FBR’s workforce and cannot establish their collusive connections down to the grassroots level.

The PAS officers have few friends and foes in the FBR establishment. Unlike the Customs and IRS chairmen, the PAS officers do not divide the revenue administration into warring factions, friends fighting their foes.

The PAS officers lack the human infrastructure within the FBR establishment to plan and execute mega revenue loss scams. These officers are taken much more seriously by the FBR workforce as well.

When a taxation service chairman assumes office, the workforce immediately assumes that money-making will be his top priority and they begin to seek adherence with some expected and prospective money-maker group.

However, things unfold differently when a PAS officer assumes office as the workforce begins to speculate about the chairman’s priorities. The workforce begins to set its direction right just because it begins to fear unknown priorities.

In case an honest and harsh administrator from PAS is chosen as chairman of FBR, he needs to take a little time and effort to reverse the taxation service chairmen’s administrative devastations.

Some technical men from the private sector have also served as FBR chairmen. A private sector professional carries all the advantages of a PAS officer except his lower administrative exposure profile. However, a private professional’s less administrative exposure may be at times compensated by his technical expertise which the PAS officers may lack.

The choice of a chairman for FBR matters because the right choice promotes the establishment of a culture of authority and accountability. This leads to transparent and vibrant revenue collection and minimises fraudulent revenue losses.

On the other hand, a wrong choice immediately sets into motion countrywide revenue loss mafias who connive with senior Customs officers and cause massive revenue losses. The smugglers also celebrate the wrong choice and make tight collusions with the top tax men in FBR to make hay while the wrong choice continues.

The right choice for the post of chairman FBR holds the promise to help revive Pakistan’s economy. A wrong choice carries the potential to subjugate Pakistan’s sovereignty to foreign donors for all time to come.