It seems that FBR chairman Shabbar Zaidi, who was brought with much optimism to spearhead the PTI government’s tax reforms, might be on his way out. The tax authority has failed to meet the tax revenue target in line with the IMF’s projection, creating a rift within the economic team.
Zaidi has refuted speculation regarding his resignation claiming that he has been unable to perform his duties due to ill health and has been advised to reduce stress. He admitted that he may be unable to continue, and even Finance Adviser Hafeez Shaikh has said that Zaidi may be replaced if he cannot perform his duties. Zaidi went on indefinite leave last month after which speculations were rife that he may be forced to step down.
The renowned chartered accountant was appointed as the tax authority head in May last year to bring about tax reforms which have been the main concern for the PTI government. During his term, tax collection increased 16 pct, non-tax revenue by 28 pct, and 2.7 million tax returns were submitted. The tax authority also worked to increase documentation and bring retailers and businessmen into the tax net.
This was insufficient as the IMF is dissatisfied with the performance of the top taxman. A delegation of the global financial institution is currently in Islamabad to review Pakistan’s economic performance before a new tranche of the bailout package is released. The FBR has requested the international lender to reduce the tax collection target to their immense displeasure.
IMF wants to emphasize achieving the tax target and increasing non-tax revenue. The FBR has said that the Rs5.5 trillion tax collection target is rather unrealistic and wants a downward revision. The IMF is refusing to budge stating that it was already reduced to Rs5.2 trillion in November 2019 and tax collection around Rs4.7 trillion is much below the allocated target. The IMF has expressed dissatisfaction over the FBR’s tax collection.
In this scenario, it will certainly be Shabbar Zaidi who will face the axe first. He could be forced out by next week before a mini-budget is introduced and a new tax regime is enforced. Zaidi was brought with good intentions but unscrupulous elements in the bureaucracy and the absence of a tax culture were the biggest obstacles that he could not overcome. The economic slowdown has affected tax targets and Zaidi’s departure might make it even more difficult to continue his efforts.
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