Contents

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Title
Interview
Train the Trainers.
Workshop on developing a unified training strategy
Performance of DOT in 2005-06
The Underground Economy in Pakistan
On Campus
Book Review
What is ..the Laffer Curve
Interview
31st STP- Passing Out Ceremony
Pakistans Tax Conundrum
DR Ishrat Hussain Visits DOT
CBRs New Model Army
The skewed distribution of Income in Pakistan
Article- Taxation of Business Profits
Book Review
Latest Intl Fiscal Research
Article- Message of the Quran
3rd ATAIC Technical Conference
Chairman CBR visits DOT
Article- The Design of Tax Incentives
33rd STP- Passing Out Ceremony
DOT Report Card, 2006
DOT TimeLine - 2006
Direct Taxation of Income in Pakistan, 1947 2006 an overview
CBRs Integrity Management Statement
Article- Ibn e Khaldun.
Yassie Hodges- CBR Consultant
Kenwood Green- A DOT Landmark
Tax Incidence
Integrated Audit Training
Capacity Building & Staff Training Program
Preparation for 1st ATAIC Conference of Heads of (Direct Tax) Training
Institutions

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Article- The taxation of agricultural income in Pakistan

A trip down memory lane
Inauguration of DOT(DT) Gymnasium
1st ATAIC Conference of Heads of (Direct Tax) Training Institutions
Interview
A trip dow memory lane
InterviewTax Awareness Workshop
Article- Tax Base Broadening
Interview
DOT performance report
Reflections o n the Federal Budget 2007-08

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2006-07 Highlights
Article- Moonsplit.
Post-Budget Seminar 2006-07
Tax Reform and mindset change
Computer related staff training
IBFD Training Course
2nd National Audit Working Session
Inaugural of IBA led Capacity Building
34th STP_ Inaugural
Developing Strategic Change Leadership
Software presentation at DOT(DT)
60th Independence Day Celebrations at DOT(DT)
Chairmans address to participants of IBA Capacity Building program
Islamic Calligraphy
New initiatives to upgrade FBRs Training Establishments
Technology as Force Multiplier.
Imam Bokhari
Change Management
Relational Database Model
IBA led Capacity Building Program
Organizational Development & Change Management
Training activities at DOT(DT) Lahore, July Dec 2007
Training Methodologies at DOT(DT)
Role Play as a training aid.
Mahasil.- Technology as Force Multiplier.
Probationers country study tour
Message from Member ( Legal), FBR
DOT(DT)
34th STP pass out
Messages for the probationers of the 34th STP
Automating the taxmans workplace
Article- Muslims and the renaissance.
Visit of Member (FATE), FBR to DOT(DT), Lahore.
Training initiatives for support staff at DOT(DT)
Employees Workshop 2008
Looking to the future
I.T Learning at DOT(DT)
Asymmetric initiatives for revenue mobilization
Workshop on Audit of Direct Taxes
Ibn e Khaldun
Intl best practices in Tax Administration
Train the trainer course at DOT(DT), Lahore.
The IBFD Connection
Article- The t2gdp enigma
Interview
Mid-Career Management Course
The Federal Budget some loud thinking
From the Editors pen
DOT(DT) Faculty participation at Intl Workshop in Mexico

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DOTGazette
RESEARCHARTICLE

Taxation of Business Profits

Realignment of tax burdens among different business entities

ifferent Legal entities are treated

variously by current tax law.
Thus the proprietory (Individual)/Association
of Persons [AOP] /URF/HUF
and the corporate forms of
business organization suffer

1
4
5
6

In this Issue
Research Article :

Taxation of Business Profits

Book Review :

Aesthetics of Incompleteness
Latest Fiscal Research
Message of the Quran
Patron

M. Muneer Qureshi
(Director General)
Staff Advisor

varying tax burdens for given

levels of income. In addition the
corporate form is further differentiated between Private and
Public limited companies. Also,
Banking Companies are taxed
differently.
In Pakistan, the present
treatment of different legal
forms appears not to have been
designed to differentiate the
tax load according to any
clearly discernible criteria.
A uniform system for taxing
business enterprise with specific relief features for small
business, irrespective of the
legal form of the business,
would facilitate

greatly the design of optimal

marginal rates of taxation-optimal in a manner as to balance
revenue yield with equity. The
objective ought to be to identify
a "small business" not on the
basis of arbitrarily contrived
legal form but on the basis of income size and ownership characteristics.
Implications of a High Marginal Rate of Tax:
In order to appreciate all
facets of the problem it should
be recognized that there can be
situations in which a high marginal rate of tax can serve specific fiscal objectives such as
when it is the intention to mop
up supernormal earnings
of business

generated by tariff protection,

monopoly, inflation etc. The
high marginal rate emerges in
such situations usually through
the interplay of multiple tax
rates on income, principally
through an excess profits tax
which is levied in addition to
the income tax. The need for
such a levy can arise due to
new revenue needs such as for
special purpose development
activity or even during
wartime. In the economic development context, high marginal rates can be theoretically
justified on the ground that
they would encourage employers with abnormally high income to lower prices for their
products or, in the alternate, to
raise wages. Thus where the
tax takes a high proportion of
each additional unit of earning,
deductible expenditures are
cheap and additional net earnings have little appeal.
Furthermore, a high marginal rate can serve as a symbol of the governments resolve
to take excessive profits
>>>>

Dr. Hamid Ateeq

(Additional Director)
Editor-in-Chief

Munir Ahmed Ch.

Editors (English)

Sobia Saleem &

Humaira Daud
Editors (Urdu)

Arsam Aftab &

Misbah Nawaz
Design & Layout

Azhar Jehangir &

Zafar Iqbal Burki
Directorate General of
Income Tax Training &
Research, Sutluj Block,
Allama Iqbal Town,
Lahore.
>>>>

DotGazette
EDITORIAL

he November issue
of DOT Gazette, like
its preceding issues,
not only attempts to
highlight the events at DOT
during the month but also attempts to provide an impetus
to the thoughts of the readers,
acting as a catalyst in an attempt to explore new vistas of
knowledge and wisdom.
With TMS and case studies
of 33rd STP going in full
swing, the training has entered into a more practical
phase in which the officers
will be familiarized with the
situations that they would
face immediately after their
posting in the field. In the
midst of all this, DOT Gazette
is trying its best to keep the
readers informed of all that's
going on at DOT and in the
department. The Director
General's interview, in the
first edition, Chairman CBR's
Interview, in the second and
Dr. Ishrat Hussain's words of
wisdom, in the third, is indicative of our endeavor to apprise the readers of the aims
of the transformation. DOT
Gazette is fully aware of the
burden and importance of this
duty.
Mr. Ovais Mazhar Hussain,
CEO Angora Textile Mills and
an ex-PSP officer, visited DOT
to deliver a lecture on Textile
Sector in Pakistan.
In order to make the
gazette more responsive to
the demands of the readers
the Director General is
painstakingly monitoring the
affairs of the gazette and your
valuable suggestions in this
regard are invited and will be
most welcome.

>>>>
out of growth.
Despite the possible advantages of a high marginal tax
rate in certain situations, it is
also a fact that in a peacetime
economy dedicated to expansion and troubled by inflationary pressures, a high marginal
tax rate injects evident inequities, incentives to waste
cheap tax currency and disincentives to growth and efficiency. As far as multiple tax
rates are concerned, these are
generally considered obsolete
in the context of future tax
planning. The verdict of fiscal
authorities generally is that
they are conducive to waste
and inefficiency. Where the
high marginal rate emerges out
of a high tax rate graduation of
a single tax on income, this can
be seen as a misguided application of the progressive ability to
pay principle that encourages
fragmentation and discourages
the growth of business enterprises.
Tax Rate Structure in Pakistan- An Overview:
In Pakistan the corporate
sector has been characterized
by three distinct types of companies- Public Ltd, Private Ltd
and Banking Companies and
each type has suffered levy of
tax differently with the Banking
Company having to suffer the
highest tax rate and the Public
Company the least. However
from 2002 a convergence of tax
rates for the three type of Companies has become evident and
Tax Year 2007 will see all distinctions removed and all three
'types' will be taxed at 35% flat.
Besides the corporate taxpayer, partnerships registered
as a 'Firm' under the statute
have also been taxed differently
till assessment year 2001-02
and such a 'Firm' has had to

pay 'Super Tax' only on profits

at maximum rates ranging
from 30% [1976-77 to 1982-83],
40% [1983-84 to 1986-87], 35%
[1987-88 to 1991-92] and 25%
[1992-93 onwards] and minimum super tax rates ranging
from 5% [1976-77 to 1982-83], 6%
[1983-84 to 1986-87], and 5%
[1987-88 to 2001-02]. This category of taxpayer is not cited in
the Income Tax Ordinance
2001. Interestingly, Firms comprising Professionals have
been exempted from levy of
Super Tax.
The [non-salaried] Individual
taxpayer [as well as AOP/ URF
/HUF /] has suffered levy of income tax at graduated rates for
different 'slabs' of income with
very high rates of tax for the

highest slabs in the 1950's and

1960's and these came down
significantly only in the mid
1980's. However the downward
trend has continued since and
in Tax Year 2006 the maximum
rate [25%] is less than the corporate rate [35%]. [see Fig 2].
The
Individual
earning
Salary Income only, or where
the salary income is more than
50% of the Total Income, has
however been accorded preferential treatment by allowing for
either taxation at a lower tax
rate or a lump sum 'ad hoc' tax
deduction and such preferential treatment continues under
the Income Tax Ordinance
2001.
In order to facilitate 'small
businesses' a Fixed Tax
Scheme was announced for the
assessment years 1991-92 to
1995-96 in which businesses
earning income upto a threshold limit, with limited capital investment and located in certain
specified areas, were taxed at
an adhoc lump sum amount of
Income Tax. No Return of Income was required to be filed
and normal law assessment
procedure was dispensed with
and qualifying businesses general small shopkeeperscould deposit due tax as notified by CBR in the Post Office.
This Scheme was discontinued

DotGazette
with effect from assessment
year 1996-97 and has not been
revived since.
A Flat Rate of Tax - Pros &
Cons
A unitary flat rate across the
board would appear to have obvious merits from the standpoint
of
simplicity
and
consequent administrative efficacy. Nevertheless, the fact remains that it would not
alleviate existing inequities in
income distribution and could
conceivably even contribute to
exacerbate the same. There
would also be considerable
problems with working out an
effective unitary rate of tax
that would ensure the same
generation of revenue as the
present graduated rate structure and at the same time reduce the burden of taxation. A
true unitary system would
mean doing away with imputation of corporate income. This
could then mean loss of significant revenue from this area. In
fact, for private limited companies this is the only area of revenue significance as far as the
exchequer is concerned, as in
Pakistan, only nominal corporate profits are disclosed by the
Pvt Ltd Co almost "as a rule."
(Because the company has a
separate juristic entity it is recognized as a 'person' apart

from its directors. Thus the

tax, under the present system,
falls on both the company and
its directors. Piercing the 'corporate veil' however makes it
only too evident that in actual
fact the separate identity of the
company is a fiction created by
statute. The identity of the directors merges into that of the
company. It is the company
that in the final analysis pays
the tax both for itself and its directors. In this view of the matter, imputation of its income
subjects the Company to multiple rates of taxation. A true
unitary flat rate system would
therefore necessitate doing
away with imputation). The
corporate ability to retain earnings and disburse salaries to
its directors, rule out, given the
present format of the statute,
disclosure of significant net
pre-tax profits for the private
limited companies which are
under no pressure to declare
dividends. It would be difficult
to offset the revenue loss from
this area. Too high a flat rate of
tax would abruptly escalate tax
burdens especially for the
small to medium enterprises.
At the same time the supernormal earnings of the larger enterprises would not be mopped
up by government which in the
long run would exacerbate in-

equalities in income distribution. The deliberate planned

quest for an egalitarian society
would thus remain unfulfilled.
A complicating factor in the
design of a unitary flat rate tax
system is the presence of many
small or new business enterprises that need preferential
treatment in order to be able to
establish their roots and grow.
Subjecting them to a relatively
high flat rate would thus run
counter to the stated objective
of ensuring their survival and
prosperity as it is these present
day small enterprises that are
ultimately expected to grow up
into the mature medium and
large size enterprises of tomorrow.
While the need to accord
some sort of relief for the small
business enterprise is a generally accepted proposition, yet it
has been argued that there
does not really exist a good
economic case for the preferential treatment of small business. It is pointed out that the
truly small business is economically inefficient and it
does not make much sense to
tax subsidize the inefficient. It
is also pointed out that small
business already enjoys, directly or indirectly, some kind
of price umbrella effect from
the forward shifting of heavier
business taxes on large enter-

prises so that tax relief on top

of tax shifting becomes a kind
of unjust enrichment. Attention
is drawn to the fact that it is the
new business that really warrants favorable treatment and
not merely the existing small
business-and for new business
it may actually be advisable to
give relief through measures
other than providing tax subsidies.
The countervailing arguments for according relief to
the small business enterprise
hinge on the recognition that
inevitable gaps occur in the
credit and risk capital supply
system and since small business depends heavily on internal funds for growth, some tax
forbearance is essential. Furthermore, it may not be at all
practical to attempt identification of "New business" vis a vis
the small business. An existing
small business in existence for
a number of years could conceivably become a new business through change in
ownership. Clearly this is not
the sort of "new business" that
the statute would like to support and promote.

Contributed by:
M. Muneer
Qureshi

DotGazette
BOOKREVIEW

"Aesthetics of Incompleteness"
This is indeed a prodigious talent at work and had it not been for the dedication of Amina Hassan , the writings might have been lost for good.
Reviewed by: M Muneer Qureshi

his compilation is
a true 'labor of
love' and one can
only marvel at
the many hours ,
nay years I am told [five to be
exact], spent on resurrecting
writings that otherwise might
well have been forgotten and
lost for good . Amina Hassan not
only ardently admires her gifted
father but much more importantly, shows an insight into his
thinking that brings out the real
persona behind the person.
Another title for this book
could be, "The protean genius of
Shoaib Bin Hassan." Not only
are the writings a brilliant example of masterly command
over the English language, they
have a range and scope that is
truly of epic proportions. This
can best be illustrated by referring to some of the titles cited in
the books' 'Contents:' -Darwin and collapse of
judeao Christian world view, Political cannibalism, The poetry
of primitivism, Secular sermons
from history, Of Tolstoy's Russia, Of Machiavellianism, The
life and love life of Dickens, Aesthetics of incompleteness, Wisdom without pillars, Of
absurdity
in
profundity,
Anatomy as destiny, Public
squalor, private affluence, A
farewell to book culture, Ghostsreal and metaphors, So spake
Zarathusthra, Saints and unsaintly saints, Cultural hor-

"Aesthetics of Incompleteness"
Prose writings of Shoaib Bin Hassan, compiled and
edited by Amina Hassan. Iqbal Academy, Lahore,
Pakistan. 484 pages. Price Rs 450/-,
ISBN 969-416-363-3. Website: www.allamaiqbal.com

rorscape, Emma Duncan's animal circus, Of things falling

apart.
The English language plays
an increasingly important role
in the 21st century. It is the language of choice in international
commerce. In the field of I.T. it
is the language in which most
computer programs are written.
It is the language of science and
modern technology. It is the preferred language in education especially higher education. And
in at least one country, India, it
is the language that has been
described as the glue that holds
the country together.
There are more than six billion human beings on this planet
today and of these about 400 million can fairly be said to be "na-

tive speakers" of the English

language. Yet English is today
widely accepted as an "international language." What is more,
many of the non native English
speakers - and writers- have acquired a proficiency in the use of
the language that exceeds that
of the native English. Who has
not heard of Joseph Conrad author of 'Lord Jim', 'Nostromo' &
'Heart of darkness' - among
many other masterpieces- who
could not even speak English till
age 21 and yet is today acknowledged as an extraordinary talent in the English language.
Vladimir Nabokov , creator of
'Lolita.' The Nigerian Nobel
Laureate, 'Wole Soyanka.' And
there are others. No, I am not
going to embarrass Shoaib
sahib by suggesting that he is in
the same league as Joseph Conrad. But he is not far behind. I
am sure that had he truly applied himself seriously to writing as a career he would today
be in the English Language Hall
of Fame.
The autobiographical section
of the book is a treat. Though incomplete, it is a snapshot that is
not easily forgotten. I was especially intrigued because going
through the autobiography, I
had a sense of 'dj vu' as many
of the places referred to have a
special meaning in my father's
[an army 'Medico'] life as well Quetta, Sialkot, Nisar Road, Lahore Cantt- especially the account of life in England in the

early fifties and the [return] voyage to Pakistan on board RMS

Caledonia, rings many bells for
me. 'Small world' indeed!
A true writer 'plays with
words.' And Shoaib Bin Hassan
is a champion at word play.
Words seem to flow effortlessly
from his 'moving finger.' And
they paint a picture that is at
once beautiful and haunting.
This is indeed a prodigious talent at work and had it not been
for the dedication of Amina Hassan , the writings might have
been lost for good.
Notwithstanding his huge talent, Shoaib Bin Hassan is
clearly a humble man, self effacing and unassuming. He clearly
shuns the limelight. But such
humility can be seen as a fault
when it almost leads to burying
a literary treasure trove! That is
what Mr. Hassan almost succeeded in doing - but for the
timely intervention of Amina.
Although I am all praise for
the book I have to refer to one
'deficiency' that I find somewhat
rankling. The articles have obviously been published over an extended timeframe in various
newspapers / magazines but
these are not expressly identified and no dates are cited. I
hope this will be remedied in a
subsequent edition of this book
as a 'Time Line' is very important to a writer for it clarifies the
context and shows how the
writer's thinking has evolved
over time.
Well done
Amina
Hassan
and very
well done
Shoaib
Bin Hassan!

DotGazette
THE LATESTINTERNATIONAL FISCAL RESEARCH
Taxation and the Evolution Tax Structure in Developing
of Aggregate Corporate
Countries: Many Puzzles
Ownership Concentration and a Possible Explanation

other policies would sensibly be

used to offset these tax distortions. Tariff protection for capital-intensive firms is one.
Inflation, imposing a tax on the
cash economy is another

Mihir A. Desai, Dhammika

Dharmapala, and Winnie
Fung NBER Working Paper
No. 11469 June 2005

Roger Gordon and We Li

NBER Working Paper No.
11267 April 2005,
Capital Account

ABSTRACT

ABSTRACT

ax policies seen in
developing countries are puzzling
on many dimensions.
To
begin
with,
revenue/GDP is surprisingly
small compared with that in developed economies. Taxes on
labor income play a minor role.
Taxes on consumption are important, but effective tax rates
vary dramatically by firm, with
many firms avoiding taxes entirely by operating through
cash in the informal economy
and others facing very high liabilities. Taxes on capital are an
important source of revenue, as
are tariffs and seignorage, all
contrary to the theoretical literature.
In this paper, we argue that
all of these aspects of policy
may be sensible responses if a
government is able in practice
to collect taxes only from those
firms that make use of the financial sector. Through use of
the financial sector, firms generate a paper trail, facilitating
tax enforcement. The threat of
disintermediation then limits
how much can be collected in
taxes. Taxes can most easily be
collected from the firms most
dependent on the financial sector, presumably capital-intensive firms. Given the resulting
differential tax rates by sector,

egal rules, politics

and behavioral factors have all been
emphasized as explanatory factors in analyses
of the determinants of the concentration of corporate ownership and stock market
participation. An extension of
standard tax clientele arguments demonstrates that
changes in the progressivity of
taxes can also significantly influence patterns of equity
ownership. A novel index of
the concentration of corporate
ownership over the twentieth
century in the U.S. provides
the opportunity to quantitatively test for the role of taxes
in shaping ownership concentration. The index of ownership
concentration
is
characterized by considerable
time series variation, with significant diffusion of ownership
in the post WWII era and
reconcentration in the late
1990s. Analysis of this index indicates that the progressivity
of taxation significantly influences corporate ownership
concentration and equity market participation as predicted
by the model. This evidence
supports the intuition of Berle
and Means (1932) that taxation can significantly influence
patterns of equity ownership.

high-tax one, and if the tax is

the statutory or effective average one. There is also evidence
that countries' own tax rates
are reduced by liberalization of
exchange controls in other
countries.

On the Undesirability of
Commodity Taxation Even
Liberalization and
When Income Taxation is
Corporate Taxes
Michael Devereux, Ben Lock- Not Optimal
Louis Kaplow
wood and Michela Redoano
Department of Economics, NBER Working Paper No.
University of Warwick & 10407 March 2004
CSGR, University of Warwick
CSGR Working Paper No. ABSTRACT
n important result
119/03 First version: July 2002
due to Atkinson and
This version: March 2003

ABSTRACT

his paper studies

whether
exchange
controls, particularly
on the capital account, affect the choice of corporate tax rates, using a panel
of 21 OECD countries over the
period 1983-1999. It builds on
existing literature (i) by using a
unique data-set with several
different measures of the corporate tax rate calculated from
the actual parameters of the
tax systems: (ii) by allowing exchange controls to affect the intensity of strategic interaction
between countries in setting
taxes, as well as the levels of
tax they choose. We find some
evidence that (i) the level of a
country's tax, other things
equal, is lowered by a unilateral
liberalization of exchange controls, and (ii) that strategic interaction
in
tax-setting
between countries is increased
by liberalization. These effects
are stronger if the country is a

Stiglitz (1976) is that

differential commodity taxation is not optimal in the
presence of an optimal nonlinear income tax (given weak
separability of utility between
labor and all consumption
goods). This article demonstrates that their conclusion
holds regardless of whether the
income tax is optimal. In particular, given any commodity tax
and income tax system, differential commodity taxation can
be eliminated in a manner that
results in a Pareto improvement. Also, differential commodity taxation can be
proportionally reduced so as to
generate a Pareto improvement. In addition, for commodity tax reforms that do not
eliminate or proportionally reduce differential taxation, a
simple efficiency condition is offered for determining whether
a Pareto improvement is possible.

Complete articles can be

downloaded from:
www.nber.com

DotGazette
MESSAGEOFTHE QURAN

onsider the profound

insights contained in
the verses of the Holy
Quran:
1. "With power did We construct the heavensverily, We
are 'continuously expanding' it."
[AL QURAN; Zariat, 51:47]
The reference to the 'heavens'
in this verse clearly refers to
what is today an established fact
- that the universe is in a state of
expansion. At the time that the
verse was revealed to the
prophet and put to writing (early
7th century A D) there was no
concept of the state of the universe as an expanding entity.
Most people then, including men
of learning, thought that the
earth was the center of the universe and the sun and the planets revolved around the earth.
No one even imagined that there
were other suns too, billions
more, other planets and indeed
other galaxies!
Living in such an age, it is
truly extraordinary that an unlettered Arabian, denizen of an
arid desert land, should make
such a profound statement. But
then this is not the prophet
speaking- these are the words of
God Almighty and God knows
all! However the scientific proof
for this has come in the 20th century. Astrophysicists have now
established through rigorous re-

search based on the light spectrum of distant stars [the so

called "red shift" phenomena]
that galaxies are moving away
from each other and the universe is expanding at a rate
called the "Hubble Constant".
Also, energy released by dying
stars at the very edge of the universe [quasars, pulsars] is being
monitored and their "red shift"
studies lend strong support to
the idea of an expanding universe. We also know now that
this expansion will one day [billions of years in the future] come
to an end and that will have
apocalyptic consequences for
human kind. All this was made
known to the prophet of Islam by
God Almighty some 1400 years
ago and the prophet ensured
that the knowledge was put before mankind in writing through
the Quran.
2. "Then He (Allah) gave the
earth an 'oval' from. (Daha ha).
[AL QURAN; Naziat, 79:30].
Although a topic as mundane
as the elliptical shape of the
earth might appear innocuous to
us today, in the 7th century this
knowledge was truly revolutionary. It was widely accepted then
that the earth was flat as it did indeed 'appear' to be. However the
Quran said otherwise and the
Arabic word used [Daha] likened
the shape of the earth to that of

the egg of an ostrich. It is significant that the egg of an ostrich is

not round but 'elliptical' and that
is exactly how the earth is
shaped. However in translation
this point was missed and as the
translators had no inkling about
a 'round' or 'elliptical' earth they
translated the Arabic "Daha" as
'spread out' or 'flat' and so it remained in translation and only
recently have scholars realized
this mistake.

Not only has the existing

shape of the earth been correctly
identified as "elliptical" in the
Quran, the 'future shape' of the
earth as it will be on 'judgment
day' (qiyamat) also finds specific
mention.
3. When the earth is flattened
out and it casts forth what is
within itand becomes empty.
[AL QURAN Inshiqaq ; 84:3-4]
Astrophysicists today are generally agreed that a time will
come when the expansion phase
of the universe will come to an
end and the contraction phase
shall start and as the universe
contracts, a reversal of gravitational force will take place that
will eventually lead to the earth
(and all other celestial bodies)
being crushed and flattened out,
spewing out all that they hold.
The origin and creation of the
universe has intrigued and per-

plexed man through the centuries. In 1950 the now well

known 'big bang' theory was put
forth by physicists Ralph Alpher,
Hans Bethe and George Gasmow that in essence postulated
that in the beginning the universe was a super dense mass
reduced to less than the size of a
pinhead - the so called 'singularity' [nukta]. Some fifteen billion
years ago it exploded suddenly
and violently and in 10 minus 32
seconds of time expanded 10 to
30 time or more in size - and continued to so expand and has
been in a state of expansion ever
since.
Astonishingly, what has been
theorized by physicists in 1950
finds mention in the Quran
[some 1400 years earlier] in
Surah Al Anbiya [21:30]
"Have they not who disbelieve
seen that the heavens and earth
were joined together (fused, as
one piece), then We parted
them."
Subhan Allah! [All praise to
Allah].
Consider further, the startling
revelation in the Quran about
the mineral 'iron' as it exists on
earth:
Thus it is stated in the Quran:
4. "We first created man from
an essence of clay; then placed
him, a living germ, in a safe enclosure (the womb). The germ
We made a clot of blood, and the
clot a lump of flesh. This We
fashioned into bones, then
clothed the bones with flesh,
thus bringing forth another creation". [AL QURAN Al Mominoon; 23:12-14].
In the Quran the "water cycle'
finds special mention and it is
emphasized that water is central
to life on earth and that God
makes special provision for an
adequate supply of water of
mankind.

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The Third Technical Conference of the
Association of Tax Authorities of Islamic Countries
It was agreed that considering the shortfall in Government Finances in
most countries, and the consequential, recurring, fiscal deficits, there was a
pressing need to significantly improve the Tax to GDP ratio.

four day International Conference,

the Third Technical
Meeting, of some 20
Islamic countries , members of

In this Issue
The Third ATAIC
Technical Confernce

2
4
5

Editorial
Chairman CBR Visits Dot
The Design of Tax Incentives

Patron

M. Muneer Qureshi
(Director General)
Staff Advisor

Dr. Hamid Ateeq

(Additional Director)
Editor-in-Chief

Munir Ahmed Ch.

Editors (English)

Sobia Saleem &

Humaira Daud
Editors (Urdu)

Arsam Aftab &

Misbah Nawaz
Design & Layout

Azhar Jehangir &

Zafar Iqbal Burki
Directorate General of
Income Tax Training &
Research, Sutluj Block,
Allama Iqbal Town,
Lahore.

the Association of Tax Authorities of Islamic countries

[ATAIC], was held at Islamabad from November 22 to 25.
A select group of Income Tax
Group officers received the delegates and represented Pakistan in the conference.
Chaired by Mr. M. Yusuf Abdullah, Secretary General (Revenue Division) and Chairman ,
Central Board of Revenue,
Government of Pakistan, the
delegates to the conference
discussed Resource Mobilization in the Region with special
reference to Improvement in
the Tax to GDP ratio, Tax Base
Broadening, Voluntary compli-

ance and Shariah Taxation

[zakat]. Mr. M. Muneer
Qureshi, Director General,
DOT, Lahore, was appointed
Conference Rapporteur. Country papers were presented,
views exchanged and questions answered by the various
delegates and there was broad
consensus on the need to move
ahead with tax reform measures already initiated by most
countries in the region.
Progress made in various
countries on reduction in tax
rates, both corporate and personal, the (imaginative) use of
Information Technology, Taxpayer Facilitation and other as-

pects having a bearing on resource mobilization was high

lighted. It was agreed that considering the shortfall in Government Finances in most
countries, and the consequential, recurring, fiscal deficits,
there was a pressing need to
significantly improve the Tax
to GDP ratio. Successes
recorded by Turkey in improving the Tax to GDP ratio and by
Malaysia in Tax Base Broadening evoked much interest. Pakistan stressed the need to
repose trust in the taxpayers
and bridge the credibility gap
between Tax Administration

>>>>

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EDITORIAL

he December issue of
DOT Gazette is with
you. This month we
had the honor of playing host
to the Chairman CBR, Mr. Abdullah Yusuf, who especially
visited DOT in order to address the probationary officers of the 33rd STP He also
.
inaugurated the newly built
Conference Hall at DOT.
Though winter in general
makes life somewhat slower,
however activities in the congenial environment of DOT do
not seem to abide by this rule
of nature. DOT remains as
hectic as ever. Its rather been
a bit more hectic as the training program for the 33rd STP
enters the final phase. The
probationers are now fast approaching the DOT STP
Exam and the FPSC FPOE
after which they will report to
IBA Karachi for the specially
designed Tax Management
MBA program.
The MBA Degree program
has been made an integral
part of the officers training
and the rationale is to equip
the officers with high level professional skills, conceptual
clarity and practical proficiency- necessary qualities in
todays demanding work environment. This speaks volumes of the CBR commitment
to create a truly efficient work
force. In November the 33rd
STP went on a Country Study
Tour to Murree, Ayubia, Nathiagalli and Abbottabad. Hopefully, the trip was both useful
and enjoyable. DOT administration and the Gazette team
are thankful to you for your
keen interest and valuable
suggestions.
Chief Editor

>>>>
and Taxpayers. Pakistan's comprehensive self assessment
scheme impressed many delegates especially as it had not led
to any fall in tax revenues as
many had initially feared. A need

to control the unhindered

growth of the informal sector
was stressed by many delegates
as this sector robbed the exchequer of revenues and contributed significantly to a
deterioration of the tax base. In

the concluding session, the conference adopted three Reports

on three different topics, viz. Resource Mobilization, Voluntary
Compliance and Shariah Taxation. In his concluding remarks,
the ATAIC Chairperson,

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Mr. M. Abdullah Yusuf stressed

the need for member countries
to equip themselves with the latest in modern science and technology, especially in the field of
Information Technology which
was crucial to enhancing the
ability of Tax Administration to
properly appraise data and automate processes central to tax
collection, audit and detection of
tax evasion.
The delegates greatly appreciated the excellent conference
arrangements made and the
deep personal interest taken by
Mr. M. Abdullah Yusuf, Secretary General (Revenue Division)/Chairman, CBR, Mr.
Salman Nabi, Member (Direct
Taxes), CBR, and other CBR officers and also the warm hospitality extended to them.
The 4th Technical Conference
of ATAIC will be held in Kuwait
in 2007.

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ONCAMPUS

Chairman CBR

VISITS DOT
The officers should think that we are
in partnership with the taxpayers and
that we should facilitate them so that
their business flourishes - the more
they earn the more will be our share
in their income.

r. M. Abdullah
Yousaf, Chairman
CBR, visited DOT
on Saturday, 18th
November, 2006, to meet the probationers of 33rd STP He was re.
ceived by the Director General,
senior officers and the faculty
members of DOT. This meeting
was originally scheduled to be
held in the CBR Headquarters,
Islamabad at the end of the six
days long Country Study Tour of
the probationary officers but due
to the pressing commitments of

the Chairman, meeting was

rescheduled at DOT Lahore.
The meeting was held in newly
refurbished Iqbal Memorial
Conference Hall, which was for-

mally inaugurated by the chairman immediately after his arrival. The newly inaugurated
Iqbal Memorial Conference
Room has a seating capacity of
50 persons with state of the art
audio visual faculties. This hall
will not only be useful for ongoing training activities but will
also be used for international
conference.
The Director General Mr.
Muneer Qureshi briefed the
chairman about the training
received by the probationers.
The chairman later addressed
the probationers and talked
about his expectation from the
new lot of officers. He also responded to various queries
made by the probationers
about their future career in
the department.

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RESEARCHARTICLE

The Design of Tax Incentives

it is increasingly becoming evident that non tax benefits might
weigh significantly in the calculations of the foreign investor and in
his scale of parameters having a bearing on feasibility these could
have primacy over the advantages conferred by tax benefits.

esigning tax incentives is not

easy. As a stimulus measure an
incentive
provided through deliberate interference with statutory taxation
measures is expected to enhance profit ability sufficiently
to increase competitiveness.
On the negative side is the revenue that the exchequer loses
as long as the incentive remains in force.
Tax incentives have been
considered important in the
context of promotion of industrialization. The geographical
dispersal of industry is another
important criteria kept in mind
while designing these incentives. The lack of adequate linkages hinders the smooth flow
of factors involved in production across the economic expanse. Tax incentives are
expected to compensate for
such limiting factors - at least
to an extent.
In the opinion of many, while
designing tax incentives the
long term objectives should
have primacy over short term
goals. Disproportionate effort
expended to realize proximate
intermediate goals can be
counterproductive for eventually such a (shortsighted) approach could interfere with and
even prevent the achievement
of the more fundamental objec-

tives of public policy.

Investment Incentives
The rationale for the deliberate encouragement of specific
industries is that these could
lead the way in the industrialization effort by giving a cue to
other related and complementary activity through the externalities - linkages - that they
induce. Given an acceptance of
such a scenario, the interest of
the planners in designing the
incentive measures is easily
understood. In their scheme of
things efforts to attract capital
to the leading industries has
high priority and tax incentives
are considered a crucial component of the plan.
While increased availability
of capital would certainly go a
long way towards increasing
the output of the specific industry to which the incentive has
been targeted, in many cases
an unintended by-product is
the substitution of capital for
labor in the favored industry.
Over time this could lead to
generalized substitution of capital for labor over the full spectrum of the entire industry.
Considering that third world
countries are plagued with severe problems related to labor
redundancy due to over population, such a development
amounts to a distortion in factor utilization and bodes ill for
the future economic format

that would take shape as a result of such incentives measures.

It would be recognized however that the real
reason for such selective subsidization of investment is obviously not merely to increase
the capital stock of an industry
targeted to benefit from the incentive but rather to enhance
the capability of the industry to
produce more of the desired
output. Thus it is the capability
to throw up increased output
that is the long term objective.
When the incentive measure is
based upon output rather then
upon investment in the selected industry than it will not
have the effect of increasing
capital formation without distorting relative factor prices.
The measure then will have
the effect of creating a bias for
adoption of techniques of production that result necessarily
in capital intensity (more capital per unit of output).
General investment
incentives have the serious defect of under pricing capital in
general. Considering the fact
that developing countries are
capital deficient the under pricing of capital would intensify
demands for capital goods.
Most of these would be machinery and allied items and
the great majority of these
would originate from already

established industry abroad. A

greater chunk of the already
scarce foreign exchange would
thus be appropriated for importing such capital goods.
The only redeeming
feature of a policy of designing
general investment incentives
would be the stimulus it gives
to foreign investment and to
domestic industry producing
capital goods. However in the
majority of cases these benefits
are not likely to outweigh the
disadvantages as it is increasingly becoming evident that
non tax benefits might weigh
significantly in the calculations
of the foreign investor and in
his scale of parameters having
a bearing on feasibility these
could have primacy over the
advantages conferred by tax
benefits. As for domestic industry producing capital goods
since this is already an area
that is sought to be developed
it would not be realistic to expect that in the formative
phases of economic development it would be sufficiently
developed to be able to make a
significant contribution thru
production of adequate quantities of capital goods.
Among the many
enigmatic problems that planners in third world countries
face is that of opening up backward regions in the country by
effecting a decisive change in
the labor - capital mix and thus
initiate dramatic changes in
productivity. The objective
clearly is to escalate wage levels from their existing depressed state to levels that are
socially acceptable and to increase aggregate industrial
output.
As should be evident
from the statement made
above the problems posed by
regional disparities in levels of

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economic development have
multiple dimensions. Because
of resource constraints the
government is unable to unilaterally make investment in all
the various undeveloped regions on a scale that would
lead to meaningful change. The
alternate plan thus is to induce
private investment to move
into these areas. This however
is easier said than done.
The less developed regions in a country are traditionally characterized by lack
of infra structure (means of
communication, energy supply,
education, healthcare etc.) and
an adverse labor - capital mix
in whatever industry obtains
there. The economic deficiencies insulate and isolate the
backward region from the
more developed areas due to
the weak linkages. Over time,
therefore, left to themselves,
the problems posed by underdevelopment breed on themselves and exacerbate and
accentuate the original situation. As a direct sequel, while
the rich in the country keep on
getting richer the poor not only
remain poor put slide downwards on the poverty scale.
Given the above scenario the
reluctance of private enterprise to move into so forbidding
a situation is quite understandable especially as improvement of the condition of a
people is hardly the principal
motivating factor in the calculations of the entrepreneur
when he makes an assessment
with regard to the feasibility of
an investment decision. The
cost - benefit equation is the
key to a positive response from
private enterprise and the
costs being what they are, the
benefits are not likely to be a
sufficient inducement for the
entrepreneur to take on the

daunting challenge that the

backward region presents.
However, if costs are lowered
sufficiently, then it follows logically that the benefits would
appear to be more attractive.
Going a stage further, if it is
possible to lower costs and at
the same time increase the
benefits the attractiveness of
the situation improves dramatically.
Insofar as the tax burden
constitutes a cost factor it impacts unfavorably on profits. As
in the final analysis it is the
profits that can be realized that
loom so large in the mind of the
entrepreneur, a reduction in
the tax burden is expected to
do the trick in luring the entrep
to the backward region. Taxes
are imposed through statute.
They can thus be withdrawn
completely (exemption) or held
in abeyance (tax holiday) or
levied at a reduced rate. (preferential taxation.)).
Most fiscal authorities today
do not favor tax exemption as a
means of attracting private enterprise to the less developed
regions. It is increasingly being
felt that most of these incentives are in the long run counterproductive.
One of the reasons that such
incentives are viewed with disfavor is that these have been
seen over time to lead to a substitution of capital for labor.
Considering that most third
world countries are labor abundant and capital poor it makes
much more sense to use labor
wherever it is feasible to do so
i.e. wherever its use does not
impact unfavorably on productivity and lead to deficiencies in
output. Given the need to increase productivity, induction
of capital is essential as there
are very real limitations to
what labor alone (or labor with

very little capital) can achieve.

In any case the use of more
capital is one of the aims of development policy. After all, industrialization means putting
machines to work for man so in
that context substituting capital for labor is inevitable. However the continuing use of
more and more capital per unit
of output perpetuates capital
intensity in industry and this
trend once established is difficult to reverse. The dangers inherent in such a situation
include exacerbation of existing labor redundancy problems
faced by the developing country. Additionally, labor is unable
to acquire the work experience
that in the long run is crucial to
instill capabilities that will have
the most long lasting impact in
terms of enhanced productivity
of a significant segment of the
total available labor force.
In addition to the reasons
given above, tax exemptions
distort information relevant to
quantification of the real cost of
economic development. Such
quantification is necessary to
evaluate and monitor the efficiency of a development program. After all it must be
known what the execution of a
development plan entails. Insofar as tax exemptions represent revenue deliberately
foregone, to that extent it represents the cost of bringing development
to
the
less
developed region. However the
fact that a specific industry has
come to the target region frequently clouds the cost involved. Again - and this is
important - it may not be at all
clear that it was the tax incentive that was actually instrumental in brining the industry
to the backward region. In fact
the available evidence suggests strongly that the exemp-

tions actually constitute windfall gains to industries that

would have located in the region in any event.
One of the problems with tax
incentives is that once enacted
they tend to become institutionalized. Over time the beneficiaries get conditioned to the
incentive and find it increasingly worth their while to come
to their defense when ever they
face a challenge. This vested
interest will take great pains and even incur much expense to ensure that the incentives
are retained irrespective of the
fact that they might be poorly
designed, inequitable or ineffective.
Tax incentives manage to escape public scrutiny largely because they are not treated as
items of public expenditure
when infact they are really on
all fours with the public expenditures in that they consume
potential public funds.
It is increasingly being felt
that explicit subsidies achieve
more in terms of desired objectives (viz increased output, employment and domestic value
added in exports) without creating undesirable distortions in
resource allocation. Also the
cost of the incentive is much
more evident when administered through a subsidy. Thus
the well-worn paths taken by
tax incentives - accelerated depreciation, investment credit,
initial write off etc - should be
trod on not with alacrity and
blind enthusiaism but rather
with extreme caution and may
be even reluctance so that the
inevitable negative effects are
minimized.
Contributed by
M. Muneer
Qureshi

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IN THIS ISSUE

Passing Out of
33rd STP
pg.1

Dot Timeline
2006
pg. 3

Direct Taxation of Income in Pakistan, 1947

-2006 - an overview
pg. 7

Passing Out of the Officers of 33rd STP

he Passing Out Ceremony

of officers of the 33rd Specialized Training Program
was held at DOT (DT)
HQ's, Lahore, on the 28th of
Dec 2006.Mr Muhammad Abdullah Yusuf, Secretary General,
Revenue Division and Chairman
CBR, was the chief guest. Mr
Muhammad Talha, Member
(HRM), CBR, Mr Salman Nabi,
Member.( Direct Taxes), CBR, Mr
Haji Ahmad, RCIT, (Eastern Region), Mr Umar Farooq, DG, LTU,
Lahore, DOT Faculty Members
and guests from the private sector, including bankers, lawyers
and doctors also graced the occasion.
The officer's of the 33rd STP went
through an eight month long

being provided to them, including

the MBA in Tax Administration at
IBA, Karachi . "Education should
be a welcome opportunity whenever it comes," he said.
Addressing the officer's, Mr
Muhammad Talha, Member
(HRM),CBR, expressed the hope
that the new skills that they will

PATRON

M. Muneer Qureshi
(Director General)
STAFF ADVISOR

Dr. Hamid Ateeq

(Additional Director)
EDITOR-IN-CHIEF

Munir Ahmed Ch.

EDITORS (ENGLISH)

Sobia Saleem &

Humaira Daud
EDITORS (URDU)

Arsam Aftab &

Misbah Nawaz
DESIGN & LAYOUT

Azhar Jehangir &

Zafar Iqbal

training program that started on

the 26th of April, 2006 and concluded on the 27th of Dec. The
specialized training at DOT
in accountancy, law, office procedure, computer skills including
TMS comprised the second phase
of the IBA MBA program [ the 1st
phase being the CTP at the Civil
Services Academy, Walton, Lahore] and the officers will now join
IBA Karachi for the final phase
after which the successful participants will be awarded an MBA
Degree in Tax Administration.
The specially tailored MBA in Tax
Administration is now an integral
part of the Income Tax Group pro-

bationary officer's pre-service

training regimen and is designed
to instill specialized skills in the
officer's that will have a direct
bearing on the work that they will
be eventually doing in the deptt.
Speaking to the officer's on the occasion, Mr M Abdullah Yusuf, congratulated them on their
successful completion of the STP
and advised them to have a positive outlook and make full use of
the unique training opportunities

acquire in accountancy, audit,

management and business studies at the IBA Karachi will enable
them to not only discharge their
duties efficiently but will give new
meaning to the reform effort currently underway in CBR and it's
field formations.
Mr Salman Nabi, Member, Direct
Taxes, CBR, said that DOT had
evolved into an important training
institution and the good work

>>>>

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EDITORIAL

DOT Report Card - 2006

he month of December,
2006 was very hectic at
DOT. This month the probationers of 33rd STP of Income Tax Group completed
their training.
Final passing out examination of the probationers of the
33rd STP was held at DOT in
the start of December, after
which they proceeded to their
FPOE at FPSC which ended on
27th of December.
The passing out ceremony of
33rd STP was hled on December 28, 2006. Secretary General,
Chairman, CBR, Mr. Muhammad Abdullah Yousaf graced
the occasion with his presence.
The batch would join IBA
Karachi on 8th of January for
the specially designed Tax
Management MBA Program.
The faculty members & DOT
administration played a commendable role in the training.
It speaks volumes of their efforts that they made the probationers,
with
diverse
educational background, pass
through this ordeal successfully. The whole batch was feeling gratified and elated on the
successful completion of their
STP
.
For this we owe special gratitude to the D.G. who took personal interest in the training,
especially the presentations on
national and international issues, role play sessions and
case studies, through which he
confronted the officers with policy issues and practical problems.
DOT faculty deserves more
gratitude than these words can
contain. We hope we will continue to benefit from their guidance through the thick and thin
of our future careers.

Three STP batches complete their training in one calendar year [unprecedented]
May 06,: Workshop on Integrated Training Strategy
June-06: Launch of TMS Training Program
Aug 06: DOT Launches DOT Gazette
Breaking new ground DOT launches training initiatives for
support staff
Capacity Building continues on new improved lines
DOT represented in 3rd Technical ATAIC Conference
hosted by CBR in Dec 06
DOT Participates in 1st ever Workshop on Integrity Management hosted by HRM Wing at Bhurban, in Dec 06.
DOT facilitates holding of Audit Working Sessions by Audit
Wing of CBR -- Dec 06

done here had already borne fruit

as was evident from the fact that
there had been a 20% increase in
Return filers which, in his opinion,
was largely relatable to the increased efficiency of departmental officer's in discharging their
duties in the field.
Mr M Munir Qureshi, DG(DOT),
made a presentation explaining
the important events in the DOT
calendar in 2006. He said that
three STP batches [the 32nd, 31st
and 33rd STP respectively] had
completed their training in one
calendar year which was unprecedented.
The DG pointed out that besides
their regular training program
the probationers made presentations on a wide variety of subjects
and engaged in 'role play' sessions
that helped build up their confidence and improve their problem
solving capabilities. Eminent
speakers from the private sector
also addressed them on significant issues.
The DG(DOT) said that given the
excellent DOT training facilities
and physical infrastructure every
effort should be made to transform DOT into a regional training
hub with an International outlook.
He pointed out that an ATAIC international conference on rev-

enue forecasting had already

been held at DOT in 2005 and another conference of ATAIC Training Institute Heads was being
planned for March 2007.
Earlier, the PMC, Mr Kashif
Aslam thanked the DG(DOT) and
Faculty for providing excellent facilities and cooperation to the probationers during the training
program.

The Chairman CBR distributed

certificates to the successful probationers and awards to position
holders. Memento's were presented by DOT to the Chairman
CBR,
Member CBR (HRM), and Member CBR (Direct Taxes).
The ceremony was followed by a
bonfire, dinner and a musical program.

A W A R D S

Munir Ahmed Ch. (Best Probationer)

Ms. Attiya Rehman (Best Female Probationer)

H O L D E R

Azhar Jehangir (2nd Best Probationer)

Capt. Arsam Aftab (Best Conduct)

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DOT TIMELINE 2006
JANUARY

FEBRUARY

Inaugoration of Badminton Court.

32nd STP- Final Passing Out Ceremony.

MARCH

APRIL

Training in the Tax Management

System (TMS) Launched.

DOT hosts an All Pakistan Mushaira

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DOT TIMELINE 2006
MAY

DOT hosts Integrated Training

Strategy Workshop.

31st STP Probationers country

study tour

JULY

AUGUST

31st STP
Final Passing Out Ceremony

JUNE

DOT gazette launched.

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DOT TIMELINE 2006
33rd STP Probationers make Field Visits

OCTOBER
Mr Ishrat Hussain, Chairman NCGR & Former
Governor, State Bank of Pakistan, Visits DOT.

NOVEMBER

DECEMBER

*DOT participates in the 3rd Technical ATAIC

Conference *33rd STP Country Study Tour *Chairman
CBR inaugurates new DOT Conference Room.

*DOT participates in the first Integrity Management Conference at

Bhurban organized by CBR HRM Wing * DOT is the venue for the first
three day National Audit Working Sessions organized by CBR Audit Wing
* 33rd STP_ Final Passing Out Ceremony.

SEPTEMBER

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RESEARCHARTICLE

Direct Taxation of Income in

Pakistan, 1947 -2006 - an overview.
The lack of equity between sectors is a major flaw in Pakistan's tax structure. It provides the 'raison detre' for evasion of tax
by those deriving income from sectors other than agriculture. They see no difference in income earned by them from manufacturing and that earned by those engaged in agriculture. It is difficult to comprehend why a feudal earning a crore of rupees
or more annually from say an orchard or land holding should be granted exemption from levy of income tax.
Contributed by
M. Muneer
Qureshi

akistan's tax to GDP

ratio in 2005-06 is less
than 10 and it has
hardly 1.7 million taxpayers on the tax rolls.
Given a population of 165 million this translates into a very
narrow base indeed
[ 1.03% ]. On the Gini scale,
Pakistan ranks at 41 and that
indicates fairly pronounced inequality in the distribution of
income. Almost sixty years of
progressive tax rates appear to
have had little or no effect in reducing inequalities in the distribution of income. GDP is
pitched at the equivalent of just
about $4 bill that yields a per
capita income of some $ 2,400.
As a consequence, overall, taxable capacity is limited and the
existing
taxpayers
get
squeezed ever more as the
need for additional revenues increases.
Between sectors,
there is a significant lack of equity. Both manufacturing and
agriculture contribute roughly
20% to GDP However Manufac.
turing contributes approximately 65% of the income tax
paid to the federal exchequer

while agriculture contributes

just over 1%. Similarly, wholesale and retail trade contribute
about 17% to GDP and only
2.8% % as income tax. Again,
Transport, Storage and Communication contribute 14% to
GDP and just 4.5% as Income
Tax.
The lack of equity between
sectors is a major flaw in Pakistan's tax structure. It provides the 'raison detre' for
evasion of tax by those deriving
income from sectors other than
agriculture. They see no difference in income earned by them
from manufacturing and that
earned by those engaged in
agriculture. It is difficult to
comprehend why a feudal earning a crore of rupees or more
annually from say an orchard
or land holding should be
granted exemption from levy of
income tax. After all, income is
income- whatever it's source.
The rationale for the federal
tax exemption for income from
agriculture is stately constitutional insofar as agriculture
being a 'provincial' subject, income therefrom too must, it is
argued, fall within the purview
of the respective provincial government- where it arises. Well,
if the income derived from agriculture can't be taxed by the
federal government, what pre-

vents the provincial government from doing so? After all

provincial governments do levy
taxes- so why not a tax on income from agriculture as well?
The fact of the matter is that
no one seems to be willing to do
so. Agriculture is cited as a 'difficult' sector of the economy
subject to the vagaries of the
weather and supposedly riddled with multiple problems.
Imposing a tax on income from
agriculture would statedly result in an insufferable burden
for the average farmer and
would ruin him .Especially in
Punjab, the average landholding is cited as not supportive of
an income tax and any such
taxation would render the cultivation of the land on commercial lines as uneconomical.
Historically, when tax has
been levied on income, the general principle has been that 'all'
income, regardless of source, is
subject to taxation. In post
Meiji Japan, agricultural income came to be taxed steeply
and, paradoxically, the yield
from land increased as land
hitherto neglected and considered to be 'marginal' was
brought into use through intensive cultivation using scientific
methods to increase output so
as to yield additional income to
compensate for the increased

'cost' of cultivation consequent

to the increase in taxation on
agricultural income. Infact the
'surplus' from agriculture
funded the development of the
new manufacturing sector as
second hand technology was
imported, installed and put to
use in Japan. Promising students in engineering and the
sciences were sent abroad to
learn first hand - and then return to Japan to put their newly
acquired knowledge and experience to use in the motherland.
With steep taxation on agriculture coupled with the 'surplus' generated from more
intensive and efficient cultivation of land providing the
wherewithal for investment in
plant and machinery, the
Japanese economy developed
rapidly and the systematic 'capital deepening & widening'
changed the complexion of the
economy from that of mainly
agricultural in the mid 19th
century to that of an industrialized economy by the 1930's. The
irony however is that taxation
of agricultural income actually
'improved' agriculture rather
than 'ruin' it - as many had
feared. In Pakistan, a century
and a half later, these (unfounded) fears still persist and
keep the wholly unwarranted

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exemption for agricultural income firmly on the statute. One
can only hope that better sense
will prevail - and soon.
While Meiji Japan was a sovereign state, India in the mid
19th century was a British
colony- and remained a British
colony till the mid 20th century.Resultantly, the governments of the day in the two
countries had different perceptions about economic development. Japan was determined to
industrialize and 'catch up' with
the western powers as it saw
industrialization essential to a
rapid increase in 'earning
power.' Industrialization went
ahead even though Japan had
no natural mineral resources
like iron ore, coal and no oil.The
British on the other hand saw
no need to industrialize
India.In their view, India had
'comparative advantage' in
agriculture and 'comparative
dis-advantage' in manufacturing and so it made eminent
sense, in their view, to develop
agriculture. It also made sense,
again in their peculiar view of
the situation as it obtained then
in India, to 'cultivate the rural
aristocracy' -largely, creatures
of the British- that owned much
of the agricultural land. And
what better way to 'cultivate'
the agriculturist's of India than
to grant them a blanket exemption from levy of any Income
Tax on the income derived from
sale of agricultural produce?
While agriculture received
'preferential' treatment with regard to taxation of agricultural
income, manufacturing was actively discriminated against.
Not only was income derived
from manufacturing subjected
to income tax, the tax rate
structure was such that the
higher slabs of income had the
highest marginal rate of tax- so

high infact as to be seen to be

almost confiscatory. Needless
to say this was not conducive to
making investment in manufacturing. Fiscal policy thus had a
good deal to do with India's relatively poor industrial infra
structure- especially in the
areas that came to constitute
the new State of Pakistan and it
is now being speculated -including informed opinion in academia- that this state of affairs
was not 'accidental' but deliberate and was deliberately contrived to ensure a steady supply
of 'primary' goods and raw materials - cotton for one- from

given the narrow tax base, any

reduction in tax rates would
necessarily lead to a fall in tax
revenues - and the greater the
reduction in tax rates the
greater the fall in revenue.
The almost perversely high
tax rates continued to plague
the fiscal scene in Pakistan till
the mid '80's. There were three
tax rates for the corporate sector, one each for Banking Companies, Public Limited and
Private Limited Companies
with the highest tax rate reserved for Banking Companies
and the lowest for Public Limited Companies. Private Lim-

India to the textile mills of Manchester and Birmingham in

Britain and also a ready market, in India, for the finished
products of British Industry.
It is indeed ironic that in the
post war period when many
former 'colonies' became independant much so called 'informed' opinion in the westincluding many academic's
with impeccable credentials
such as the Swedish researcher Gunnar Myrdal, of
'Asian Drama' fame, continued
to advise developing third
world countries that their salvation lay in a high enough tax
rate structure that would 'ensure' that much needed tax revenue was put in the State
coffers. The great fear was that

ited Companies were placed in

between the two. For personal
Income taxation, the highest
marginal rate was pitched at an
incredible 97% in the 1950's but
came down to 60% in 1983-84
and then down further to 45% in
1986-87 to be further reduced to
35% in 93-94 and to 25% in 2006.
By tax year 2007, the three
tiered corporate rate structure
will be a thing of the best and
there will only one flat rate of
35% for all companies.
In the late 1970's the existing
income tax statute- a carryover
from the colonial era- was perceived as having become cumbersome with the many
amendments made over the
years. Moreover, the exemption
for income from agriculture

was also being seen as an

anamoly and these deficiencies
were addressed in a new income tax statute prepared to
supersede the old income tax
statute. But lo and behold, such
is the power of vested interests
that the exemption for income
from agriculture was soon restored in the new tax statute,
the income tax Ordinance of
1979 and the 'status quo' maintained. The narrow tax base
enigma was thus not resolved and continues to haunt us to
this day.
With the yield from income
tax on a 'plateau,' only a dramatic change in the tax statute
was seen as making it possible
to bring about a significant escalation in income tax revenues. This change finally
came about in the early 1990's
when a system of income tax
withholding at source on a wide
range of transactions was introduced and in it's wake followed
the expected surge in income
tax collections with the result
that by 1995-96 the tax to GDP
ratio shot up to 13.7% from the
previous almost static level of
12% or so.
.
Another change in law that
has had a salutary effect on
revenue collections was the so
called system of presumptive
income taxation. Over the
years a number of economic activities such as those related to
imports, exports, execution of
contracts etc, income wherefrom was subject to normal law
assessment were seen as having become problematic insofar
as the normal law assessment
would usually result in a refund
after allowing for credit of tax
deducted at source and the issuance of this refund would
make a dent in collection and
lead to all sorts of complications including proper verifica-

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tion of the payments claimed to
have been made and the serious problem of corruption. A
possible way out was to reduce
the rate of tax deduction at
source and to render the tax
deduction at source as final discharge of income tax liability.
This did away with the need to
pass any formal order of assessment and avoided issuance
of any refund.
While 'presumptive taxation'
may have been Ok as a short
term, 'stop gap' measure, it is
clearly not suitable as long
term policy. Presumptive taxation targets 'receipts' not 'income.' There is no objective
method to convert receipts into
income 'at a glance' as it were.
It imposes inequitable tax burdens. There is no 'adjustment'
of tax paid because there is no
formal assessment. 'Full and
Final' discharge of liability is
more akin to 'appropriation'
than taxation.
Tax withholding in advance
of the actual earning of 'income'
can create a perception of inherent unfairness -especially
when it is not possible to fully
adjust the deducted tax . It also
creates a financial burden not
easily understood and appreciated because there is no obvious nexus with income. Tax
deduction in advance of the actual earning of income is the
opposite of 'tax deferral' and entails a cost that the payer may
find to be completely unwarranted.
Such a system clearly does
little to inspire confidence.
For all these reasons, the
government is committed to
phasing out tax withholding
and presumptive taxation.
However that is not going to
happen any time soon because
there is the apprehension that
a sudden move to abruptly do

away with the system might

lead to a serious fall in revenues.
A problem with regard to the
corporate sector in Pakistan,
especially the private corporate
sector has been the persistent
declaration of net loss when the
Return of Income / loss is filed
and the suspicion is -actually
much more than suspicionthat the loss is mostly artificially contrived and not genuine. The improvisation made
here to offset the loss to the exchequer that such declarations
entailed was to levy a tax on the
turnover declared by corporate
entities. This 'turnover tax'
brought in much needed revenue but led to an outcry that
such tax of turnover was not 'income taxation' and was therefore not legal under income tax
law. The statutory provision
was strongly contested by the
affected taxpayers and equally
strongly defended by the income tax department and the
matter eventually went right up
to the Supreme Court. In a
landmark judgment the Apex
Court ruled that such levy of
tax on turnover was not illegal.
While statutory enactments
such as those described above
were specifically designed to
lead to increase in income tax
revenue collection, beginning
in the mid '80's the tax rate
structure for corporate and
personal income underwent a
significant change and tax
rates were reduced, tentatively
at first and then deliberately
with the conviction that such
reduction in tax rates would not
lead to any precipitous fall in
revenue. Much of the intellectual underpinning for this radical move was provided by the
American economist, Arthur B.
Laffer of Chicago University.
He in turn referred to the writ-

ings of an arab muslim scholar

some 600 years earlier, Ibn e
Khaldun.In his masterpiece,
Muqaddimah, Ibn e Khaldun
observed that:
".as the tax rate goes
beyond the moderate rate, the
taxpayers compare their tax liabilities with their profits and
become pessimistic and as a
result do not promote economic growth and development. A large number of people
refrain from productive economic activities thus causing a
decline in the accrued tax revenue to the state."
This was precisely the argument made by Arthur B. Laffer.
He drew a simple yet elegant
diagram - apparently first
drawn by the professor on a
napkin as he had dinner with a
friend at a restaurant- to explain the proposition and the
'Laffer Curve' soon became
well known and came to be referred to frequently, in academia as well in government
circles as policy makers in developing, so called 'third world
countries', grappled with the
seemingly intractable problem
of effective resource mobilization. Briefly, the Laffer curve
showed that starting from a
zero rate of tax, given the size
of the tax base, upto a point, an
increase in the tax rate will increase tax revenue. Tax rate in-

crease beyond that point will

decrease revenue. At the extreme 100% tax rate, tax collection will be zero. The curve
further clarifies that for any
given level of tax revenue collected, given the size of the tax
base, there are two rates of tax
capable of achieving the collection- a high rate and a low rate,
and it is much better, in terms
of it's economic effects, that the
lower rate option be exercised
to realize the given collection of
tax.
India was one country that
appeared quite enamored of
the Laffer curve logic and resorted to systematic tax rate
reduction AND opening up of
the economy by de-regulation
and privatization coupled with
development of the I T sector.
The move paid rich dividends
and India's coffers swelled with
increased
revenues
and
sharply increased exports and
foreign exchange reserves
went up dramatically.
As Pakistan followed suit and
reduced tax rates all round, the
much feared decline in revenues did not happen. In fact
tax revenue actually increased
- fully consistent with the logic
of the 'Laffer curve.' What has
surprised everyone though is
that even when self assessment
of income became universal in
Pakistan for the first time ever

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through the income tax ordinance 2001, there was no fall in
tax revenue. Again this appears
to be in keeping with the argument made by Laffer - and six
centuries earlier, by Ibn e Khaldun.
While the tax statute was redesigned there was also a redesign of the administrative
arrangements made to mobilize revenue. The entire tax hierarchy was re-modeled on
functional lines and primary
authority to levy tax and collect
revenue was now invested in
the person of the Commissioner of Income Tax in sharp
contradistinction to the previous arrangements when the Income Tax Officer occupied
pivotal position. Needless to
say the Commissioner would
delegate authority down the
line and would not be doing
everything himself but nevertheless a sea change has taken
place in the conceptual framework laid out by government
for the assessment and collection of income tax and this
change is expected to go a long
way in building up taxpayer
confidence and improvement in
compliance levels. Concomitantly, the compensation package for selected tax personnel
in all categories - officer's as
well as support staff- has been
significantly augmented. Ultimately, some retrenchment of
personnel rendered redundant
appears inevitable but the
measures in their totality are
definitely expected to improve
efficiency all round and that
should translate into a much
better tax to gdp ratio than it's
present abysmally poor level.
The plethora of 'exemptions'
stipulated in the second schedule to the Income Tax Ord '79
have been another reason for
the low tax yield. Over the

years this fiscal concession in

the guise of a five year 'tax holiday' normally extended to a
second five year term, was
seen an important incentive
measure for 'new industry' especially in the far flung regions
of the country with deficient
infra structure. While the blanket exemption from levy of income tax may certainly have
'facilitated' investment in new
industrial projects, it is highly
questionable whether the income tax exemption 'per se'
was actually instrumental in
the investment decision. Informed opinion today appears
not to hold such exemption to
be the key factor in an investment decision and 'non tax' factors are now considered to
have been much more important. However an important 'exemption lobby' was certainly
created that ensured it's retention on the statute and the
large number of concessions
accorded have played their part
in reducing 'tax yield.' In the
new Income Tax Ordinance
2001, the number and variety of
'exemptions' have been reduced - but not eliminated.
However CBR is now committed to a policy of not encouraging tax exemption as a policy
measure.
Besides the 'tax holiday' the
statutory provisions related to
an accelerated allowance for
depreciation are of significance
in reducing the taxable income
of 'new industry.' This allowance is retained in the new
tax statute and has played a
key role in reducing tax liability
- and also tax yield.
Tax concessions, once accorded, tend to become an almost
permanent
feature.
These do erode the tax yield
and have no clear and direct
causal relationship with an in-

vestment decision. That being

so dependence on such concessions ought to be avoided in the
future.
While all these changes are
no doubt hugely significant in
the context of revenue mobilization, the seemingly un-hindered growth of the 'informal
sector' poses a grave challenge
to tax administration in Pakistan. Over the years the so
called 'parallel economy' has
ballooned in size from Rs 15 bill
odd in 1973 to Rs 1500 bill in
2006 with a 'tax evaded' component of Rs 2.15 billion in 1973
and Rs 180 bill in 2006. As a percentage of GDP the 'Under,
ground Economy' comprised
20% of GDP in 1973 and in 2006
this has increased to 35% of
GDP This sector robs the ex.
chequer of desperately needed
revenues, prevents enlargement of the tax base, undermines the 'rule of law,' acts as a
brake on the growth of the formal sector, corrupts national
income data, confounds economic planners, and burdens
tax administration to the detriment of revenue. To be sure,
the 'informal sector' is not ' all
bad.' It does provide employment and income -albeit,
mostly subsistence level income - and consequentially
also some dignity- to a large
segment of the national labor
force and that is of course
much better than unemployment and all it's attendant ills.
Nevertheless, the fact that this
sector is largely undocumented, pays no tax and contributes to the perpetuation of
a tax base that is extremely
narrow [only 1.7 mill registered
taxpayers in a population of 165
mill] must mean that it cannot
be ignored and it is incumbent
on tax administration to deal
with the problem 'head on.' The

new tax statute does help as

non maintenance of regular accounts now entails significant
penalty and can lead to prosecution and incarceration in a
penitentiary - something that
was absent in the old tax law-.
However it appears that technology will have to be brought
into play in a big way if it's continued growth is to be arrested
and put into reverse. The tax
reform initiatives involving
computerization of tax procedures, networking, setting up
of a relational data base, data
mining etc are all of extreme
importance as they will make it
possible to collate data meaningfully and zero in on tax
evaders. Only when this has
happened in a big way will it be
possible to have a significant
impact on the 'informal sector.'
Once the department achieves
such capability it will then become possible to enlarge the
tax base significantly and augment revenues meaningfully.
The 'spin off' from advanced
technology brought into play
will enable departmental officer's to not only arrest and reverse the growth of the
'informal sector' but very importantly, will also provide the
wherewithal for dealing effectively with the chronic understatement in turnover [and the
resultant understatement of
the Net Income declared in the
tax Return] in the retail and
wholesale sectors and also the
manufacturing sector. Effective 'electronic surveillance'
holds the key to 'tax compliance' and the sooner the department makes headway in
this crucial area the better it
will be for revenue mobilization. If there is a magic wand
that tax administration can put
into play to boost revenues,
this is it.

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Ibn-e-Khaldun, 'Abd al-Rahman (1332-1406)

His most important philosophical work is the Muqaddima, the introduction to a much longer history of the Arabs and Berbers. In this work,
Ibn Khaldun clearly defines a science of culture and expounds on the nature of human society and on political and social cycles.
bn Khaldun's work on the
philosophy of history is a
landmark
of
social
thought. Many historians Greek, Roman, Muslim
and other - had written valuable historiography, but here
we have brilliant reflections on
the meaning, pattern and laws
of history and society, as well
as profound insights into the
nature of social processes and
the interconnections between
phenomena in such diverse
fields as politics, economics,
sociology and education. By
any reckoning, Ibn Khaldun
was the outstanding figure in
the social sciences between
Aristotle and Machiavelli, and
one of the greatest philosophers of history of all time.

His most important philosophical work is the Muqaddima, the introduction to a

much longer history of the
Arabs and Berbers. In this
work, Ibn Khaldun clearly defines a science of culture and
expounds on the nature of
human society and on political
and social cycles. Different social groups, nomads, townspeople and traders, interact
with and affect one another in
a continuous pattern. Religion
played an important part in
Ibn Khaldun's conception of
the state, and he followed alGhazali rather than Ibn Rushd
as a surer guide to the truth.
The work on which Ibn Khaldun's reputation chiefly rests
is and learning its grammar,

and on the use of intuition as

opposed to logic in solving difficult problems, can still be
read with profit.
However, it is Ibn Khaldun's
views on the nature of the
state and society which reveal
most clearly both his profundity and the originality that
marks him off so sharply from
his Muslim predecessors and
successors.
The overwhelming impression given by Ibn Khaldun's
writings is that society is an organism that obeys its own
inner laws
Ibn Khaldun sees the historical process as one of constant
cyclical change, due mainly to
the interaction of two groups,
nomads and townspeople

Ibn Khaldun does occasionally refer to the existence of

turning points in history, and
thought that he was himself
witnessing one of them. The
main cause for this great
change was the Black Death,
which had a profound effect
upon Muslim society, together
with the Mongol invasions; and
he may also have been impressed by the development of
Europe, whose merchants and
ships thronged the seaports of
North Africa and whose soldiers served as mercenaries in
the Muslim armies. He suggests that a general change in
conditions can produce an entirely new social and political
scene, rather as if a new world
had been created.

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September, 2 0 ,
06

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IN THIS ISSUE

Interview:
Yassie Hodges
pg.1

Integrated
Audit Training
pg. 6

Kenwood Green
re-inaugurated
pg. 8

INTERVIEW

PATRON

Yassie Hodges, CBR CONSULTANT

STAFF ADVISOR

M. Muneer Qureshi
(Director General)

Ms Yassie Hodges was interviewed by the Director General, DOT, Mr. Muneer Qureshi,
When she was visiting Lahore in connection with the Special Audit Course
DG(DOT): Yassie Hodges, can
you tell us something about
your professional background?
YASSIE HODGES: My overall
background is that I have approximately 27 years of experience in
tax administration.
I started my career with the
Internal Revenue Service in the
US as an auditor. I spent eight
years as an auditor before I became resident lead instructor in
training,training auditors that
were coming into the service.
I initially worked as Chief of
Audit and later became the Director of Compliance responsible
for collection, compliance,
criminal investigation and
research.
Approx two years
ago I left

govt and started working with a

private consulting firm.
Part of my work with the consulting firm had to do with helping tax administrators in
developing countries deal with
problems such as those obtaining
in Pakistan.
I spent time in the Philippines
specifically focusing in on their
audit program
looking
at
audit techniques.
Before
I
came here I
was actually in
Kenya doing
very much
t h e

same type of work.

So I was selected here to actually take a look at the full audit
program in Pakistan- not just
make recommendations but
rather reach an agreement with
the CBR and implement a full
fledged audit program and then
follow up and monitor the program to see whether the changes
envisaged are actually being
properly implemented.
DG(DOT): You have been in
Pakistan for some time now
and have had an opportunity to
get to know CBR personnel at
all levels. What is your opinion
of their overall competence and
skill ?
YASSIE HODGES: Generally I
must admit that I am very impressed with the overall skill set
within CBR. I think you have a
highly educated workforce which
is a plus for the organization
as a whole.
One of the things
that I thought was a
shortcoming however is whether you
have the right people
in the right job and
that is something
that needs to be taken
into consideration.
I was impressed

Dr. Hamid Ateeq

(Additional Director)
EDITOR-IN-CHIEF

Amna Faiz BhattY

(Deputy Director)
EDESIGN & LAYOUT

Zafar Iqbal
Directorate General of
Income Tax Training &
Research, Sutluj Block,
Allama Iqbal Town,
Lahore.
Ph: +92-42-7842710
PABX: +92-42- 7830211
Fax: +92-42- 7842702
Web: www.dgtrdt.gov.pk
e-mail: dg@dgtrdt.gov.pk
also by the fact that the organization puts in so much effort in it's
overall training program but then
again are we giving the right type
of training to people for the jobs
that they are assigned?
In particular I think that it applies to the MBA program. I think
that's an excellent program but I
was also wondering whether that
was the most effective way to do
the program at this point in time.
The new Income Tax Group &
Sales Tax & Federal Excise officers have already spent 16 years
in a learning environment and
then to put them through a two to
three year program before they
even get any experience may be
a little bit challenging in not being
able to capitalize as much from

>>>>

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DOTGazette
The newsletter as well as its earlier issues are also available at our website www.dgtrdt.gov.pk
DOT Peacock
Photographed by: M. Muneer Qureshi

Kenwood Green' re-inaugurated

Kenwood Green' re-inaugurated

he eye catching wood structure known as "Kenwood Green" is a DOT landmark and was built
in 1998-99 entirely through funding contributed
by Mr Khalid Hameed, then DOT instructor in Bookkeeping & Accountancy. Not only did he provide the
funding for the project, he also supervised the erection of the structure right from the cuttting and shaping of the wood planks to the painting of the finished
structure, the installation of the large clock on the
face of the structure and also the electrical lights and
fixtures. The beautiful lawn where the structure
stands was then uneven, undeveloped, rough ground,
strewn with stones and pitted with potholes. This too
was prepared painstakingly under the supervision of
Mr Khalid Hameed with tons of earth trucked in from
outside and the ground levelled and planted with
grass and flower beds laid out. All this was done by
Mr Khalid Hameed out of his love and affection for
DOT and the finished structure was inaugurated by
him on15th March 1999 and a commemorative plaque
was put up. Mysteriously, this plaque subsequently
'disappeared' sometime in 2000 and no one seemed
to be much concerned - notwithstanding the attention drawn to the disappearance of the plaque by Mr
Khalid Hameed who by then had left his teaching assignment at DOT. This 'wrong' has now been addressed and on 18th Jan 2007 "Kenwood Green" was
re-inaugurated by Mr Khalid Hameed and a fresh
plaque, that is a carbon copy of the original, was unveiled by him in the presence of DOT faculty and selected guests including Mr Haji Ahmad, RCIT,
Eastern Region, Mr A.A. Zuberi, former Director,
DOT / Member ITAT, Mr Mohsin Akhtar, former Director General, DOT / Member, ITAT, Mr Nazir
Chaudhry, Accountant Member, ITAT, Lahore Bench,
Mr Saadat Saeed, former Director

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EDITORIAL

he January issue of
the DOT Gazette
wishes its readers a
very Happy New Year. May
this year bring the best to
all the readers. For DOT,
this year is turning out to be
as challenging and demanding as the previous we
parted ways with.
In December we bid
farewell to. the probationary officers of the 33rd STP
who left for Karachi to pursue their MBA (Taxation)
from IBA, Karachi. Since
May 2004 till December
2006 The DOT administration was over stretched in
organizing back to back
five training programs of
Income Tax Officers (ITO)
and Assistant Commissioners . Come January 2007 .,
and the Directorate is again
geared up to shift its energies and resources to the
Capacity Building Programs of Officers and Officials alike.
DOT also hosted the first
ever joint training program
of around 40 Audit officers
of both Income Tax and
Sales Tax Group from 15th
to 27th January 2007
Recognizing the selfless
services of Mr. Khalid
Hameed, a visiting faculty
member, who enriched not
only the minds of his students but also the DOT
landscape with a legendary
Kenwood Green , the Director General Mr. M. Munir
Quershi arranged a special
inaugural of the site . It is
hoped that this gesture
shall set future traditions
of giving the rightful credits
where deserved.

the program than if they had

they had some practical experience that they could relate to in
the classroom.
DG(DOT): So the MBA program is a good thing?
Oh excellent!
DG(DOT): But the overall
training timeframe is perhaps
too protracted?
YASSIE HODGES: No, I was
thinking of the timing for it.
To give you an example, when I
went for my MBA program one
had to be a manager for 5 years
before they even considered you
for the program. ..
The only thing that I was saying
was that with this particular program where you bring in new Income Tax Group & Sales Tax &
Federal Excise officers and put
them in that type of situation for a
whole year without any type of
work experience.. is
that really the best way to do it.
Maybe giving them some practical experience first dealing with
actual real life situations in the
field and then bringing them back
into the MBA program later will
be a little bit more beneficial.
So I don't have any problem
with the length of the MBA program but just the timing.

DG(DOT): Do you think it

would be possible to achieve all
the tax reform objectives by
2009 - the so called, 'year of arrival?'
YASSIE HODGES: I think it's
very, very do-able -if you can stay
focused.
Sometimes one of the problems I have faced is that there is
so much going on that it is easy to
get distracted and get side
tracked and everytime you get
side tracked it takes you away
from the ultimate goal that you
are trying to get to. That is something you will have to look at very
closely.
Once the path is laid out then
you should be able to put all available resources behind it so that
you are able to fulfill the commitments instead of being directed
to another area.
If you do that then I think it's
do-able.
But it is going to be a hard jobI don't want anyone to think that
this is going to be an easy job because it's not.
I personally think that there
are a lot of skills and abilities
throughout the organization but
they may not be utilized in quite
the right fashion and that's what

needs to be focused in on.

DG(DOT): Many knowledgeable people see the present tax
system as inherently complex
and a strain on tax administration and see a system based on
a standard 'flat tax' to be more
easily manageable and more effective in terms of results. The
debate in the U.S has been
quite contentious and many
people appear frankly fed up
with the almost mind bending
complexity of the present system and would like to see a
change and a shift to the 'flat
tax.' What is your opinion on
the matter?
YASSIE HODGES: Yes, but
that debate has been going on for
some time.
Whether or not it is ever going
to be a reality, I don't know.
But it's not only in the US that
the debate has been going on. It
is going on throughout the world
because no matter what tax system you look at, everyone is saying the same thing whether or
not an actual effort has in fact
been made to simplify the system.
From a theoretical standpoint
I think it's an excellent idea if you
could have a flat rate system.
However I don't know what the
overall consequences would be if
a flat rate system were actually
implemented. I am not really familiar with any research in this
area.
DG(DOT): So a shift to a 'flat
tax' system is not imminent in
the U.S?
YASSIE HODGES: Imminent?
No I don't think so!
DG(DOT): There are skeptics in the Pakistan Tax Administration
who
are
still
uncomfortable with the Universal Self Assessment Scheme
and see it as too far reaching
and fear that given the weaknesses in tax administration,

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taxpayers are bound , sooner or
later, to exploit these to the
detriment of revenue. What do
you think?
YASSIE HODGES: This topic
I've often discussed with the
Member Audit quite a bit.
Universal Self Assessment
does'nt mean that taxpayers can
file a Return in any manner and
in any fashion that they feel like.
That's not what it means.
Rather, taxpayers are required
to maintain proper books and file
proper returns and in order to
have a strong program you also
have to couple that with an effective enforcement program. With
a proper audit program in place
the USAS will in my opinion yield
very good results - for revenue
and for taxpayers.
I do think that Universal Self
Assessment is a very good idea.
Taxpayers have already responded positively and frankly I
don'nt see any reversal of the
same.
DG(DOT): Based on your experience so far, what new training initiatives would you
recommend?
YASSIE HODGES: One of the
things that I think I would have
most is instilling skills that would
better enable tax personnel to
solve practical problems that
they come across.
I have found everybody is talking a lot about the many problems in the organization.
I would like to see people act a
little differently- using skills to diagnose problems and then get to
the root cause of those problems
and finally resolve the problems.
This is the way to move forward.
When an organization focuses too
much on the problems themselves and too little on ways and
means for their resolution, it really starts getting everyone down.
People lose their self esteem and
morale. Any time you are in an

environment where everything is

so negative, you have a problem
and you lose productivity.
The focus should always be on
problem solving and if you can
get people to start looking at the
problem with a view to seeking
it's resolution you will see dramatic improvement.
However this is not going to be
easy and it is imperative that all
available resources are brought
to bear to ensure that the requisite problem solving skills are instilled in the work force through
appropriate training.
DG(DOT): There is a lot of
talk about the need to change
the 'mindset' of the CBR workforce. This ofcourse is easier
said than done. How do you
think we should go about it?

We need to change this negative attitude in the organization

as a whole.
If that happens I think it would
go a long way in changing the
mindset on positive lines.
You will see a change in the
way people go about doing their
day to day job and they will interact better with taxpayers.
They will also take more interest in the organization as a whole.
DG(DOT): What are your
specific recommendations to
increase the effectiveness of
the audit workforce?
YASSIE HODGES: One of the
key things we can start with is the
qualification of the audit personnel.
We may usefully refer to
Malaysia in this context.

Through lectures? Workshops

?
YASSIE HODGES: Not really.
I think it's more how you interact
with people and treat everyone.
I have a concern that there is
still a 'class system' throughout
the organization (CBR).
It depends on what position
you hold.
People don't associate with certain types of people who they may
perceive to be inferior to them in
(official) status.

Malaysia is often cited as a role

model in the ATAIC group.
The manner in which Malaysia
selects it's audit personnel has
changed significantly since 2001.
Auditor's are now required to
have either an accounting or law
background and without such a
background one cannot even be
considered for appointment as an
auditor.
What that does is that it speeds
up the learning process.
They are able to bring people in

and put them through a shorter

period of training - may be three
to four months in a class room
setting. Then they are given onthe -job training where they actually apply what they have learned
in the classroom and then the
process is rotated back and forth.
A more or less similar situation
obtains in the U.S.
In time you will be able to assess what their overall skill level
is and to determine whether they
are fit for their particular job.
This way you can get much
more productivity out of tax personnel than when you induct
'generalists' and put them in a
class room setting for a protracted length of time.
DG(DOT): Strong Executive
support is essential to the success of any program of tax reform. You have worked in the
CBR for some time now and
have met the senior officer's, including the Members and the
Chairman. What is your candid
opinion of their commitment to
tax reform?
YASSIE HODGES: Frankly I
really have been very impressed especially with the Chairman
himself because he really takes
keen interest in any and every
problem facing the organization
and is ever willing to move forward. So do other members of his
team.
When you have that kind of
commitment in which the key
players are willing to commit all
available resources to get the job
done, that is when things change
for the better.
I think that's a critical aspect
when you are going through a reform process.
DG(DOT): But the Chairman
did not start his career in government as a taxman. Infact
initially he worked in the private sector as a professional accounts man - he is a Chartered

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Accountant. Is that a problem?
YASSIE HODGES: I think
that's a plus point.
Any Organization can do with
fresh outside perspective to better understand problems confronting the organization and to
be able to devise new approaches
for their early resolution.
DG(DOT): Pakistan has a
very narrow tax base. You have
seen the statistics. Can anything be done in a hurry to enlarge the tax base?
YASSIE HODGES: In a hurry?
I don't know.
Is it possible to expand the tax
base within a 'reasonable' timeframe? Yes it is.
One of the things I looked at
when I came here was there is so
much business activity that is
going on and to have only 1.5 million tax returnsI just
could'nt even imagine that especially when you consider that a
large number of filers are
salaried and wage employees.
What about all those businesses that are not filing Re-

RESEARCH
Tax Incidence

ery few reliable studies of

tax incidence
in developing countries. Broad indication
of
mildly
progressive impact.
"Chile case shows
that this is not due to
direct taxation; with
VAT strongly regressive.
"World Bank study
(Ferranti et al, 2004)
stresses importance
of topic but comes up
with no new evidence.

turns?
I think that if we, selectively yet
systematically, focus in on a particular segment of the business
population instead of doing a
'shotgun approach' trying to rope
in all non- filers in one go, we will
have much better results.
May be doing a pilot study with
the Rawalpindi MTU - because
they don't deal with the corporate
taxpayers- to look at what kind of
data is currently out there and
see if we can get data more effectively from the provincial governments.
This way we can start using
our own creative energy on a
small part of the population and
this narrow focus may actually
help unearth many more non-filers than any other method. Once
we have achieved success with
this relatively small group, we
can then replicate the methodology on a larger group until we
have covered most of the 'potential' taxpayer population.
These are the type of things
that I think are very, very do-

able.
DG(DOT): Finally, technology has been cited as a 'force
multiplier' to dramatically enhance the effectiveness of tax
personnel . What specific recommendations do you have in
this area?
YASSIE HODGES: I think
that's a critical aspect.
If collectively you really want to
move forward quickly, technology
provides many of the answers.
Trying individually to do things
with pencil and paper, you can go
only so far.
The rather limited taxpayer
population in Pakistan actually
makes it easier to concentrate resources and deploy technology
effectively.
You already have underway
the Integrated Data Management system and Data
Warehouseing.
In order to efficiently digitize
and put to use the mass of available hard copy data, proprietory
Optical Character Recognition
software in conjunction with Op-

tical Scanning hardware may

offer a viable solution. Even if
OCR is not always practical,
Imaging technology can still help
in making it possible to 'store' and
then 'pull out' and use tax relevant information.
Technology is able not only to
facilitate Tax Deptt personnel but
also taxpayers. Electronic filing
of Returns and data input and access across telephone lines are
realistic possibilities using appropriate technology.
The imaginative use of technology creates a 'win-win' situation
for everyone.
However whenever technology
is put to use in this manner to
store, retrieve and collate sensitive data, it is essential that robust control and data encryption
systems be devised simultaneously to ensure that the new systems are not misused in any
manner by 'unauthorized' persons.
Video of the Interview can be
seen at www.dgtrdt.gov.pk

Sources of Tax Revenue for various country groups, 2001

Taxes on income profit
and capital
gains

Social Security
contribution and
taxes on payroll
Property Tax

Property
Tax

Sub-total:
taxes on income and
property

Taxes on
goods
and services

Other
Taxes

Total

Percent of GDP
OECDa
12.4
9.7
2.4
24.5
7.7
0.3
32.5
LACb
4.7
3.8
0.3
8.8
8.8
3.4
21.1
Othersc
6.5
0.8
0.2
7.5
8.3
3.4
19.2
Percent of total tax revenues
OECDa
38.2
29.8
29.8
75.3
23.8
0.9
100
LACb
22.1
18.1
18.1
41.5
42.1
16.2
100
Othersc
33.9
4.2
4.2
39.1
43.2
17.8
100
a. Excludes Mexico
b. LAC include Argentina, Brazil, Chile, Guetamala, Ecuador, Mexico, Paraguay, Peru, Uruguay and
Venezuela
c. Others include India, Indonesia, Malaysia, Russia, Singapore, Thailand and Ukraine
Sources: Artana, Lopez Murphy and Navajas, 2003
OBCD Revenue Statistics 2001: IMF Government Finance Statistics and IMF country reports to complete
on subnational government

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Country

Decade Before Tax

Gini Coeff
Brazil
1970s 56.2
China
1970s 27.3
1980s 31.7
1990s 36.2
Czech Republic 1990s 28.3
Ecuador
1990s 51.5
Hungary
1980s 26.9
1990s 28.1
India
1970s 40.5
Indonesia
1970s 42.7
Mauritius
1980s 45.7
Mexico
1970s 52.5
1980s 50.6
Nigeria
1980s 35.7
Pakistan
1970s 33.5
1980s 33.4
Peru
1980s 49.3
Singapore
1970s 38.7
1980s 41.3
1990s 37.8
Taiwan
1970s 29.3

A f t e r-Ta x
Gini Coeff
55.3
31.7
33.3
43.0
22.1
43.0
22.4
26.3
30.9
36.6
39.6
51.0
55.0
37.0
31.2
32.0
42.8
34.0
35.5
37.9
28.9

Difference Before and After-Tax Income distribution for Chile (1996)

Decile Income Income Change in Progressivity (tax as %
share pre- share
of income
total
-0.9
Income VAT Other Tax
tax
after_tax share
4.5
tax
taxes System
1.6
0
11
3.42
14.4
1.45
1
1.4
0.05
6.8
0
2.74
11.8 4.2
16
2
2.63
-0.11
-6.1
3.77
0
11.4 4.33
15.8
3
3.61
-0.16
8.5
0
10.9 4.25
4.73
15.2
4
4.59
-0.14
-4.5
5.57
0.01
10.7 4021 15
5
5.47
-0.1
-1.9
6.76
0.04
10.2 4.07
14.3
6
6.64
-0.12
-9.6
0.11
9.7
8.22
4
13.8
7
8.2
-0.02
-6.1
10.6
0.23
9
3.85
13.1
8
10.61
-0.01
-6.1
0.62
8
3.54
12.2
15.42
9
15.75
-0.33
-1.5
2.54
6.3
40.75
2.96
11.8
10
41.09
-0.34
4.4
GINI 0.4883
0.4961
1.4
RATIO 13.41
14.12
-2.3
-1.4
-6.6
-4.7
-5.9
0
-0.3

Source: Chu, et al. (2000)

Incidence of tax and spend

Now widely argued that
a single rate of tax on income/consumption combined
with equal per capita income
would be strongly redistributive (IABD, 1998)
But this would only work
if large cash transfers to the
poor were involved (not a feature of EMs) as in UK; and
above all depends on strong
assumptions about distributive effect of public goods.
The imputation of the
benefits of public goods by income class is difficult, and
can only be done rigorously
for health and education (a
third or so of public expenditure).
Evidence on direct tax and
growth
Macroeconomic instability, debt overhang, social conflict much more an enemy of
private investment that tax
(Serven and Solimano)

Empirical literature for

OECD countries indicates little or no effect of direct tax
rates on growth.
Strong intuition in endogenous growth theory that
human capital is not a credit
collateral, so inequality hurts
growth (Aghion and Howitt,
1998)
Growth and direct taxation
Our preliminary estimates for OECD countries
indicate a marginal positive
relationship; and direction of
causality remains to be established.
Our estimates for
Latin America indicate a
barely
significant
(Rsq=1.7%) negative relationship. Growth is thus
largely independent of tax
rates.
But even accepting
this and assuming that
causality
runs
tax=>
growth, implies that doubling

direct tax burden from 5 to

10% of GDP would only reduce growth by 0.4% - surely
an acceptable price for the
welfare gain?
Arguments against direct
taxation
Disincentives to saving
and entrepreneurial or professional effort; corporation
tax passed on to consumers.
Difficulty and cost of
collection, particularly in
open economics (asset mobility) with large unregulated
sectors (informal firms) and
no cadasters etc.
What matters is net incidence, so flat rate income
tax (or better consumption
tax, i.e. VAT) combined with
targeted expenditure is the
solution.
Arguments for direct
taxation
Savings effect ambiguous (Ricardian Equivalence)

and effort disincentives exaggerated: inequality may

lower growth.
Collection problem one
of political pressure rather
than administrative incapacity.
Direct taxation (progressive) central to the social
contract with wealth-holders
in a democratic society
(Rawls).

Political issues
Lack of administrative
reach created by political
process as well as crime, corruption etc. Wealthy avoid
paying tax 'legally'.
Tax evasion justified in
elite discourse by corruption
and waste in the public sector.
Underlying lack of a
sound social contract: not
only between state and society, but between the wealthy
and society.

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Integrated Audit Training

The first such training program was launched at DOT's main campus at Lahore
by CBR Audit Wing on 15th Jan 2007. This was a twelve day session and in a significant move, personnel from both the direct and indirect tax jurisdictions participated to make this a truly 'Integrated Training" program.

udit is a core component

of the of the Tax Reform
measures currently underway in CBR. are Without effective audit the Universal Self
Assessment Scheme - an integral part of the Income Tax Ord
2001- cannot realistically be expected to yield the results expected by the framers of the
new statute.

Regular Audit of Income Tax

Returns has been held in
abeyance by CBR for sometime
now pending formulation of a
clear policy for selection of Returns for Audit. Personnel deputed for Audit are also being
trained on professional lines for
the first time ever. The first
such training program was
launched at DOT's main cam-

pus at Lahore by CBR Audit

Wing on 15th Jan 2007. This was
a twelve day session and in a
significant move, personnel
from both the direct and indirect
tax jurisdictions participated to
make this a truly 'Integrated
Training" program. The training
itself had been 'outsourced' to
M/s Professionals Academy of
Commerce, a leading private
sector institution manned by
Chartered Accountants that
was carefully chosen through a
competetive, fully transparent
selection process. The actual instruction in the class was less
through the traditional 'lecture'
and more through an interactive highly participative process,
that included 'hands on' computer work.
DOT participated fully in the
preparatory phase of the program including design of the
training curricula and training
methodology and it also made
it's excellent facilities available
for the training sessions. DOT
also independently monitored
the actual conduct of the training sessions. The training program ended on 27 - 01 - 2007.

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Capacity Building & Staff Training
Programme durring Janurary 2007
In this context the Directorate regularly organizes Capacity Building Programs for officers and Refresher Courses for officials of the Income Tax Group. In the month of
January 2007, two Refresher Co In the month of January 2007, two Refresher Co
pacity Building Programs for
officers
and
Refresher
Courses for officials of the Income Tax Group. In the month
of January 2007, two Refresher Course were organized for officials such as
UDC's and LDC's. The duration of each course was 12
days and were so organized
that Computer skills , Income
Tax Laws and Civil Service
Rules were taught for 12
hours each . Spot tests
/quizzes and strict class attendance ensure the level seriousness attached to these
trainings. Each batch comprised of not less than 22 par-

BR is presently undergoing massive reforms

whereby
functional as well as infrastructural reforms are underway. In this scenario there
is an increased emphasis on

the need to develop workforce

capabilities at all levels by
equipping them with appropriate knowledge, skills and abilities .
In this context the Directorate regularly organizes Ca-

ticipants
The Directorate also held
one Capacity Building Programs for officers of grade1718 and one for officers of grade
19 in the month of January .
The focus of these Programs
was sensitization of participants to major economic issues facing the country in
addition to issues related to
Income tax. Lectures on topics such as WTO and Its implications for Pakistan, Water
issue and its Economic Repercussions etc. were arranged
from subject specialists. Multi
dimensional training techniques were utilized to elicit
maximum response from participants. To highlight the importance
of
Freedom
Movement and the role of Jinnah , the movie "Jinnah" was
shown to the participants and
their views requested in writing.

DOTGazette
IN THIS ISSUE

The Taxation of
agricultural income in Pakistan
pg. 2

A trip down
memory lane
pg.4

PREPARATION

Inauguration of
Gymnasium/Sports
Room pg. 8
PATRON

Preparation for ATAIC conference

of Heads of Training of Institutes

M. Muneer Qureshi
(Director General)
STAFF ADVISOR

Dr. Hamid Ateeq

(Additional Director)
EDITOR-IN-CHIEF

Amna Faiz BhattY

(Deputy Director)
EDESIGN & LAYOUT

Zafar Iqbal
Directorate General of
Income Tax Training &
Research, Sutluj Block,
Allama Iqbal Town,
Lahore.
Ph: +92-42-7842710
PABX: +92-42- 7830211
Fax: +92-42- 7842702
Web: www.dgtrdt.gov.pk
e-mail: dg@dgtrdt.gov.pk

he ATAIC( The Association of tax Authorities

of Islamic Countries)
was established in year
2003 at Kula Lumpur. The mission of the Association is to facilitate the improvement of tax
administration and promote
Sharia Taxation with particular reference to Zakat within
the Islamic countries, in order
to
meet
the
challenges/changes rapidly
taking place in the world. Its
first conference was held at

Malaysia Kula Lumpur. Thereafter the second conference

was held at Tehran, Iran and
the third Conference was held
from 22nd to 25th November,
2006, at Islamabad, Pakistan
ATAIC with twenty member
countries is presently the most
active organization of Tax Administration in the Islamic
World. Member countries include, Bangladesh, Brunei,
Darussalam, Comoros, Egypt,
Guyana, Indonesia, Iran, Iraq,
Jordon, Kuwait, Lebanon,

Malaysia, Morocco, Pakistan,

Qatar, Senegal, Sierra Leone,
Sudan, Tajikistan and Yemen.
In order to explore opportunities for further cooperation
in the field of tax training, a
Conference of ATAIC head of
training institutes is scheduled
from 12th 14th March, 2007. As
Chairman, CBR Mr. M. Abdullah Yusuf, is currently the
Chairperson of ATAIC, the Directorate of Training & Research [DOT] has the honour
of hosting this International

Conference at its Lahore Campus.

In addition to member countries, delegates from USA,
Turkey and IBFD [The Netherlands] are also participating as
observers. In order to make
the upcoming Conference a
success, the entire staff and
faculty of DOT is actively engaged in organizing this event.
General repairs in the International Hostel, refurbishing of
the main entrance lobby and
upgrading and modernization
of conference room [Iqbal
Hall] are underway. It is hoped
that the combined energies
and efforts of all involved synergize to make this event a
success.

DOTGazette
EDITORIAL

he March issue of the

DOT Gazette coincides
with the welcoming
gentle winds of spring beckoning us all in action.. In
DOT itself, hectic preparations for the upcoming
ATAIC Conference scheduled from 12-14th March are
underway.
These preparations however, have not gotten in the
way of all important in service capacity Building Programs organized by the
Directorate. Keeping pace
with the momentum of past
one month, three separate
Capacity Building Programs
and the second Integrated
Audit Training course were
held in the month of February. Credit goes to the efficient organizational skills of
the DOT administration for
successfully managing all
these activities, albeit, sometimes simultaneously.
Another achievement for
DOT is the upcoming affiliation with IBFD (International Bureau of Fiscal
Documentation)
Amsterdam, Holland. IBFD is a
world renowned institute
known for research and publications on international as
well as local fiscal laws and
statutes. This affiliation
would make all current publications of the institute and
its library accessible to DOT
for utilization in teaching
and research.
Not to be out done in the
field of physical training
along with building of mental capabilities, DOT recently upgraded its Gym /
sports facilities through
purchase of necessary exercise equipment.

The Taxation of agricultural income in Pakistan

Income from agriculture is exempt from levy of income tax in Pakistan because the law governing the taxation of income declares such income to be outside the ambit of taxability. The continuation of this exemption for agriculturists not only deprives the federal exchequer of significant
potential revenue but also sabotages attempts to inculcate the ideal of voluntary compliance
which is central to the functional efficiency of any system of taxation.

griculturists in Pakistan
contribute
nothing to the federal exchequer by
way of taxation of the incomes
generated by them from their
agricultural pursuits. The
share of the agricultural sector
in the total direct tax burden
(federally administered) is
thus zero. Considering that
agriculture as an economic
sector contributed more than
20% to GDP - the highest of
any sector- the conclusion is
inescapable that something is
seriously amiss here and it is
the duty of government to address the situation directly and
design a system of income taxation for this sector that will
cater to it's peculiar features
and yet make the necessary
contribution to the federal exchequer.
The argument for taxation of
agricultural income rests on
the fact that there exists a
'slack' in this sector in terms of
untapped capability that the
right kind of policies can exploit to release resources to
fund the overall development
effort.
That there exists an actual
'slack' in the agricultural sector in Pakistan appears to be
borne out by various indices
viz inefficient cropping pattern, under utilization of fertilizer, inadequate and / or
improper use of pesticides / insecticides, improper use of irrigation
facilities
and

mis-utilization of private investible potential in the hands

of the farmers. Because of this
'slack' Pakistan is no where
near the top among other developing countries with significant agriculture in terms of
agricultural productivity and
this not because Pakistan's
agricultural land is inferior but
because that land is not properly cultivated and the agriculturists are not much inclined
to make the extra effort to do
so. If tax on agricultural income was to be levied however
- as was done in Japan- then
perforce the agriculturist
would have to put in that extra
effort to increase the productivity of 'all' land -including
land now labeled as marginal
or barren.
Historically, we have the
telling example of Meiji Japan
where when in the 1880's the
drive to modernize Japan was
launched aggressively, heavy

taxation of agriculture brought

in it's wake a huge increase in
land and labor productivity,
quite unparalleled in the history of the world. Of course it
was the successful harnessing
of the dormant 'capacity' or
'slack' that led to this increase.
Had there been no 'slack' taxation would only have resulted
in misery for the agriculturist.
Taxable capacity of a person
is based on the income that
person can earn in a given period less the subsistence requirement for himself and his
dependent family. What remains after meeting the subsistence requirement is the
extra out of which taxes can be
paid. In a society with a fairly
skewed income distribution
those at the upper end of the
skew will have the most capacity to meet taxation levies notwithstanding the fact that
their subsistence requirements would be larger

DotGazette
as their perception of subsistence would be different from
say a small farmer with a limited landholding. Thus average per capital income data is
not really very useful in defining taxable capacity in a
given sector of the economy.
We must know how this income is actually distributed.
Inequalities of distribution
must mean differences in taxable capacity.
'Subsistence' has different
implications in the agricultural and other non-farm sectors.
This
is
because
subsistence has a biological
as well as a sociological basis.
In strictly biological terms it
entails the requirement to
keep body and soul together
i.e., it is essentially a 'survival'
matter. In that narrow sense
it can be argued that the subsistence allowance both in
caloric and monetary terms
would be roughly the same.
However when we look to the
sociological dimension we do
see that 'subsistence' has a
quite different connotation in
the farm and non-farm sectors. Thus families in the
rural areas, in general, do not
spend as much on fuel, lighting, house rent etc as do their
counterparts in the non-farm
sectors. Infact the differences
are quite significant. Furthermore, other 'necessary' expenditure
that
non-agricultural families in
general and urban families in
particular have to bear is that
connected with clothing,
footwear, medicines, education and even entertainment.
In all these areas the agricultural family escapes much of
the high expenditure enigma
that the non-agricultural family cannot - though of course
in varying degrees. An addi-

tional complicating factor is

that non-agricultural families
have to make the bulk of their
purchases from the 'market'
and have to contend with
service and marketing costs
that add to prices.
In view of what is stated
above, it is apparent that 'subsistence' in the agricultural
sector costs a good deal less
than in the non-agricultural
sector. That being so the incidence of indirect taxes- which
generate the bulk of government revenues- is necessarily
markedly less on the agricultural sector than elsewhere.
This therefore adds to the advantage that the agricultural

exaggerated impact in the

agricultural sector as the majority of the population resides there. Thus lower
relative subsistence requirements in the agricultural sector must mean a higher
relative taxable capacity.
That is why we say that the
agricultural sector has the
potential capability to suffer
much higher taxation than it
currently has to bear.
The incidence of benefits of
public expenditures is another important aspect to be
considered in the context of
the economic argument in
favor of additional taxation of
the agricultural sector. An

sector has through the income tax exemption. In other

words we can safely conclude
that the tax burden there is
markedly less than in the
non-agricultural sectors. This
is contrary to what many
commentators say - especially those who speak 'for
and on behalf' of the agriculturists- who would have us
believe that the tax burden in
infact roughly the same for
the agricultural sector vs a
vis the other sectors since indirect taxation which everyone has to bear must have an

analysis of public expenditures on the current and capital account would reveal that
government expenditures incidence is much greater than
the tax incidence on the agricultural sector. This implies a
net outflow of public funds
both on the current and the
capital account from the nonagricultural sector to the
agricultural sector. What it
boils down to is the inescapable fact that the agricultural sector is receiving
much more monetary funding
than it is contributing. Inter

sectoral inequity is thus

patent.
In Pakistan there appears
to exist sound economic justification for really strong taxation on agricultural income
especially on the big land
owners. It is known to all that
these big feudals have made
a mockery of land reforms
and continue to own huge
tracts of prime agricultural
land. It follows that the income from these landholdings also accrues to them.
Notwithstanding the charges
that they do bear by way of
abiana etc the fact remains
that their taxable capacity is
enough to bear the burden of
income taxation. A progressive land tax combined with a
presumptive income tax
could yield good results both
with regard to generation of
revenue and for achieving
other economic objectives.
However if political impediments to implementation of a
progressive land tax are pronounced, other alternatives
can and should be explored
and these include a fairly
heavy proportional land tax.
Whatever alternate is chosen
-or 'mix' of alternates- it
should be recognized that an
effective tax policy for the
agricultural sector will have
to be formulated in conjunction with other specific measures
viz
land
reform,
technological change and
specific measures to improve
the lot of the small farmer

Contributed by:

M. MUNIR
QURESHI

DOTGazette
1STCOMMON

Dot Gazette feels privileged for commencing this journey into the past from Mr. Haji Ahmad.
With the most apt educational background of Master in Administrative Sciences from the Punjab University, Mr. Ahmad joined the 1973 Batch of Civil Servants, named "The First Commons".

tarting
from
our
March 2007 issue,
DOT Gazette has initiated a new theme
Captioned - "A Trip down the
Memory Lane". Under this
theme, beginning from 1st
Common onwards, each issue
shall include a special writeup on Income Tax Officers belonging to various Common
Training Programs.
The purpose of these writeups is to establish a communication link amongst officers of
our group belonging to various
commons.
Dot Gazette feels privileged
for commencing this journey
into the past from Mr. Haji
Ahmad. With the most apt educational background of Master in Administrative Sciences
from the Punjab University,
Mr. Ahmad joined the 1973
Batch of Civil Servants,
named "The First Commons".
Be it a mere coincidence of
time, he was lucky enough to

be groomed as a probationer
in the very first batch, resulting from the then "Civil Service Reforms Agenda", where
officers of various cadres /occupational groups were to be
commonly trained.
Mr. Ahmad vividly remembers the initial days of service
as formative phase of his life
as a dedicated Civil Servant.
He very proudly counts on the
opportunity of working as
Salary Circle assessing Officer under the ablest guidance
of Mr. Abdul Aziz Khalid, the
then Commissioner of the Lahore Zone nearly encompassing the entire areas now
styled as Eastern Region, Lahore. Mr. Abdul Aziz Khalid, is
a note-worthy poet and eloquent writer.
Mr. Ahmad quite emotively
memories his early days
super-ordinates, Ch. Salah-udDin, and Mr. Sikandar Hayat
Khan; the former for his dedication to extensive develop-

ment works he had undertaken and the later for being a

strict disciplinarian, a researcher, thorough bred tax
professional, prolific writer
and poet.
The traits of being an efficient administrator with a noticeable passion for reforming
the institution and love for literary activities can be perceived to be a reflection of Mr.
Ahmad's grooming in the initial years of service while
working with these super- ordinates.
Given the administrative milieu of the department
in those old days, the idea of
getting posted in the Companies Circle very after his promotion to BS-18 and then,
persistently continuing as assessing Officer of Companies
till further promotion in next
grade, gives him a solace.
Coming true to the maxim,
"Luck always favours the hard
worker" Mr. Ahmad was se-

lected in an open competition

for the coveted "Mason Fellowship" at the prestigious
Kennedy School of Government (KSG) at the Harvard
University. Proving his worth
as an excellent academician
at KSG, Mr. Ahmad earned a
certificate in "International
Tax Program" at the Harvard
Law School (HLS) in addition
to Masters in Public Policy
and Management.
One of the latest feathers in
his cap of success, of which all
members of the service are
rightly proud of, is the conferment by the Prime Minister of
Pakistan of "Certificate of
Commendation" for the year
2005-06 on him alongwith his
worthy batch mate, Mr.
Salman Nabi, the Member (Direct Taxes).
Besides his dedication and
commitment to the official
business, he has been successful in not letting his passion for Sports and Arts
diminish in any way. No wonder, he is also the Senior Vice
President of Pakistan Gymnastic Federation, President
of the Punjab Gymnastic Association and the Editor in Chief
of the pioneer annual publication of the Regional Tax Office,
"The Renaissance". He has
represented Pakistan on a
number
of
international
sports congress both inside
and outside our homeland.
Our discourse with Mr. Haji
Ahmad, explored the soft, mellow, subtle and kind person inside the strict administrator
when he remembered his
passed away batch mates with
un-controlled tears.
Rightly remarked by one of
his batch-mates,"Ahmad is a
highly qualified batch-mate,
who has inherent cravings to
excel in every walk of life"

DotGazette
FLASH BACK
The year 1973 will go in history as Year 1 for the Civil
Service of Pakistan, coming
in place as a result of Administrative Reforms of early
70's. It was for the 1st time
that initial training of all
service/occupational groups
was jointly organized at the
ACADEMY FOR ADMINISTRATIVE TRAINING, LAHORE. The main campus of
the academy was situated
opposite The Administrative
Staff College (The Mall) in
Lawrence Garden in a
grandiose building which is
presently known as "Quaid-eAzam Library".
The batch comprised of
247 probationers, who joined
the common training program on 1st December, 1973.
Unlike the later day development, group allocations were
not made prior to joining the
Common Training Program
(CTP). Implicit in any transition are the experimentations, and differences of
opinion. It was decided that
final group allocation would
be done on the basis of combined marks obtained in the
initial Competitive Exam
and Final Passing Out Examination (FPOE).
As a bye product of transition, most probably the difference of opinion between
the Establishment Division
and FPSC, reflected in what
ultimately happened to the
batch while getting allocated
to various services. May be
in a bid to flexing its arms,
the then FPSC cleared only
16/17 probationers in the
Final Passing Out Examination, setting a tough target
for the Establishment Division to go for allocations. The
riddle was however resolved

when it was finally agreed between Establishment Division

and FPSE that those probationers who cleared the FPOE
shall have their first choice of
group allocation and the rest
of the probationers would be
allocated on the basis of joint
marks of competitive examination and FPOE, irrespective
of their not getting through
the exam. Courtesy the transition, one of our batch mates
who was the last to join the
training program due to
dropouts of few successful
candidates, got allocated to
DMG group as he had cleared
the FPOE.
A hind sight interpretation

ferent important positions

across the country.
Coming back to our parent
service - Income Tax Group,
the 1st Commoners are holding important portfolios inside
/ outside CBR and working
continuously to serve the department and the country to
the best of their abilities.
Our Income Tax Batch from
1st Common comprised of 20
bright and committed officers.
Describing persons is generally difficult but once it comes
to your known ones it turns
out to be an uphill task. Looking back through the prism of
time takes one back to memorable moment. Writing about

and London. A frequent visitor

between Pakistan and Great
Britain, he is touching new
heights of glory in international exposure.
Mr. Zahir Kaleem is a jovial
person lively to talk, who excelled amongst his batchmates to an international
position in CATA. He is
presently working as Executive Director of Common
Wealth Association of Tax Administrators (CATA), a prestigious slot for a number of
common wealth countries in
the World.
Mr. Muhammad Khan, having command over both
Pushto and Punjabi languages

1st Row sitting L to R: Hamid Ali Alvi, S. Ansar Hussain Shamshi, Abdul Hameed Khan, Ali Asghar, Kh. Anees Ahmad (Deputy Director), M. Zafar Ali Rizvi (Asstt. Director), Kh. Muhammad Sadiq Butt, Sayed Nasrul Karim Ahmad Ghaznavi, Abdul Rauf Khan
2nd Row sitting L to R: Tahir Sajjad, Parvez Akbar Lodhi, Muhammad Saeed, Muhammad Mazhar Hussain, Ashfaque Ahmad Memon,
Mukhtar Ahmad Gondal, Arshad Mahmood Malik, Hazrat Ali, Khadim Hussain Chaudhri, Inayatullah Kashani,
Ghulam Qadir Mahar, Abrar Alam, Tariq Iqbal Puri
3rd Row sitting L to R: Hafeez ur Rehman Khan, Mazhar Ali Sha h, Muhammad Khan, Muhammad Asadullah Sheikh, Haji Ahmad,
Malik Muhammad Ashraf, M. Mohsin Khan, Aftab Ahmad Shah, Saleem Sultan Durrani, Moin Gul Khan Afridi, Zafarullah Sheikh

of history reveals that the

Common Training Program
has served an important national purpose of inter-provincial harmony and inter-group
cohesion. By the grace of God,
a sizeable number of 1st commoners are contributing to the
welfare of the homeland in dif-

friends and batch mates is always gratifying:

Mr. Qadirul Jalil is a good
friend and batch mate, who
opted for retirement from
service on his own initiative.
He is presently running a consultancy and family sports
business in Lahore, Sialkot

and hailing from Attock, is

presently posted as CIT (Appeals) at Islamabad. He is a
friend of friends, who is living
his life in his own peculiar way
of living.
Mr. M. Illyas Sheikh is a
very lively personality from
Lahore. He is presently posted

DOTGazette

as Commissioner (Southern
Region), Karachi. Now settled
in Karachi, he is an active participant of social life in the metropolis.
Mr.
Mukhtar
Ahmad
Gondal, a serious minded
prominent figure amongst 1st
Common Income Tax Officers,
is presently posted as D.G.
LTU, Karachi. Earlier, in the
Direct Tax Policy side of the
Central Board of Revenue, he
proved his mettle in negotiation of International Tax
Treaties. With God gifted qualities and religious - cum - mystic leanings, he has made
himself singular in the tax
service and social life.
Mr. Usman Khalid Mirza is
again another outstanding,
sober and graceful officer of
our batch, who will be the last
man to compromise on his virtuous graces. He is presently
posted as D.G. (Inspection &
Audit) C.B.R.
Affectionately called as
"Judge Sahib" by the batch
mates, Mr. Salman Nabi was
a Civil Judge before joining
the Income Tax Service. He is
a serious - minded career officer; besides having a ready wit
and a live sense of humor.
Salman is presently serving as
Member
(Direct
Taxes)

C.B.R., and thus holding the

most important post in this period of transition and reforms
and is managing the affairs excellently.
Khawaja M. Sadiq Butt, a
representative from the beautiful valley of Kashmir, is a colleague who was always
smiling and ready to help. He
is now retired from service
and is enjoying a peaceful family life.
Mr. Abdul Ali Khan is
presently posted as Chief Coordinator (DPC). Mr. Khan always had an impressive and
charismatic personality. A part
of his charisma stemmed from
his name "Hazrat Ali". When
he initially joined the common
training program, his name
"Hazrat Ali" evoked immediate
responses. When he introduced himself in the academy
as "My name is Hazrat Ali", the
batch mate sitting next to him
retorted and said " and I am
Amir Maawia!!". Hailing from
Rocky Mountains of Ghazni
Khel, Mr. Ali had the taste of
serving across the country.
Persistently practicing muslin
since his childhood, he safeguards the characteristics of a
Pakhtoon.
Mr. Umer Khan M ohmand
was our only batch mate from

FATA and has now retired

from service. He served for
most part of his career in
NWFP However, just before
.
his retirement he was posted
as Commissioner (Sargodha).
It seemed that God wanted
him to have a good taste of Kinoos and Punjabi diet before
bidding farewell to the service!!
Mr. Inayat Ullah Kashani,
a Baloch to the core, is our
only
batch
mate
from
Baluchistan. He possesses a
witty personality and an intelligent bearing. He has retired
from service and one of his
sons qualified for the Competitive Examination and joined
the DMG Group.
Mr. Abdul Ghani Channa is
presently posted as C.I.T.,
(Southern Region) Karachi,
Channa is a thorough gentleman who has to his credit
noteworthy publications in
Sindhi literature.
Mr. Iqbal Muzaffar is another accomplished batch
mate of ours who is presently
posted
as
D.G.
RTO
(Rawalpindi). A witty and affectionate person by nature,
Iqbal is also a poet with active
interest in literary pursuits.
He is loved alike by seniors,
colleagues and juniors.
Mr. M. Farooq Ahmad
Amin: Educated in Law from
London School of Economics
(LSE), he could not withstand
the bondages of civil service
and opted to quit in the early
years of his career to independent life. He is presently
running a successful consultancy in Karachi.
Sardar Irshad Shaheen is
presently posted as the Regional Commissioner (AJK)
and in that capacity he is incharge of all taxes. A poet and
writer, he used to organize

memorable literary gatherings while he remained posted

in places such a Gujranwala,
Fasilabad, Sialkot and Sargodha. As a young man he was
known for his progressive
leanings.
Life herein is transitory.
Some of our batch mates have
left this mortal world, obviously leaving a sense of profound grief amongst the
survivors. All of them are so
close to my heart that though
physically apart, their presence is always felt by my soul .
A brief introduction of those
friends;
Mr. Munir A. Sheikh was a
thorough gentleman and professional, who left this world
at the prime of his career, leaving an indelible impression of
his nice, disciplined and sober
personality for his batchmates, colleagues and friends.
His last assignment was as
Member ITAT.
Mr. Aftab Ahmad Kohati
was a hardworking and competent officer, whose untimely
death in grade 19 was a sad
blow to his family as well as
friends.
Mr. Muhammad Arshad
Malik was another of our very
competent colleagues, who resigned from service in Grade
19. A jovial and well rounded
personality, he established a
name for himself in the field of
business. Another tragedy for
his family is that his brother
another officer of Income Tax
Group Mr. Amjad Malik, has
also passed away.
Mr. Nawal Rai N. Oad was a
master in figure work, accounting and law. He was always
ready to guide fellow colleagues
in solving problems while undertraining in the academy. His last
posting was as C.I.T. Corporate
Region, Karachi.

DotGazette
TRAINING

Training Activities Undertaken in February

The purpose of all such trainings and capacity buildings remains to expand the horizon of mid
career officers of income tax group through lectures and group tasks.
The Directorate also organized two separate capacity building programs/trainings for Income Tax Officers (ITO)/Special officers and Supervisors/Administrative officers.

these training programs were simultaneously organized from

12.02.07-24.02.07. Each group
comprised of more than 20 officials each. The focus of these
trainings was to explain the new
provisions of Income Tax Ordinance 2001 and to upgrade the
computer skills of the officers.
The second session of the Integrated Training Program commenced from 19th February
2007 and as previously officers of
both Income tax and sales tax

he DOT Lahore Campus remained busy in

conducting various Capacity Building programs for officers as well as
officials during February . In
addition , the second session of
the Integrated Audit Training
Course of officers of both income
tax and sales tax was organized
in collaboration with Audit Wing
( CBR) and Professional Academy of Commerce (PAC) .
The main focus of Capacity
Building Program for grade 19
officers held from 12.2.07-17.02.07
was sensitization to important
economic concepts having relevance to incidence of taxes and
measurement of economic
growth. Extended lectures and
group discussions were held on
topics such as " The phenomenon of Under ground Economy,"

" WTO-Concepts & Implication" ,

"Integrity Management ( Working
of
Invigilence
Wing
,CBR)"etc. In addition , two lectures were organized on " Sales
tax-Concept & Practice in Pakistan" in view of the future
merger of two internal taxes in
RTOs and LTUs. Mr. Akhtar Ali
Naeem (Ex-Collector Customs )
delivered these lectures followed by a lively Q&A session. In
all 32 participants in grade 19
from all over Pakistan underwent this Program. The pur-

pose of all such trainings and capacity buildings remains to expand the horizon of mid career
officers of income tax group
through lectures and group
tasks.
The Directorate also organized two separate capacity building programs/trainings for
Income Tax Officers (ITO)/Special officers and Supervisors/Administrative officers. Both of

participated in the twelve days

training program. Largely based
on case study approach, the purpose of this training is to equip
the officers of audit wings of both
services in conducting meaningful audits. The Directorate
remained fully associated in
planning the course design and
in provision of all allied infrastructural facilities to the participants of the course..

DOTGazette
Inauguration of Gymnasium/Sports Room
Y
et another achievement
in the month of February for DOT was the inauguration of the newly
created Gymnasium /Sports
room .The need for proper
gym facilities complete with
necessary exercise equipment was being felt for the
last few months. All modern
training campuses provide
gym/sports facilities for ensuring mental as well as physical
discipline
amongst
the
trainees.
Recognizing this need , our
Director General, Mr. M.
Munir Qureshi , took a personal interest in sanctioning
the necessary funds for this
purpose. Dr. Hamid Ateeq (
worthy Additional Director &
also our health mentor!!) and
Dr. Yasmin Fatima ( Deputy

erly utilized by the probationary officers as well as by the

faculty. In future , there are
plans for construction of a separate Gym complete wi th
sports facilities like Tennis ,
badminton etc. under one
roof. For faculty members

Director & another doctor!! )

surveyed the market and selected the equipment comprising of electronic/ manual tread
mills, Air bikes, Stepper,
Twister etc.

there shall now be no excuse

for extended waist lines!!
Also present at the inauguration were Mr Haji Ahmed
, Regional Commissioner
(Eastern Region ) and Mr.
Noorul Amin Hotiana (Add.
Commissioner (HQ)).

Thus equipped , DOT is

keeping up with its past efforts
for making its Lahore campus
an International Tx Training
Academy. It is hoped that
these facilities shall be prop-

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IN THIS ISSUE

ATAIC
PICTORIAL
pg. 5

ATAIC International Conference of

Heads of Training Institutions, March 12-14, 2007,
DOT (DT) Lahore, Pakistan. pg.1

PATRON

M. Muneer Qureshi
(Director General)
STAFF ADVISOR

Dr. Hamid Ateeq

(Additional Director)
EDITOR-IN-CHIEF

....The theme of the conference was Technology as a Force Multiplier in training and the workplace....."

Amna Faiz BhattY

(Deputy Director)
LAYOUT & DESIGN

Zafar Iqbal
he first Conference of
ATAIC Heads of
Training Institutions
was held at the Directorate General of Income Tax (Training and
Research), Lahore from March
12 -14, 2007.
Nine countries represented
by seventeen delegates, including observers, participated.
The theme of the conference
was "Technology as a Force
Multiplier in training and the
workplace."
The purpose of holding
this conference was to look
in-depth at the existing
arrangements for training of direct tax personnel in the ATAIC
group, to evaluate
different options to
improve the same
and develop a broad
consensus on the key
issues involved and the
best practices in this area.
The poor yield from taxation
is a feature common to many
countries of the ATAIC group.
The tax to GDP ratios are well

veloped countries where a yield

of 20% and above
vis a vis GDP is
not
uncommon. And in
the highly developed Scandinavian
countries tax
to GDP ratios of
40%
and

above are commonplace.

In the ATAIC group the average "aggregate revenue" [tax
and non-tax revenue] for the
entire group comes to just
419.5 bill dollars US which is
just 12% of the overall GDP
of 3474 billion dollars. Considering that the aggregate revenue includes both tax and
non tax revenue, the yield
from taxation is certainly very much
on the lower
side. Countries
like
Pakistan
have a tax

ATAIC Chairperson, Mr M Abdullah Yusuf, the driving force

behind the March 2007 Conference of ATAIC Training Heads,
in whose tenure as Chairman, CBR, CBR has, todate, hosted
three ATAIC Conference (April 2005, on Revenue Forecasting,

Directorate General of
Income Tax Training &
Research, Sutluj Block,
Allama Iqbal Town,
Lahore.
Ph: +92-42-7842710
PABX: +92-42- 7830211
Fax: +92-42- 7842702
Web: www.dgtrdt.gov.pk
e-mail: dg@dgtrdt.gov.pk
to GDP ratio of just about 10%.
Needless to say this needs to be
improved drastically. Only three
countries of the ATAIC group,
oil rich Kuwait, Qatar and Iran
are able to generate aggregate
revenues significantly in excess of their
aggregate expenditures.
Consistent with the Conference theme, presentations were
made on a wide range of topics
including Forensic Audit, Computer Forensics, Simulation
methodology, Computerization
in the tax department and it's
role in selecting Returns for
audit, data warehousing, multi

pril Issue.qxp

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DOTGazette
SYNDICATE BRAINSTORMING

DOT WALKABOUT

CLOSING SESSION

POST CONFERENCE

pril Issue.qxp

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DOTGazette
EDITORIAL
M

arch 2007 was one hectic month. It was the

month of the ConferenceThe first meeting of ATAIC
Heads of Training Institutions since the inception of
the Association in 2003. Many
months of diligent preparation went into the landmark
event. Eventually the hard
work paid off and when the
delegates started arriving on
March 10, DOT(DT) had an
almost festive look to it with
National Flags of the Member countries fluttering on
the
flagpoles
on
the
sparkling green front lawn
ablaze with the bright colors
of spring flowers. The above
average rain in March contributed to a pleasant extension of winter chill and added
to the natural beauty of the
conference setting. And that
was not the only change one
noticed on entering DOT.
The main entrance to the
DOT administrative block
looked quite, quite different.
The old faded photographs of
stern tax men of yesteryears
were gone and in their place
were panels of outstanding
examples of Islamic calligraphy - by the great Sadequain.
The brand new Conference
Room - the main conference
venue- was another significant change at DOT. With
state of the art electronics
and sound system and eye
catching furniture it made an
immediate impact on all who
entered the room.
Alas! all good things do
have an ending. But the
memories remain. And the
tremendous goodwill generated in these three memorable days at DOT will

dimensional training methodology etc

The use of modern technology
has revolutionized work place
practices in all areas. Information Technology has probably
had the biggest impact of all the
different technologies available.
At the heart of Information
Technology is the ubiquitous
computer. This may be a full
fledged 'mainframe,' a 'mini
mainframe,' or a P Whatever
.C.
it's configuration, given appropriate software, a networked environment
and
suitable
peripherals, this machine has
magnified enormously the
human capability to store, retrieve and process vast amounts
of raw data.
In revenue mobilization, the
training of tax personnel in diverse disciplines is today heavily dependent on modern
technology. Forensic audit, computer forensics and Simulation
are all highly specialized areas
in which tax personnel need to
be trained intensively in order to
make it possible for them to
conduct meaningful audit, detect tax evasion, bring the concealed / suppressed income to
tax and, in selected cases, successfully prosecute tax evaders
in a court of law, leading eventually to a significant jump in government revenues - revenues
necessary to launch programs
of economic development and
meet other pressing expenditures, including those on Defense and Administration.
At the DOT(DT) main campus at Lahore there has already
been a sea change in the induction of modern technology to impart training to tax personnel.
Four, state of the art computer
labs with 100 odd P-IV branded
computers with comprehensive,
uninterrupted power backup

ronment are the core component of the new technology dedicated to provide training on the
Tax Management System
(TMS) newly developed by Pakistan Revenue Automation Ltd,
a fully owned CBR subsidiary
company. Besides, multi media
projection,
electronic
panaboards with built in optical
scanners, laser printers and flat
bed optical scanners etc lend
full support. It is now possible to
render realistic simulation scenarios using dedicated proprietory software.
DOT(DT) is also well on the
way of becoming a full fledged
member of the International
Bureau of Fiscal documentation
and will soon be able to tap the
superb on-line IBFD resources
including comprehensive data
base and specialized tax journals and this promises to lead to
a quantum jump in DOT(DT)
training potential. Incidentally,
IBFD membership does not
come cheap and CBR's willingness to commit significant resources to the much sought
after membership of this prestigious institution is symbolic of
it's firm resolve to upgrade the
training and research establishment and bring it up to International standards.
The first Conference of ATAIC
Heads of Taxation Training Institutions was inaugurated on
the 12th March 2007 by Mr
Salman Nabi, Member (Direct
Taxes), CBR and in his inaugural address he recapitulated
Pakistan's participation in the
ATAIC Technical Conferences
held so far and CBR's initiative
in emphasizing the need for a
conference convened expressly
to appraise the arrangements
for training of taxation personnel within the ATAIC group. He
pointed out that most ATAIC

recurring fiscal deficits and

there was an urgent need to
augment revenues meaningfully which can only happen if
there was a very well trained
workforce of taxation personnel.
Mr Salman Nabi drew attention to the fact that in an era of
globalization and economic integration it was imperative that
taxation personnel are familiar
with the latest investigative
techniques and understand the
relatively new science of computer forensics for which a concerted training effort was
necessary. He pointed out that a
beginning had already been
made by DOT when in 2005 a 12
day workshop on revenue forecasting was organized using the
micro simulation approach developed by a foreign consultant
to plot future revenue streams.
He expressed confidence in
DOT's ability to conduct more
workshops on these lines and
advised that DOT implement a
CBR commitment to the United
Nation's to use the available
training facilities at DOT on an
international plane.
Mr
Muneer
Qureshi,
DG(DOT)(DT) also spoke on
the occasion.
During the conference proceedings delegates from all the
participating countries made
presentations and there was
something of value in each presentation. However the presentations by the delegates from
Malaysia and Turkey do need
special mention. Malaysia has
made significant progress in developing training modules in
Forensic Audit, Computer
Forensics and Simulation and
has been identified as a Best
Practices ATAIC Member in
these disciplines. The efficacy of
Tax Administration in Malaysia
is evident from the fact that with

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has more than four million registered taxpayers (20% odd).
Likewise, Turkey has much to
offer in computerization generally and more particularly, data
ware housing and although not
yet an ATAIC Member but because of it's active participation
as an 'Observer' in all ATAIC
conferences / meetings, is identified as a Best Practices country in these areas that ATAIC
members can emulate. The
progress made by Turkey in the
imaginative use of computers
and related Information Technology is evident from the fact
that 91% of corporate tax taxpayers in Turkey use the e-filing
channel for tax Returns and
overall some 67% of the total
taxpayer population [corporate
and non corporate] required to
file Tax Returns use the e-channel. This translates into savings
of some 6000 tons of paper annually with a monetary value of
some 1.2 million euros.
From Pakistan there was a
useful presentation by PRAL
CEO, Mr Nasir Khan on the
computerized Tax Management
System in which DOT(DT) facilities have been used to provide
training to a core group of master trainers who are now in a position to impart training to
members of CBR's field formations in different parts of the
country. The TMS is unique in
that it has been developed by
CBR / PRAL using in-house expertise. It is based on the Oracle
Data Base platform and is being
used to input tax data to build a
'taxpayers profile' and to implement and store statutory orders
of income tax assessment, rectification and issuance of refunds.
Mr Muhammad Talha, Member (HRM) CBR, [Pakistan]
made a very succinct presenta-

/ Capacity Building and explained how the reform process

has evolved since 2001 with special reference to the training
program for CBR personnel.
Also from Pakistan, Mr
Muneer Qureshi, the Director
General DOT(DT) explained to
the conference delegates the
new 'multi dimensional' training
methodology being developed at
DOT(DT).
In contradistinction to the
previous, lecture based uni-dimensional training methodology in vogue since 1947 [and
even earlier!], the new holistic,
multi-dimensional
training
methodology exploits new approaches to learning including
dynamic, interactive class participation, case study, role play
and simulation. It was explained
that this approach seeks to relate course content with the
conditions actually prevalent in
the economy and training is
thus made more meaningful
and more relevant to the real
world in which tax personnel
work. The 'under ground economy' is one such real world scenario in which the new training
methodology has promise. The
UGE is of great significance to
most developing countries in
that this segment robs the exchequer of much needed tax
revenues besides creating
destabilizing distortions in the
economy and under mining the
rule of law in the country. The
capacity building training at
DOT(DT) makes full use of this
new training methodology as
does the specialized training
program (STP) for the income
tax group probationary officer's.
Maj Gen Sikandar Shami
[(HI(M)], Director General of
the prestigious Civil Services
Academy- where the training of
the 'raw' CSS 'recruits' entering

tually begins- gave a very lucid

presentation on the initial training process and explained how
they too at CSA are using modern approaches to teaching to
achieve optimal benefit.
At the end of the three days of
intensive deliberations, the delegates agreed on nineteen recommendations
and
the
following communiqu has been
released by DGDOT(DT) and
sent to all ATAIC Members:
RECOMMENDATIONS OF
THE DELEGATES PARTICIPATING IN THE CONFERENCE OF HEADS OF ATAIC
TRAINING INSTITUTIONS
HELD AT DOT(DT), LAHORE,
PAKISTAN. March 12 - 14, 2007.
The Reports as submitted by
the Conference Rapporteurs
having been scrutinized, corrected / amended, where necessary, and finally duly approved
by the respective Chairpersons
in the various Sessions,
It is hereby resolved that:
1.
The officer's of the
(Taxation) Training Institutions
of the Association of Tax Authorities of Islamic Countries
(ATAIC) will continue to meet at
regular intervals to discuss and
consider issues pertinent to the
training of their taxation personnel.
2.
All Members of the
ATAIC shall participate fully in
Conferences / Workshops held
and absence will be avoided.
3.
To improve interaction
between Members, special efforts will be made to overcome
the "language barrier" between
Members.
4.
Normally,
English
(UK) will be used as a common
medium of expression between
Members and Members will
make efforts to improve the
English expression and comprehension of their Taxation

especially those likely to participate in International Conferences.

5.
When ATAIC Members hold Conferences, where
possible, simultaneous translation facilities
(English to Arabic) will be provided.
6.
There shall be improved sharing of relevant information
between
ATAIC
Members and the World Wide
Web /Internet will be fully and
properly put to use in this context.
7.
Relevant statistical information / data will be organized and maintained in a
common, mutually acceptable
format, with effective safeguards / security to ensure data
integrity but at the same time
readily accessible by Members.
8.
ATAIC Members will
make their Training Institutions
/ facilities available for training
of each others taxation personnel on a reciprocal, 'no profit, no
loss' basis.
9.
As far as possible,
Members will endeavor to use
state of the art but "appropriate"
technologies in imparting instruction, including "information technology."
10.
Members will also use
dynamic but "appropriate,"
multi-dimensional
training
methodologies, including 'simulation modules,' in imparting instruction.
11.
Members will consult
each other on curricula for different subjects in which instruction is imparted in the training
institutions and will endeavor to
'harmonize' curricula used, as
far as is practical and feasible.
12.
There shall be special
emphasis on providing training
in 'forensic audit,' and 'computer
forensics' to taxation personnel.

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information technology, including computers and related peripheral equipment, will be
accelerated in training institutions.
14.
Malaysia will be "Best
practices model" in imparting
instruction in 'Forensic Audit,'
'Computer Forensics' and in the
use of 'Simulation Methodology'
in training.
15.
Turkey (OBSERVER
COUNTRY but active participant) will be "Best practices
Model" in computerization and
data warehousing.
16.
Pakistan's experience
with 'Self Assessment' / 'voluntary compliance,' 'Withholding
Taxation' and 'Joint Audit Training' will be referred to by Members in designing their training

programs.
17.
The Pakistan Direct
Taxation Training Institution
(DOT(DT)) will make necessary
arrangements to provide training in English Language communication skills to ATAIC
Members desirous of receiving
such training, on a 'no profit, no
loss' basis.
18.
The 'Informal Sector'
will receive special emphasis in
the Training curricula.
19.
ATAIC Taxation Training Manuals will be digitized
and On-Line access by Members will be enabled.
Issued by M Muneer Qureshi
DG(DOT)(DT), the Conference
Convener, this 14th day of
March, 2007 and sent to all
Members of the ATAIC.

DOT was privileged to have

the Chairperson ATAIC, Mr M
Abdullah Yusuf - who is also the
Secretary General, Revenue Division and the Chairman CBRin person to address the conference delegates on the final session of the conference. Mr
Abdullah Yusuf congratulated
the delegates on a 'job well
done' and exhorted them to
make full use of the latest technological developments to increase the efficiency and
productivity of the ATAIC taxation personnel. He said that
while there was no need to try
and "re-invent the wheel," nevertheless, it was necessary that
developing countries be aware
of latest technological developments and be willing to use

such technologies after imparting suitable training to the

workforce. Proper training is
thus a 'condition precedent' to
the ability of tax administration
to devise effective technological
solutions to the many complex
problems faced in revenue mobilization. In this context he referred especially to 'data
warehousing' and 'information
technology' and advised ATAIC
members to share information
in these areas.

Contributed by

M Muneer
Qureshi

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INAUGURATION CEREMONY

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CONFERENCE SESSIONS

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CULTURAL EVENTS

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IN THIS ISSUE

An Interview
with Observers
from IBDF
pg.1

A trip down
the memory
lane
pg. 3

AN Awareness
Workshop
pg. 7
PATRON

M. Muneer Qureshi
(Director General)
STAFF ADVISOR

Dr. Hamid Ateeq

(Additional Director)

n the month of March,

2007 DOT paid host to
ATAIC Conference of the
Heads of Training Institutions. Two observers from
IBFD Mr. Aurobindo Ponniah
(IBFD
Head,
Malaysia and Dr. V. Van Kommer (Manager, Government
Consultancy) attended this conference. Mr. M Muneer Quershi
DG DOT interviewed the two
gentlemen on this occasion and
an extract of this interview is reproduced as under.
Q.1 Kindly dilate upon the
mandate and functions of IBFD
(International Bureau of Fiscal
documentation).
Ans: IBFD is a foundation established in 1938 with the view
to maintain fiscal documentation that could benefit the tax
world at large. We are an independent organization based in
Amsterdam, the Netherlands
and run by a board of trustees
comprising of eminent tax personnel. Over the years our library has grown to include tax
laws of all countries and is one
of the largest tax libraries in the
world. In addition we specialize
in tax publications and journals
written by tax professionals on
issues such as transfer pricing,
European taxation etc.

now have a full fledged tax academy in Amsterdam for training

government officials and corporations. This academy offers inhouse structured courses to
interested governments and
multinationals e.g. IBFD in collaboration with the Malaysian
Tax Academy are running
courses on" transfer pricing" for

Ans: Our major beneficiaries

are South East Asia, Central
Asia, Nepal, Vietnam, China,
Central Africa and Countries in
Eastern Europe. As countries of
Latin America are Spanish
speaking areas, language remains a barrier for most of
Latin America as our medium of
training is English.

Right to left: Mr. Aurobindo Ponniah (IBFD Head, Malaysia, Dr. V. Van
Kommer (Manager, Government Consultancy)
the Malaysian Revenue Services. Dr. Kommer, (Manager,
Government
Consultancy)
added that their services also
included advising various governments on policy implementations.
Q.2 How many countries in the
developing world have benefited

Q.3 I understand that you have

an office in India and another
one in Malaysia.
Ans: No. We don't have an office
in India. We are based in Amsterdam and have a small sub-office at Washington D.C. Since
November 2006, we have
opened up an office in Malaysia

EDITOR-IN-CHIEF

Amna Faiz BhattY

(Deputy Director)
CREATIVE DESIGNER

Zafar Iqbal
Directorate General of
Income Tax Training &
Research, Sutluj Block,
Allama Iqbal Town,
Lahore.
Ph: +92-42-7842710
PABX: +92-42- 7830211
Fax: +92-42- 7842702
Web: www.dgtrdt.gov.pk
e-mail: dg@dgtrdt.gov.pk
may expand further in this region.
Q.4 Can you tell us something
as to how you collect data and
establish a data base?
Ans: Normally we have one
professional for each country for
collection of data. For example
we have divided Asia Pacific into
South East Asia, Central Asia
and Pacific regions. For each region we assign two researchers
with requisite qualifications
such as an MBA or PhD. These
researchers have further contacts amongst local correspondents in a country for supply of
information on tax matters. For
Pakistan our local correspondent for the last many years is

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EDITORIAL

he warm breeze of a
typical summer, did
nothing to dampen
our enthusiasm for a momentum driven month of
April following a hectic
March . The resounding
success of the ATAIC (Association of Tax Authorities
of Islamic Countries) Conference of Heads of Training Institutions (12-14
March) speaks volume for
the managerial acumen of
the DOT administration
headed by the Director
General Mr. M. Munir
Qureshi. As no team can
ever succeed without the
teamwork & commitment
of those involved , the letters of appreciation issued
by the Director General's
office to all team members
(may it be officers or officials) gave a new impetus
to the DOT administration.
Dot has always been a
centre
for
imparting
training as well as an avenue for much needed discourse and discussions in
the present phase of reform & change . In order to
apprise all stake holders
amongst the field formations of the reform initiatives and the way forward,
a one day "Awareness
Workshop" was organized
in collaboration with the
HRM wing (CBR) in the Directorate. Officers belonging to both direct as well as
indirect taxes participated
in this workshop. Not forgetting the all important
task of training, the Directorate also managed to
conduct a Capacity Build-

....Continued from page 1

practitioner and an author of
various publications.
To ensure the sanctity of data
collected, we require the local
correspondents to supply the
original text in the local language. For example in case of a
tax treaty we request the government for original copy of that
treaty. Any translation or transcription by our correspondents

Through proper and thorough

documentation of your domestic
and other companies you can
access a part of your informal
sector. We can also help in training of officers working in LTUs.
Even in Holland, their LTU remains connected with the IBFD
data base. We can further compare tax systems of various
countries to develop "best practices model" for improving the

with any change incorporated is

not acceptable to us.
Q.5 Do you hire correspondents on the basis of the needs
of an area?
Ans: Yes and No. We have a
team of dedicated researchers
who may cover more than one
particular country. For example
our Malaysian expert may also
handle Thailand. In Amsterdam
we have a team of 70 tax professionals.
Q.6 As you may already know,
the informal sector in Pakistan
is very large and income equal
to around 40 per cent of GDP is
generated by this sector and yet
no taxes are being paid by it.
What role, if any can IBFD play
in assisting us in this regard?
Ans: We can offer assistance in
further documentation of your

implementation side of a reform

initiative.
Q.7 Can you tell us something
about your educational backgrounds?
Ans: (Aurobindo Ponniah) I
am basically a Law Graduate
from U.K. and then I joined the
private sector. I have now spent
almost 17 years in this field and
currently I am heading our office in Malaysia.
(Dr. V. Van Kommer) I am
also a Law Graduate and joined
the tax service as a Tax Inspector. Having served in various capacities, I then joined the
diplomatic corp. I am also an author of various books on issues
such as Performance Management, Effective Tax Administration etc. but my interest has
always been in the implementa-

Q.8 It is interesting to note that

both of you gentleman have law
backgrounds whereas the common perception for a research
foundation is that people involved in research generally
have an economics background.
Ans: Yes, it is interesting that in
countries like India, Pakistan,
Indonesia, Malaysia etc. generally economists handle tax administration whereas the trend
is different in countries of Europe and even in America
Q.9 Do you use video conferencing as a tool in you organization?
Ans: No. E-learning with all its
potential, has certain limitations. We have started using elearning
for
maintenance
purposes e.g. case studies of
laws. Huge investment is required for e-learning and generally it does not result in much
satisfaction with a recipient of
the information.
Q.10 But video conferencing
and e-learning is sometimes
cheaper for the recipients and
also results in more accessibility to experts.
Ans: It is our experience that
face to face interaction in a class
room environment is more rewarding and learning is more
for the recipient. However, we
are developing our e-learning
facilities and have started using
it for maintenance purposes.
The interview was concluded
with an offer from the two experts from IBFD that they
would be willing to lend their expertise in implementation of the
reform initiative currently
under way in CBR.
Interviewed by:

M. MUNEER
QURESHI
(DG DOT)

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A trip down the memory lane

In course of his career Mr.

Khawar attended various
international courses such as
a course on "Computer
Systems Accounting and
Auditng" held in University of
Glasgow, U.K. in 1984 and
"Advanced Tax Management
Course" organized by the
Japanese International
Cooperation Agency (JICA) at
Tokyo in 1991.

ontinuing with our

journey into the
past, we now move
to the 2nd Common
Income Tax Batch.
The
DOT gazette feels honored in
having Mr. Khawar Khurshid
Butt, Member, ITAT, Lahore
to share the memories of his
common with us.
Mr. Khawar did LL.B. and
Masters in Political Science
from the Punjab University,
Lahore. His display of leadership qualities was apparent even during his student
life when he was elected
President of Students Union
of Forman Christian College,
Lahore for the session 196970. He was also an accomplished debater of F.C.
College and Punjab University Law College, Lahore in
the period 1969-73.
In course of his career Mr.
Khawar attended various in-

tems Accounting and Auditing"

held in University of Glasgow,
U.K. in 1984 and "Advanced
Tax Management Course" organized by the Japanese International Cooperation Agency
(JICA) at Tokyo in 1991.
During his distinguished career, Mr. Khawar served on
various important assignments. His humility and
straight forward approach
makes him a model officer and
a good human being. As remarked by one of his junior
colleague "Khawar Sahib believes in leading not through
criticism or coercion but
through reposing trust in junior officers especially new entrants to the service".
FLASHBACK
The 2nd Common Batch of
Civil Services Academy comprised of approximately 245 Officers. Continuing with the
policy followed in the earlier
batch, the service allocation
was done by the Establishment Division after completion
of the Common Training Program at Civil Service Academy
(CSA), Lahore.
Learning from the experience of 1st Common Batch
where a number of probationers failed to qualify in the Final
Passing Out
Examination
(FPOE), the 2nd Common
Batch took their initial training
with relative seriousness.
In those days, the Academic
Block of CSA was located at
Montgomery Hall (presently
Quaid-e-Azam Library, The
Mall).
Hostel accommodations were available at three
different locations for the probationers namely: The Walton
Campus, The International
Hotel (Upper Mall) and The
DMG Campus. Mr. Khawar

Campus was located in a relatively less prestigious part of

Lahore, it was fondly known
amongst the probationers as
"the Third World". This label
was further strengthened by
an old dilapidated bus which
occasionally transported probationers from Walton Campus
to the Main Campus for weekly
extension lectures etc. Another honor for Mr. Khawar
was his selection as PMC
(President Mess Committee)
at the CSA (Watlon Campus).
Mr. Khawar fondly remembers his departmental training
and the teachers who imparted training with all due
dedication and devotion. Mr.
Muhammad Afzal affectionately known as "Lala Afzal"
was the Director at the Academy, which was situated at Income Tax Complex, Nabha
Road in those days.
Lala
Afzal was less of a teacher and
more of an Institution who
faithfully guided the steps of
many new entrants to the
service. The most interesting
fact revealed by Mr. Khawar is
that outstation probationers
were not provided with any
hostel accommodation or
transportation facility during
the course of their Specialized
Training. A sharp contrast
from present day Directorate
General of Training & Research (DOT) where a purpose-built Campus provides
best possible hostel and transport facilities to the Probationers. The Departmental FPOE
of the Income Tax Officers was
conducted by CBR itself in
those days and the examination hall was located at Nabha
Road (presently the Auditorium).
Moving to the 2nd Common

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tioners, it comprised of 19 aspiring young Tax administrators who by the Grace of Allah
today are holding important
assignments inside and outside CBR. The Batch has the
distinction of being a very unified group which saw the
promulgation and application
of three Income Tax Ordinances starting from Income
Tax Act, 1922 to the new Income Tax Ordinance, 2001. A
brief introduction of the Batch
who are now more of a family
than colleagues with association of more than 32 years is as
under:

1. Malik Bashir Ahmed

Hailing from Punjab, Malik
Sahib has mostly served in
Karachi and has to his credit
important assignments in
Southern and Corporate Regions at Karachi. He is currently posted as Director
Inspection and Audit (I&A),
Karachi.

2 Mr. Javed Athar

Mr. Javed holds a master's
degree in Economics from
Karachi University and has
also done LL.B. Hailing from
Vehari (District Burewala), he
has the distinction of having
served in almost all major stations within Pakistan. He is interested in music and has a
very good collection of rare
musical treasures.
He has
done various foreign training
courses including "Train the
Trainers" Workshop from U.K.
and "Advanced Tax Management Course" organized by the
Japanese International Corporation Agency (JICA). He is
presently posted as CIT, RTO,
Gujranwala.

3. Mr. Ihsan ul Haq

Mr. Ihsan holds a master's
degree in English and has also

University, Islamabad. A very

humble man , who has interest in Sufism. While under
training at NIPA (National Institute of Public Administration) in Quetta in the year
1993-94, he took a personal initiative to visit the backward
and
far-flung
areas
of
Baluchistan. After promotion
to Grade-21 in 2003, he was
posted as RCIT, Central Region, Multan. He is currently
posted as Coordinator Special
Initiatives in CBR.

4. Mr. Naseer Ahmad

Currently serving as Member, ITAT, Lahore Bench, he
commands respect and fond
feelings amongst batch-mates
and juniors alike. Except for
very short period of time, he
has served in Lahore which reflects his love for the city.

5. Mr. Liaquat Ali Leghari

Mr. Leghari belongs to
Leghari tribe settled in
Sadiqabad, Punjab. Extremely
soft-spoken and sober, he is
now settled in Karachi. He resigned from service in the year

2003.

6. Mr. Amjad Javed

Hashmi
Mr. Amjad is the most proficient in Income Tax Law
amongst the 2nd Common
Batch. He found the courage
to bid farewell to the Income
Tax Service after 27 years and
established an independent
Law Practice at Karachi. He
resigned in the year 2002 and
is doing very well in Income
Tax / Sales Tax and Customs
Law Practice. He is currently
teaching law in two Universities. He also has to his credit
various law related publications.

7. Mr. Muhammad Aslam

Mr. Aslam belongs to Mandi
Bahauddin. He has done Masters in Economics from Punjab
University and has good command over Income Tax and related Laws. He is currently
posted as CIT, Appeals, Gujranwala.

8. Mr. Muhammad
Istataat Ali
Mr. Istataat belongs to Chak-

wal, Punjab. He has mostly

served in Islamabad and
Rawalpindi. A Law Graduate,
he served as a Civil Judge before joining the Income Tax
Service. Bold and straightforward, he is known to be a gentleman with command over
Income Tax Law. He has also
done his Masters in Strategic
Studies from National Defense
University, Islamabad. He is
currently serving as Member,
ITAT, Islamabad, Bench.

9. Mr. Mahmood Saleem

Mahmood
Another outstanding officer
of our Common. He has distinguished himself not only
amongst the batch but also
amongst other contemporary
officers in federal bureaucracy.
He has successfully served
with various governments in
different capacities. Currently,
he is holding the important position of Additional Secretary
(In charge), Women Development Division in the Ministry
of Women Development at Islamabad. He has done "Ad-

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Mr. Humayun is currently
serving as Regional Director,
NAVTEC (National Vocational
and Technical Education Commission), Karachi. A thorough
gentleman, Mr. Aqeel has done
masters in History from
Karachi University.

15. Mr. Musharaf Akhund

Hailing from Sindh (Urban),
Mr. Akhund did his masters in
Economics from Sindh University. Opting for voluntary retirement in 2001, he is now
permanently settled in USA.

16. Mr. Muhammad

Iftikhar Khan

First Row (sitting L to R) Abdul Latif Khan (Secretary Mess Committee II Term), Mohammad Yousaf Alvi, M. Zafar Ali Rizvi (Asstt Director), Kh. Anees Ahmad (Deputy Director), Mr. Mahdi Hassan (Director), Khawar Khurshid Butt (President Mess Committee I Term),
Sibtain Fazal Halim (President Mess Committee II Term), Jalauddin Qureshi (Member Mess Committee II Term), Usama Maud
Second Row(sitting L to R) Mohammad Hussain Chaudhry (Member Mess Committee II Term), Dost Mohammad Khan (Secretary
Mess Committee I Term), S. Muddasir Noor, Fazal Nabi,
Ziaul Hasan Siddiqi,
Mahmood Salim Mahmood,
Zahid Hussain,
Tariq Jamil Syed Sardar Hussain Shah (Member Mess Committee I Term), Mohammad Sharif, Ghulam Shabbir Khan Baluch, Nazir
Ahmad, Malik Bashir Ahmad
Third Row (sitting L to R) Mohammad Ali, Maqbool Ahmad, Sarfraz Khan Habibi, Abdul Rauf Chaudhry (Member Mess Committee
I Term), Qaiser Ali Shah (Member Mess Committee I Term), Mohammad Wasim, Mohammad Ayub Khan Tarin (Member Mess Committee
II Term), Shahid Najm, Masud Muzaffar, Mohammad Saleem
Fourth Row (Standing L to R) Mohammad Ihtesham Khan, Tariq Shafiq Khan (Perfect), Saif Alf,
Ashraf Khan, Nazir Hussain, Iftikhar Hussain Tariq

vanced Tax Management

Course" under the auspices of
Japanese International Corporation Agency (JICA). He has
also attended courses at Royal
Institute of Public Administration, UK and Management
Course at Harvard, USA.

10. Mr. Masood Ali

Jamshed
Mr. Masood has done
M.Com. from Hailey College,
Punjab University. Has great
command over accountancy
and Income Tax Law. He has
a jovial personality and commands respect amongst batchmates and juniors alike. He
has never believed in compromising his principles even in

Mr. Liaquat has done M.A.

Economics from Punjab University, Lahore and Masters in
Strategic Studies from National Defence University Islamabad. A very well read and
intellectual person, he has also
served as Member Directing
Staff in NIPA, Peshawar. He is
currently serving as Member,
ITAT, Peshawar.

12. Mrs. Abdia Ali

Mrs. Abida is the only lady
officer in 2nd Common Batch.
She holds an M.Sc. in Home
Economics and has done Masters in Strategic Studies from
National Defense University
Islamabad. A very soft spoken
and gentle person, she has

M. Akram Shaheedi, Mohammad

sionally sound officer.

She
was the first amongst 2nd
Common, to be promoted to
Grade-21 (in the year 2000).
She is presently posted as DG,
RTO, Peshawar, on deputation
from Ministry of Law & Justice.

13. Mr. Bilal Khan

Mr. Bilal has done Masters
in Economics from Peshawar
University and Masters in
Strategic Studies from National Defense University Islamabad.
He is currently
serving as Member National
Tariff Commission, Islamabad.
He attended "Common Wealth
Advanced
Management
Course for In-service Tax Offi-

Hailing from FATA Janni

Khel Wazir Tribe, Mr. Iftikhar
has done MA Economics from
Peshawar University and Masters in Strategic Studies from
N.D.U, Islamabad. A good-natured man, he has always displayed the traditional Pathan
hospitality.
He has mostly
served in NWFP and is currently posted as CIT, Appeals,
Peshawar.

17. Mr. Muhammad

Ishaque Memon
Belonging
to
Deeplo
(Tharparkar), he is a graduate
from Sindh University. Before
joining the Income Tax Group,
he served in Habib Bank Limited for two years. He is currently
posted
as
Commissioner,
Zone-A,
Karachi.

18. Mr. Arjundas Oad

(Deceased)
Mr. Arjundas hailed from
Sindh (Rural). He met with a
fatal road accident way back
in 1978. A jovial person who
died very young which put an
end to an otherwise bright and
promising
young
officer.
Physically a strong man, he
was accompanied by his family when the accident hap-

ay Issue.qxp

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12:50 PM

Page 6

DotGazette
ANINTERVIEW WITH

Madam Noor Azian Abdul Hamid

D i r e c t o r M a l a y s i a n Ta x A c a d e m y
Q.5 What are your suggestions to make training more effective?
Ans: I think as far as training
is concerned, there is a large
gap between the levels of training needed for different countries, e.g. as revealed during
country presentations by participants of this Conference,
some countries lack even the
basic
level
of
training,
whereas, countries such as

Q.1 What impressions are you

carrying back viz-a-viz- our
training academy?
Ans: I was pleasantly surprised, you have the best at the
DOT Academy. Your computer
labs are very impressive and upto-date. In fact, these labs are
even better than the computer
facilities available at the
Malaysian Tax Academy. Most
importantly, the layout of your
hostels and the gardens are
beautiful.
Q.2 In three adjectives how
would you express the ATAIC
Conference 2007?
Ans: Educative, educative and
educative.
Q.3 In one line, briefly, how can
we follow up on what we have
achieved?
Ans: We have achieved a lot in
getting all the countries together, but I must admit that because of the language barrier,
we sometimes had problems.
We need to overcome this bar-

concerned, we must come up

with concrete suggestions for
the future and have regular follow-up sessions.
Q.4 Would you say that DOT is
comparable with the Malaysian
Tax Academy?
Ans: Yes! However, you have a
little bit more luxury of space
whereas we have less space
available at our Academy but
then we are not comparing apples with apples. The Malaysian
Tax Academy handles a number
of cross disciplines. We have
hostel accommodation comprising of 150 rooms , but sometimes
the in-take of new officers is
much more than the available
accommodation, e.g., this year
we have around 475 new officers
joining the Academy. Space is a
big issue for us and construction
work is currently underway to
resolve this infrastructural
issue. As far as facilities are concerned we are more or less at
par, however, your Auditorium

Pakistan are looking towards

advanced level of I. T. Training
such as data warehousing and
simulation techniques. We
have to address specific issues
for a specific country. We have
to tailor training according to
the needs of each country.
Q.6 Your suggestions for further cooperation between Pakistan and Malaysia in the field
of tax administration?
Ans: I think we need to sit

and requirements of our countries as revealed during this

Conference. There are many
areas where we can cooperate
in the field of training.
Q.7 Finally are you satisfied
by the period assigned to the
Conference?
Ans: I think that three days
are fine, but in future we need
to differentiate between a
"Technical Conference" and a
" Conference on Issues related
to Training ". Subject matters
such as technology needed for
improving training can be incorporated in a training conference but a purely Technical
Training Conference should be
kept separate. In future, we
need to confine ourselves to a

"Conference on Training Issues of Heads of Training Institutions" where specific issues

related to tax training can be
discussed. Technology related
issues in relation to training
can then be included in such a
Conference.
Interviewed by
MS. IRAM
ADNAN
(Add Director)

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ANAWARENESS WORKSHOP

Mr. Muhammad Talha,

Member (HRM), Mr.
Ather Maqsood Ahmed,
Member (FR&S) and Mr.
Abdur Razzaq, Member
(Audit) spoke on the
occasion. In his opening
speech, Mr. Muhammad
Talha explained in depth
the HRM initiatives and the
progress on projects such
as restructuring of
offices, the legal
framework of reforms,
the procedure of job
placement through IJP
(Internal Job Posting) and
the renewed focus on
training and development
in liaison with institutions
such as LUMS, IBA etc.

he success of any reform initiative is dependent

upon
its
skillful execution and
involvement of a motivated
workforce. In order to keep all
field officers of CBR well informed of the progress so far
of reform initiatives along

with a road map of future, a

one day "Awareness workshop" was held in DOT, Lahore in collaboration with
HRM (Wing) CBR.
Mr. Muhammad Talha, Member (HRM), Mr. Ather Maqsood Ahmed, Member (FR&S)
and Mr. Abdur Razzaq, Mem-

ber (Audit) spoke on the occasion. In his opening speech,

Mr. Muhammad Talha explained in depth the HRM initiatives and the progress on
projects such as restructuring
of offices, the legal framework
of reforms, the procedure of
job placement through IJP

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Page 8

DOTGazette
(Internal Job Posting) and the
renewed focus on training and
development in liaison with
institutions such as LUMS,
IBA etc. He informed the audience of the pace of reforms
resulting in setting up of regional offices where placement of officers was being
done in a transparent manner
by advertising the jobs on internet. He explained in depth
that the focus was on developing a professional work force
whereby the new entrants to
service went through a one
year MBA Taxation program

tackle macro economic and

fiscal imbalances, a three
pronged strategy comprising
of resource mobilization, expenditure management and
debt deduction and exit strategy were envisaged. He explained that as a result of this
strategy, tax rates had been
lowered to reduce tax evasion,
"tax on production and investment" had been replaced by
"tax on consumption and income" and there was a gradual reduction of corporate tax
rates to make investment internationally competitive. As
scheme under the Income Tax
Ordinance, 2001. He informed
the audience that the audit wing
in collaboration with a professionally qualified academy and
DOT, Lahore had so far trained
128 Audit Officers/Officials belonging to both Income Tax and
Sales Tax to conduct meaningful audits by applying modern
investigative techniques.
These presentations were followed by a detailed Q & A session where the participants
raised important queries related to the future of audit and
job placements through IJP
.

from IBA, Karachi. For mid

career officers , training modules in liasion with LUMS and
IBA, Karachi were being finalized.
Mr. Ather Maqsood Ahmed,
Member (FR&S) dilated upon
the Tax policy and Administrative reform initiatives and
the outcome so far. He highlighted some of the factors
which impeded the growth of
revenue collection in Pakistan
such as low tax / GDP ratio,
narrow tax base due to ex-

a result of these measures

collection of direct taxes had
increased from Rs. 183.4 (M)
in financial year 2004-05 to Rs.
225.0 (M) in financial year
2005-06 or a growth of 22.7%.
Overall ,there was an increase
in tax collection by 20.8% in financial year 2005-06 as compared to financial year
2004-05.
Mr. Abdur Razzaq, Member
(Audit) highlighted the performance of the Audit Wing and
the initiatives undertaken to de-

w w w. d g t r d t . g o v. p k

11th Issue

June, 2007

INSIDE THIS ISSUE

Tax Base Broadening
By: M. Muneer Qureshi
Page - 1
By:

M Muneer
Qureshi
DG (DOT)(DT)

he mobilization of tax
revenue has a direct
nexus with the number of
taxpayers participating actively
in the system set up to levy and
collect taxes. In the case of
Income Tax the number of
persons filing periodic 'Returns'
vis a vis the total population of
the country, is a key indicator of
the 'Tax Base' for the direct
taxation of income earned by
individuals and other entities
including corporate entities
recognized as 'persons.'
Over the years Pakistan's
(Income) Tax Base has been
more or less stable at 1% or less
of the total population. In the
United States, 72 million
Returns of Income are filed
annually with the I.R.S which,
given a population of 300 million,
translates into a tax base of just
over 24%. In Malaysia, the tax
base is about 20%. In Turkey, 5%.

PATRON
M. Muneer Qureshi
Director General
EDITOR-IN-CHIEF
Amna Faiz Bhatty
Deputy Director
LAYOUT & DESIGN
Asad Ali
Directorate General of
Training & Research
(Direct Taxes), Lahore.
Ph: +92-42-7842710
PABX: +92-42-7830211
Fax: +92-42-7842702
Web: www.dgtrdt.gov.pk
email: dg@dgtrdt.gov.pk

In India, 2%. The 'tax to GDP'

ratio has a direct correlation
with the tax base size and
Pakistan's poor tax base
therefore means a poor tax to
GDP ratio [ 10%] which ofcourse
means poor tax revenues. In
fact Pakistan is placed at the
lower end of the 'T2gdp'
spectrum whereas those at the
higher end
typically, the
Scandinavian countries led by
Sweden and Denmark- score
well over 40%.
What are the reasons for this
dismal tax base picture?
To begin with, the largest
single sector of the Pakistan
economy, agriculture, generating 22% of GDP , occupied by
50% of the total population [ ie 80
million plus] and 42.5% of the
total labor force [ ie 20 million]
pays zero income tax to the
federal exchequer because it is
'exempt' from payment of
income tax under the statute ie
the Income Tax Ordinance of
2001 in fact this sector has been
'exempt' since 1947 and the
Income Tax Ordinance of 2001 is
the third income tax statute to
'renew' the exemption originally
available for agriculture in 1947
when the Income Tax Act 0f 1922
was adopted as the Income tax
Statute for Pakistan.

Secondly, Pakistan's huge

and burgeoning 'Infor mal
sector' also known as the 'black
economy' and the 'parallel
economy'- appraised variously
at 35 to 55% of formal GDP- and
employing some 20 million out of
the total labor force of 47 million.
Thus between them, these two
sectors, take away 110 million
out of the total population of 165
million from the 'tax net' leaving
barely 55 million to bear the
burden of tax on income.
It is to be noted that in
Pakistan there are some 24
million bank account holders.
This means in effect that after
accounting for the 1.7 million
who do file Returns of Income
annually, more than 22 million
do not do so. Why? Is their
'Income' Exempt? Is is below
the taxable limit? No body
seems to know. The banks
ofcourse have all the relevant
data regarding these account
holders but the department of
Income Tax has no authority to
demand these details 'en
masse.' Nonetheless this data
base is there and is a veritable
treasure trove of information
that could have a direct bearing
on the income earned by the
account holders.
Thirdly, inequalities in the

Measures to control the unhindered

growth of the parallel economy
Credible Statutory deterrence.
Comprehensive tax coverage of all sectors Minimal exemptions.
Expenditure taxation.
Rationalizing the tax rate structure.
Vigilance to curb flight of capital.
Breaking the power of vested interests.
Pre-emption law.
Meaningful economic surveilliance.

An interview with
Mr. Lee M. Niederman
Page -5
Performance Report
DOT (DT)
Page - 8
distribution of Income. On the
universally recognized 'Gini
Index,' Pakistan scores a poor
41. This means that a very large
segment of the population
remains impoverished with
income levels below the
threshold of taxability.
If we are to succeed in
augmenting income tax
revenues significantly then we
have to address the core
reasons for the narrow tax base
pointed out in the preceding
paragraphs.
Strictly on merit it is neither
fair nor logical to make a
distinction between agricultural
and non-agricultural incomes
for purposes of taxation. A
distinction so made arbitrarily
amounts to creating a preference for one class of income
over the other. Instead of
creating such a preference for
which there appears to be no
economic justification, it is
suggested by the counter
exemption lobby that just as
business and salary incomes
below a certain level are
exempted from income tax, the
same principle should be
extended to agricultural
income. This would take care of
the subsistence farmers who

>>>

w w w. d g t r d t . g o v. p k

EDITORIAL

s the financial year 2007

draws to an end , it is
time to see in retrospect
and ponder on the past performance for improvements in the
future.
The year 2007 witnessed a
variety of training assignments
professionally & successfully
completed by the Directorate
starting from the Specialized
Training of the
33rd STP ,
organization of three joint
Audit training programs for
officers of both Income Tax &
Sales Tax and lastly the
successful organization of the
ATAIC Conference of Heads
of Training Institutions (1214th March). In between ,the
Directorate also managed to
organize a sizable numbers of
Capacity Building Programs
both for officers as well as
officials. All of above mentioned
activities, required substantial
amount of human as well as
infrastructural support.
It has
always
been the
underlying philosophy at our
Directorate to consistently
improve upon the infrastructure & other facilities
for
imparting quality training to the
end users . What lies behind
immaculate hostel facilities &
most modern teaching aides
are months of planning and
decision making . In order to
keep pace with the changing
technology side by side with
improvements in physical
infrastructure, efforts are made
to ensure transparency in the
whole process. That is exactly
the reason why in the month of
May various committees were
formed
headed by a
Chairperson and assisted by
two members for purchase of
needed items through open
tender. It is hoped that the
machinery , furniture , I.T
software/hardware etc.
purchased through this process
would continue to serve the
growing needs of our institution.

11th Issue

would be automatically
excluded.
Levy of income tax on
agricultural income is also
recommended to reduce the
evasion of income tax in
Pakistan which is by all
accounts, considerable. The
availability of statutory
exemption for agricultural
income has resulted in the
systematic exploitation of this
exemption by those enjoying
non agricultural income.

agricultural business contrived

artificially through the creation
of "ghost" liabilities, has
provided legal cover to substantial investments funded by
accumulations of untaxed
"black" money. Had agricultural
income been subjected to
income tax then it would not
have been so simple a matter to
create such liabilities as the
affairs of the agriculturist would
have been as much subject to
scrutiny as the person engaged

June, 2007

reported to the tax authorities only those accounts are

reported that "suit" the
taxpayer, the cash flow of funds
constitute an added impediment in this context as these
cannot be monitored.
Thus if incomes generated
through agriculture were made
taxable, the "facilities" presently available through the
"devices" mentioned above, for
securing huge unwarranted tax
benefits, would be effectively

Pakistan Tax Conundrum

Econ Sector

Share in GDP

Share in Taxes

Agriculture
Mining & Quarrying

20.2
1.9

1.2
4

Manufacturing

17.1

62.2

Construction
Electr & Gas Distrib

2.2

2.9
5.3

Transport, Storage & Comm

WholeSale & Retail Trade
Finance & Insurance
Ownership of Dwelling
Public Admn & Defence
Services
Through the simple expedient
of attributing part of their
income to agricultural activity
they are able to secure substantial tax benefits. In reality of
course such people are not
actually significantly engaged
in agriculture at all. However
since they have purchased
agricultural land-which may be
marginal land or even wasteland (banjar) for all they care- it
is not too difficult to hoodwink
the federal tax authorities on
the bonafides of the investments made by them and
attributed to the earnings of
their agricultural holdings.
On another and more subtle
plane, the "phantom" flow of
funds from agricultural to non

2.4
13.8
16.9
3.2
2.5
5.2
8.3

in business. So far however, the

income tax authorities have no
direct record of the agricultural
activities. Only sketchy
information of dubious origin is
relied upon to decide on the
bonafides of a reported liability
shown as owing to the agriculturist. Again, since bank
accounts are as a rule not

4.5
2.8
3.9
0.3
5
7.8
neutralized.
The feasibility of mobilizing
revenues from the agricultural
sector through direct taxation
of income generated there is
also apparent from the fact that
the agricultural income tax
would be more income elastic
than land revenue. With a
greater yield per acre, higher

According to researchers and Government

statistics, in Pakistan 40% of the richest
landowners own 70% the arable land.
>>>

w w w. d g t r d t . g o v. p k

procurement prices and

mechanization, incomes in the
agricultural sector have risen
considerably, but yield, in terms
of direct taxes on agriculture,
has lagged behind appreciably.
To illustrate the point, it is
pointed out that between 1972 -

11th Issue

sector. Progressive rates of

income tax, if applied to the
income of this rural elite, could,
over time, alleviate this malady,
the persistence of which can
only bode ill for the social
stability of agraria and for the
politico economic well being of

tax evasion on their part.

In a historical context too, in
the case of post Meiji era Japan
in the 1880's when the drive to
modernize the country was
launched aggressively, taxation
of agricultural income was the
principal source of revenue to

Distribution of Income in Pakistan

% share of GNP going:
- To poorest 20%
- To richest 20%
- To Poorest 40%
- To Top 5%
- Rural rich
- Urban rich
- Rural poor
- Urban poor
73 and 1978 -79, the yield from
the direct taxation of agriculture (land revenue and irrigation charges) increased by 78%,
while value added in agriculture, at current factor cost,
increased by 157%. There is
every reason to say that this
trend continues to this day.
That the taxable capacity of
the larger farmers (who
constitute the rural elite) has
improved over time is evident
from the considerable increase
in consumption expenditure of
the rich farmers. According to
Alavi, even when there are
adverse changes in the terms of
trade for agriculture, the rural
elite enjoy considerably
enhanced real incomes.
The conspicuous consumption of the rural elite is not only
an indication of the steadily
increasing affluence of the rich
farmer but it is also a pointer to
another evil - that of accentuating differences in income
distribution in the agrarian

1980

1987

2006

7.0
45.4
19.1
31.7
40.8
48.1
8.5
6.8

6.1
49.8
16.1
35.7
42.2
45.3
7.8
7.8

5.7
55.0
14.0
45.0
45.0
50.0
6.0
8.5

the country in general.

However one looks at it,
there appears to be little
justification for a blanket
exemption for agricultural
income. There is no denying
that the small farmer with a
limited landholding may not be
able to bear the burden of
additional taxation.
However bar ring such
exceptions, levy of an income
tax would appear to be fully
justified - and even necessary if
the negative perception in the
other sectors of the economy of
such blanket exemption from
levy of income tax for the
agriculture sector is to be
corrected. It is now acknowledged that one of the important
reasons for tax evasion in
Pakistan in the other sectors of
the economy is this 'unjust
preference' for agricultural
income which provides a
justification for tax payers
enjoying non agricultural
income to justify and rationalize

fund the industrialization drive.

Paradoxically, the taxation of
agricultural income in Japan
did not 'ruin' Japanese agriculture as many had predicted.
Rather, once the agriculturist
realized that agricultural
income would 'have' to suffer
tax, the agriculturist made
concerted efforts to increase
agricultural productivity by

June, 2007

systematic use of natural and

chemical fertilizers, use of
insecticides and pesticides,
better crop rotation, use of
improved quality seed ,
improved water management,
use of machinery the tractor
and harvester- , all of which
resulted in greatly increased
productivity and consequentially, sharply increased income
for the farmer which increase
made it possible for him not only
to pay tax but also left him with a
healthy surplus. Part of this
surplus was then used to
improve the farmers standard
of living and quality of life.
It is clear that this improvement in agricultural productivity would not have been possible
had there been no 'slack' in the
agriculture sector. Prior to the
modernization drive launched
in Japan in the 1880's, agriculture was entirely feudal in it's
organization and structure and
absentee landlords owning vast
tracts of land let out to harshly
exploited tenant farmers had
little impetus to increase
agricultural productivity. All
this changed dramatically once
reforms were introduced and
taxation levied on agricultural
income.
In Pakistan, after almost
sixty years of independence,
there has been little 'real'
change in the traditional, feudal
complexion of our agriculture.
True, land reforms have been e

Distribution of Family Income - Gini Index

Namibia
S. Africa
Brazil
Mexico
Argentina
Thailand
Malaysia
Philippines
United States

70.7
59.3
59.7
54.6
52.2
51.1
49.2
46.6
45.0

China
Iran
Singapore
Turkey
Pakistan
Russia
Japan
U.K.
S. Korea

44
43
42.5
42
41
40
37.9
36.8
35.8

Australia
Egypt
Indonesia
India
Spain
European Union
Bangladesh
Finland
Norway
Sweden
Denmark

35.2
34.4
34.3
32.6
32.5
32
31.8
26.9
25.8
25
23.2

w w w. d g t r d t . g o v. p k

introduced but these have

been largely cosmetic. The
powerful feudal families owning
much of the rural land have
succeeded in making a mockery
of the land reforms by resort to
phoney land re-distribution on
paper with the active connivance and collusion of the
provincial revenue authorities
whose parasitic dependence on
the 'largesse' of the feudals has
made them more than willing
partners in this reactionary
enterprise. As in pre Meiji era
feudal Japan, these feudals
have little interest in pressuring
the tenant farmers to augment
land productivity. All they want
is their ' share' and once they
have received that they call it
'quits' and return to their
comfortable lives. They know
that they will suffer no tax on
their income and this adds to the
'surplus' that is available to fuel
a cycle of conspicuous consumption.
That there is a considerable
'slack' in the agricultural sector
in Pakistan is quite evident from
the available statistics [ Source:
F.A.O ]. Thus, (in 2004) with a
total land area of 0.9% under
cultivation, Pakistan's agricultural production index is pitched
at 109 [base year 1989-91=100].
With an identical land area
under cultivation, Brazil has a
production index of 125. Egypt
with 0.5% land area under
cultivation has a production
index of 109
the same as
Pakistan's but with far less land
under cultivation. Russia has
just 0.1% of land area under
cultivation and it's agricultural
production index is 114.
In the case of aggregate
cereal production [wheat, rice,
maize], Pakistan is ranked 18th in
the world [33 mill tons] while in
yield it is ranked 87th in the world
[2423 kg per hectare]. Similarly,
in the case of cotton production
Pakistan is ranked 4th in the
world [6.6 mill tons] but in yield
is ranked 27th [1935 kg per
hectare]. Again, in sugarcane
production Pakistan is ranked

11th Issue

5th [57.4 mill tons] and in productivity is

ranked 58 t h [49576 kg per
hectare].
The above indices clearly
show that there is considerable
scope for improvement in
agricultural productivity in
Pakistan and relying on the
historical experience of post
Meiji era Japan, there is every
reason to expect that the right
set of policies
including
taxation of agricultural incomewill increase agricultural
productivity significantly and
will enable the farmer to not
only pay tax on his significantly
increased income but to also
improve his own standard of life
as has admittedly happened in
the case of Japan one of the
outstanding success stories of
our times.
Coming now to the informal
sector, compulsory (statutory)
documentation of all economic
transactions is probably the
single most important step that
can make a significant impact in
reducing the size of this sector. A
beginning has been made [after
60 years!] and the new income
tax ordinance of 2001 now
makes it mandatory for all
businesses to maintain
'prescribed' accounts. However
much more needs to be done
especially in the case of the

large 'illegal segment' of this

sector where smuggling
/hoarding /profiteering and
widespread 'underground
manufacture' and sale of
spurious and counterfeit goods
with brazen violation of
copyright laws generate huge
profits on which no tax is paid. A
great deal of deterrence will
have to be built into the tax code
by enactment of appropriate
punitive laws. High profile tax
evaders need to be taken to task
and prosecuted aggressively.
Their successful incarceration
in a State penitentiary for a
protracted period is essential if
the criminal elements in the
informal sector are to be
deterred effectively.
With regard to reducing
inequalities in the distribution of
income, the traditional reliance
on the so called 'progressive' tax
rate structure alone does not
appear to have been very
successful and much more
needs to be done by reintroducing Wealth Taxation
and also by direct state intervention to help and facilitate the
disadvantaged and underprivileged members of society
through better education
facilities and healthcare and
easier access to institutional
credit so that they are able to

June, 2007

compete and improve their

economic standing.
We have to realize that
economic prosperity must
'trickle down' to the under
privileged sections of society
and if the existing institutional
arrangements and market
forces do not facilitate such a
'trickle down' then the State
must intervene and ensure that
the fruits of prosperity do flow to
all sections of society and do not
remain concentrated in a few
hands.
Given greater sectoral
equity with regard to levy of tax
on income, meaningful reduction in the size of the informal
sector and reduction in income
inequalities in the distribution of
income, there is no reason why
the tax base should not be
greatly enlarged in size and
scope so that we have not only
many more taxpayers who file
Returns of Income regularly but
also declare significantly higher
levels of income and eventually
when all is said and done, it is
these two aspects that will bring
about the quantum jump in
revenues that is presently, only
a distant dream.

Under Ground Economy in Pakistan - vital statistics

Year

UGE-Size

UGE- Tax Evasion

1973
1978
1983
1988
1993
1998
1999
2000
2001
2002
2006

Bill Rs. 15

Bill Rs. 2.15

41.832
104.759
192.752
470.124
1449.891
1146.839
1094.052
1298.233
1388.064
1500

4.644
13.361
26.672
62.913
193.397
152.499
141.077
169.025
176.472
180

UGE- % of GDP
20 %
23.51
28.75
28.54
35.27
54.52
39.03
34.76
38.00
37.25
35.00 %

Source:
M. Ali Kemal, Underground Economy & Tax evasion in Pakistan - A Critical Evaluation.

w w w. d g t r d t . g o v. p k

11th Issue

June, 2007

An Interview With

(Tax Administration Advisor) U.S. Department of The Treasury

r. Lee M. Niederman [Tax

Administration Advisor] U.S.
D e p a r t m e n t o f Tr e a s u r y
attended the ATAIC Conference of Heads of
Training Institutions held from 12-14th
March 2007, at DOT, Laore as an observer
Mr. Lee, an expert on designing training
modules for developing countries, shared
his views on ATAIC Conference and
training priorities in an interview with Ms.
Iram Adnan (Add. Director) and Syed
Imran Raza Kazmi (Add. Director).
Extracts from this interview are reproduced as under:

Q: Lee, it is wonderful to have you here

for the conference. This fact apart,
would you like to set our curiosity to rest
and explain as to how exactly did you end
up here?
Ans: I was doing an I. T. Program for the
Jordanian Tax Authority when they
received the invitation for this conference. I
thought that they should be attending this
ATAIC conference, as it was an excellent
opportunity for them to establish a net work
with other training authorities. As the
program sounded interesting I then got in
touch with the Malaysian Tax Academy and
their D.G. was kind enough to let me know

the details of the conference. I then emailed to authorities concerned in

Pakistan.
Q: Would you term this conference as a
success considering the fact that it was
only a three day program?
Ans: I think this conference was a huge
success in brining countries together so
that they can compare the level of their tax
training. The countries were able to share
their experiences, where the more
advanced countries were able to demonstrate what they have accomplished and
the less advanced countries could see as to

w w w. d g t r d t . g o v. p k

where they need to concentrate

more. I think the brain storming
sessions were very useful in
helping to focus as to what
needs to be done. This conference is the first step and if the
recommendations reached
through this conference are
implemented on a regional
level, it would be a great
achievement.
Q: In your opinion, what more
could be added to the training
aspect of the conference?
Ans: I am not sure that you could
add anything as it was a three
day conference, but I think what
we have begun to do is to identify

what they can achieve. For

countries like Malaysia, Turkey
etc. which are technologically
advanced, they also need to
recognize that they have not
reach the end of the road, either.
What I have seen in working
over years with other countries
is that when they come to USA
they are overwhelmed by the
level of technological advancement in USA and they cannot
believe that this level of
advancement is ever possible
for them. But when they see
countries in the same region
and having the same economic
issues, resource constraints
etc., attain technological

11th Issue

that we coordinated was a

training program on Computer
Evidence Analysis Training
and we took this training to
countries such as Brazil,
Malaysia and the Caribbean.
The most interesting thing was
that the Brazilians took the
software developed by our
Federal Enforcement Training
Center improved upon it, and
handed it back to us with the
remark that this is the way a
software should have been
developed. It was incredible.
This is what you call success in
transfer of technology that the
county benefiting from technological assistance not only

June, 2007

depending upon the needs of the

country such as restructuring.
We also coordinate our efforts
with other international donor
agencies such as IMF, World
Bank, Asian Development Bank
etc.
We try to share the expertise
and cooperate with other
donors, e.g., there were certain
on-going projects in Latin
America where our budget did
not allow us to buy computers.
The Inter Development
American Bank was working on
another project and they had
funds available so they bought
the computers needed and on
another project where the Inter
Bank needed outside expertise,
we provided the relevant
resource persons for that
project.
We respond to the needs of a
country based upon a formal
request from that particular
country.
Q: But that requires timely
coordination and response
between different agencies. Is
the coordination and response
always timely?
Ans: Yes! The response is timely
as the Department of Treasury
has ample funding at its
disposal to respond quickly in
case of immediate assistance..
Nor mally, we also tr y to
coordinate our efforts with
various donor agencies such as
World Bank , IMF etc. while they
are working at various projects
in countries such as Pakistan.

the agenda for more extensive

trainings for the future.

advancement, it seems like an

attainable goal for them.

Q: How would you propose

that technological gap
between the member countries in the field of training can
be filled?
Ans: For the countries that are
less developed there is now a
benchmark in shape of member
ATAIC countries such as
Malaysia, Morocco etc. as to

Q: Lee, we have already talked

about forensic audit software
in Malaysia. For the purpose
of record, could you please
once again give us the U.S and
Brazilian example?
Ans: When I was working with
IRS, one of my jobs was
coordinating inter national
trainings and one such program

utilizes the technology, but can

also tailor it according to its
needs.
Q: Being an ex-IRS functionary, how best can you help any
c o u n t r y, r e f o r m i t s t a x
system?
Ans: The Treasury Department
has its own technical assistance
program where we provide
technical assistance and
training to a variety of countries

Q: Does the U.S Department

of Treasury has some priority
list in terms of assisting
certain countries /governments in their reform initiatives? Would you elaborate?
Ans: Yes & No! If the United
States Department of Treasury
as a special interest in a country
it can offer assistance. However,
we also offer assistance based
upon a specific request for
assistance from a particular
country, e.g., I am here in
Pakistan as a representative of

w w w. d g t r d t . g o v. p k

11th Issue

June, 2007

U.S Department of Treasury and it is up to

the Government of Pakistan to come with
its requirements for assistance from us.
Q: In your views whether for technical
services such as Income Tax, Sales Tax,
Customs etc. only people with prior
knowledge of accounting or background
of business administration should be
hired and not generalists as is currently
being done through the process of
competitive exam?
Ans: In your country, the people coming
through the competitive exam first go
through a training period of 2 3 years and
are then posted on supervisory positions.
In our country the system is different, we
first hire people on technical positions and
after having served in those positions for 4
5 years, these people are then moved to the
supervisory positions.
Our system is
different as we hire technical people who
then go through the necessary experience
and training work and eventually work
their way up to becoming supervisors.
Q: Where would you place DOT as
compared to other developing countries
in the field of training?
Ans: DOT because of its facilities, is an ideal
center for regional training. I think that for
country specific trainings you have to go
into local laws and legislation and then
train the people for a particular job. The
regional training centre can play an
important role where experts from
different countries can share experiences

e.g as regards audit training and the

countries can take back those experiences
to best fit their own needs for training
according to their local environment.
Q: What measures should be taken to
enhance the efficiency of training
institutions of the developing countries?
Ans: As my expertise is in the designing of
training material, one of the things that the
countries need to develop to handle
technical training delivery system, is to
train a team of people who are in turn
trained to handle infrastructural technolo-

gies, course design etc. so to deliver

training properly. One of the recommendations that we have come up for training
institutions such as DOT is that, they
should have a mix of faculty on rotational
basis in DOT, which comes from the field so
that they bring technical expertise with
them, but you should also have a permanent faculty here whose expertise is in the
training design and not necessarily in tax
administration. As a result the professional
training experts can then work with the
rotational faculty members to develop
proper training methodologies. Thirdly you
can bring in training staff from outside, if
you need expertise such as I. T. expertise,
accounting expertise etc. by hiring
teachers from outside.
Q: Which country paper and approach
towards training did you like best?
Ans: I was impressed by the Pakistani
presentation as regards to your vision of
where you want to go. As regards training
design, I think both Malaysia and Morocco
have come a long way and I think Pakistanis
are moving in same direction.
Interviewed by:
Mrs. Iram Adnan
(Additional Director)
Syed Imran Raza Kazmi (Additional
Director)

w w w. d g t r d t . g o v. p k

11th Issue

June, 2007

PERFORMANCE REPORT
DIRECTORATE GENERAL OF INCOME TAX (TRAINING & RESEARCH)
LAHORE AND SUB OFFICES AT KARACHI & ISLAMABAD

t has always been the

philosophy at DOT to
develop workforce capabilities at all levels by equipping
them with appropriate knowledge, skills and abilities through
a comprehensive training
approach based on planned,
systematic and continuous
training programs. To ensure
quality in training, a periodic
review of performance is
mandatory.

The comparison of first

three quarters of the calendar
year 2006-2007 with the same
period in 2005-2006 reveals that
the Directorate keeping up with
its past performance has so far
conducted 37 Capacity Building
Programs (grade 16-19 ) in this
year as against 41 such training
conduced in the year 2005-06.
The slight difference in numbers of trainings offered to
grade 16 officers is due to
preference given in specialized

pay positions to a more professional workforce.

Realizing the value of
trained officials to assist in the
new system, the Directorate has
so far conducted 54 training
programs for Stenographers,
Inspectors and UDC's this year
as against 19 such trainings
conducted in 2005-06.
As the focus of training has
now shifted to training on
functional lines as against

generic
trainings
, the
Directorate this year played
host to three Audit Training
programs developed by the
Audit Wing (CBR) in which 128
officers both from Income Tax &
Sales Tax participated followed
by an evaluation session at the
conclusion of each training .
This period also witnessed
the completion of Specialized
Training of 33rd Common batch
comprising of 36 officers.

The comparison of performance with percentages is as under:

s.
No

2005-06
Full Year

Name of Course

2005-06
9 Months

2006-07
9 Months

01.07.05-30.06.06

01.07.05-31.03.06

01.07.06-31.03.07

VARIATION
(+) OR (-) IN
% AGE

No. of
Courses

01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24

Capacity Building Training (BS-19)

Capacity Building Training (BS-17/18)
Capacity Building Training (BS-16)
Specialized Training Program (32 Batch)
Specialized Training Program (31 Batch)
Specialized Training Program (33 Batch)
Appeal Management Processing System
Training Course on Expenditure / Audit
Workshop on Withholding Taxes
Refresher Course for Tax Bar Members
Orientation Course on TMS
Training Course in Acctts. Matters & I.T.
Specialized Training Program for ITOs
Foundation Course for Sgs / Stenos
Special Training Program for Sup. / Supdt.
Foundation Course for Inspectors
Foundation Course for UDCs
Financial Mgt. & Expend. Training
Special Course on Audit & Accounting
Withholding Tax Management System
3 days ATAIC Conf. of Heads of Training Institutions
Foundation Course for Naib Qasids
Seminar on Perf. Evaluation of NPOs
Seminar by Members
TOTAL

No. of
Trainees

No. of
Courses

No. of
Trainees

No. of
Courses

No. of
Trainees

No. of
Courses

11
26
14
2
1
1
3
3
2
2
2
3
1
13
1
10
7

102

157
370
191
55
40
38
45
38
177
40
97
60
59
196
14
155
99

1831

No. of
Trainees

135
317
170
55

1
2
1

60
59
102
14
106
69

10

133
259
121

0.0
(-) 5.0
(-) 33.3
(-) 100.0

(-) 1.5
(-) 22.4
(-) 40.5
(-) 100.0

36

(-) 100.0

100.0

(-) 100.0
(-) 100.0
(-) 100.0
100.0
50.0
(-) 100.0
53.3
(-) 100.0
30.0
82.8
100.0
100.0
100.0
100.0
100.0
100.0
100.0
(+) 43.7

(-) 100.0
(-) 100.0
(-) 100.0
100.0
46.4
(-) 100.0
46.6
(-) 100.0
19.7
84.9
100.0
100.0
100.0
100.0
100.0
100.0
100.0
(+) 46.8

13
177
24

3
1
7
1
7
5

8
20
9

8
21
12
2

71

1301

5
6
0
15

75
112
0
191

10
29
9
3

132
458
144
128
12
40
56
300
250
2447

1
1
5
3
1
126

13th Issue

August, 2007

INSIDE THIS ISSUE

By:
M. Munir Qureshi
DG (DOT)(DT)

he 21st century bureaucrat is increasingly

being visualized as a
sophisticated, highly motivated, super efficient, squeaky
clean, 'client' friendly, almost
r o b o t l i k e c r e a t u r e p r ogrammed as it were to 'perform'
and 'deliver'- quite unlike his /
her grasping, domineering,
haughty, dependant, highly
adversarial predecessor, able
and willing mainly to assert
authority and show importance. This transformation, if
indeed possible, would be
nothing short of a sea change.
In any work environment
the buzzword today is 'productivity.' That is what really
matters. For personnel in the
taxation services this means of
course the amount of tax that
they are able to assess and
collect. But that is certainly not
all that is expected of them.
The corporate culture in
PATRON
M. Muneer Qureshi
Director General
EDITOR-IN-CHIEF
Amna Faiz Bhatty
Deputy Director
LAYOUT & DESIGN
Asad Ali
Directorate General of
Training & Research
(Direct Taxes), Lahore.
Ph: +92-42-7842710
PABX: +92-42-7830211
Fax: +92-42-7842702
Web: www.dgtrdt.gov.pk
email: dg@dgtrdt.gov.pk

government organizations is a
new phenomenon. A new
improved pay package, better
working conditions, merit
based assignments, functional
specialization, fast track career
possibilities for high performers, dispersal and delegation of
authority from the top down all
these are seen as part of the
'make over.' But none of these
changes can actually lead to a
significant enhancement in
worker productivity unless
there is also a concomitant
change in the mindset of tax
personnel.
What is this 'mindset?'
A mindset refers to a set of
assumptions, methods or
notations held by one or more
people or groups of people
which is so established that it
creates a powerful incentive
within these people or groups to
continue to adopt or accept
prior behaviors, choices, or
tools. This phenomenon of
cognitive bias is also sometimes
described as mental inertia,
"groupthink", or a "paradigm",
and it is often difficult to
counteract its effects upon
analysis and decision making
processes.
An 'entrenched mindset'
that develops over time given
little or no change in the
underlying assumptions on
which an organization work
procedures are based thus
inevitably leading
to a
perpetuation of existing
attitudes. This can lead to
serious problems when the
ambient circumstances have
changed. It is then that the
organization will find itself on a
plateau with regard to productivity of its' workforce
or
maybe even a diminution of it's
existing productivity and
regression back to an earlier

stage of even lower productivity. This change in the external

environment often necessitates
workforce mindset change if
the organization is to continue
to exist as a viable entity.
In Pakistan all government
functionaries inherited a
mindset bequeathed to them by
their erstwhile British colonial
masters. This was based
largely on the use of procrustean methods to achieve given
targets. The public at large was
usually seen as an 'adversarial
entity' that it was necessary to
dominate and keep cowed down
to ensure obedience to the
Master's diktat. Such a
mindset did appear to have
served the interests of the
colonial authorities well. Their
colonial administration based
on a few thousand civil
servants was able to control
effectively a population of many
hundreds of millions. It levied
and collected taxes, including
tax on income, policed the
realm and opened up the vast
expanse of the Indian sub
continent with a presence that
was both feared and respected.
After the partition of India
in 1947 and the creation of
Pakistan and India as independent, sovereign States, the
ambient circumstances
c h a n g e d d r a m a t i c a l l y.
However the consequential
changes in Pakistan in the
administrative framework
were either slow to come or
even non existent. The result
was that a free public continued
to be dealt with by an administration that was still largely
mired in the old colonial
mindset.
Tax collection is a difficult
and sensitive task at the best of
times. In a newly independent
country with limited financial

Computer Related Staff

Training Organized by
the DOT
Page - 3
Two days course on
Corporate Financing (Malaysia)
Page - 4
2nd National Audit
Working Session
Page - 5
Inaugural of IBA, Karachi led
Capacity Building Program
Page - 6,7
Inaugural of 34th STP
Page - 8
resources, low per capita
income, a large population,
deficient infra structure,
serious external military
threats and the overly optimistic expectations of a free people,
tax collection is especially
challenging.
Given the exigencies of the
situation one would have
expected that serious attempts
to address the fairly obvious
problems that beset tax
administration would have
been taken soon after independence. That however did
not happen. Inertia is probably
p a r t l y t o b l a m e . Ve s t e d
interests of the entrenched
bureaucracy are probably more
significant as a causal factor.
Whatever the reason, the fact is
that the negative mindset of tax
functionaries
officers and
support staff- persisted and
there was no meaningful
improvement for almost fifty
three years ie till 2000.
A key initiative taken up by
the new government that took
office in October 1999 was Tax
Reform. A Task Force set up
continued on page-2

w w w. d g t r d t . g o v. p k

13th Issue

August, 2007

continued from page-1

DITORIAL

he commencement of
new financial year has
brought fresh challenges
for our Directorate.
The year has started off
with hectic pace, as DOT pays
host to Capacity Building
Training Programs for grade
17-19 officers organized in
collaboration with Centre for
Executive Excellence (CEE),
IBA, Karachi. The purpose of
these Capacity Building
Programs is to impart unified
training to all offices of both
Income Tax as well as Customs
& Excise group. Three such
consecutive Capacity Building
Programs were organized in
the first three weeks of July
this year. Thanks to the
efficient and professional DOT
Administration , all three
events were managed successfully to the satisfactions of both
trainers from IBA and the
participants of these trainings.
The last week of July was
devoted to the 2nd National
Audit Workshop held from 2426th July at the Directorate.
The event was organized by the
Audit Wing , CBR with an aim
to develop a unified Audit
Program applicable throughout the country. Member Audit,
Mr. Abdur Razzaq & Ms. Yassie
Hodges, Consultant CBR
actively participated in the
deliberations and working
sessions throughout the three
days event.
DOT also welcomed the
Probationary Officers of 34th
Specialized Training Batch on
27th July, 2007 in a formal
Inaugural Ceremony graced by
the Director General DOT /
Director General Regional Tax
Office Mr. Haji Ahmed.
DOT Gazette wishes the
young officers best of luck for
successful completion of their
training and for a bright future

under World Bank specialist, Shahid Hussain, identified

critical areas in tax administration that were in need of a
drastic overhaul and made
specific recommendations in
this regard. The CBR then set
about implementing the
recommendations.
A fundamental change in
mindset and attitudes was seen
as an essential prerequisite to
the success of the far reaching
tax reform program. To some
extent this change was expected
to follow consequentially in the
wake of the structural, procedural and legal changes
introduced in the CBR and its'
field formations through the
reform measures. However it
was recognized that it would
also be necessary to take action
independently and educate and
re-educate tax personnel at all
levels to bring home the
necessity of mindset and
attitude change in the changed
work environment.
One of the most far reaching
changes introduced through the
Tax Reform measures, is the
scheme of universal self
assessment incorporated in the
new tax statute ie the Income
Tax Ordinance of 2001. This
scheme of truly universal self
assessment
available to all
entities has acted as a catalyst
in provoking positive mindset
change in Direct tax personnel
as well as taxpayers. This has
happened in a number of ways.
Firstly, the self assessment
provisions are couched in a
language that makes it abundantly clear that they are truly
applicable to 'all' tax entities
and there is no room or scope for
making exceptions on frivolous
grounds. This statutory 'finality'
went a long way in deterring any
'adventurer' tax officer / official
from making an attempt to
circumvent the Scheme. Self
Assessment of Income put an
end to casual contact between
tax personnel and taxpayer that
was almost the norm previously
and this easy familiarity was the

cause of much taxpayer

harassment and corruption in
the tax deptt. Secondly, the all
encompassing scope and finality
of the self assessment provisions
has inspired confidence in the
taxpayer and this is reflected in
the dramatic upturn in the
declarations of taxable income
and the resultant tax paid in the
tax Returns filed.
Tax personnel have now seen
for themselves that they can
actually collect more tax simply
by placing trust in taxpayers
and without any need to resort
to coercive measures. The
positive response of taxpayers
over a fairly significant
timeframe has convinced a very
large number of tax officers and
support staff that the tax reform
measures taken are indeed
beneficial so far as revenue
mobilization is concerned. True
there are still some intractable,
chronic 'doubters' and reactionary elements who miss the 'good
old days' when thanks to the
constant interaction between
tax personnel and taxpayers
there was much scope for
taxpayer harassment and
resultant extraction of extra
legal 'benefits.' Hopefully, these
obstinate elements will change
and learn from experience and
from the example of others. If
they do not then they will be
seen as 'misfits' and will either
have to leave the deptt on their
own initiative or will have to be
weeded out perforce.
It is clear that a 'paradigm
shift' has taken place within the
CBR and its' field formations in
which the departmental
personnel have themselves
become 'agents of change.'
This Paradigm Shift may
thus be seen as a change from
one way of thinking to another.
It is indeed nothing short of a
revolution, a transformation, a
sort of metamorphosis and has
not taken place 'suddenly' but
rather has been driven by
'agents of change.'
Government has shown a
great deal of sensitivity to the

undeniable fact that the

available deficient compensation package was not seen as a
'living wage' by tax personnel
and was a major reason for
corruption in the deptt. The
scheme of enhanced compensation for those officers and
support staff who are able to
meet specific performance and
integrity criteria has removed
much misgiving in departmental personnel and has created an
environment in which Tax
Reform measures are much
more readily acceptable.
Tax personnel now understand that given the changes
introduced through the Tax
Reform measures, henceforth,
the only way to improve their
career prospects in the deptt will
be through performance based
on professional expertise and
integrity. Tax personnel and
taxpayers are both keenly aware
of the fact that self assessment
does not amount to a license
given to taxpayers to declare
any income that they wish. In
fact rigorous Audit of a limited
number of Tax Returns on the
basis of well defined criteria
goes hand in hand with self
assessment and is bound to be
an effective deterrence to the
chronic under-declaration of
income that was commonplace
in the past.
Taxpayers are also aware
that the deptt is putting a great
deal of emphasis on meaningful
training of tax personnel which
is bound to enhance their
professional expertise and their
ability to detect tax evasion.
They also know that given the
enhanced compensation
package, tax personnel will be
much less inclined to overlook
tax evasion when detected
simply because of the extra legal
inducements offered by tax
evaders. Taxpayers thus now
have a healthy respect for tax
personnel and their entire
outlook vis a vis the deptt has
changed for the better.
continued on page-3

w w w. d g t r d t . g o v. p k

13th Issue

August, 2007

CCentral Board of Revenue is

going through fast paced
reforms aimed at modernization and up gradation of
facilities along with provision of
quality service to taxpayers
through a professionally
trained workforce.
The implementation phase
of these reforms include
establishment of newly created
Regional Tax Offices and Large
Taxpayer Units. In these
refurbished offices efforts have
been made to introduce office
automation at all levels.
The need for Information
Technology related training of
Income Tax officials from grade
5 to 16 in these newly created
offices was being felt for quite

some time, as this small step

could lead towards a giant leap
of completely automated and
paperless environment.
For achieving the objectives
of developing basic IT skills of
officials from grade 5 to 16, our
Directorate organized a series
of Information Technology
related trainings aimed at
imparting basic computer
skills.
These trainings
comprised of a crash program
course of 18 days (3 weeks)
challenging the enthusiasm of
trainers as well as trainees.
First such batch of officials
completed its three weeks
training in the first week of
July. A group of 70-80 officials
from Lahore region partici-

pated in this course.

Information Technology
basics, MS. Windows, MS.
Word, MS. Excel, MS. Power
Point and Web Browsing skills
are being taught in course of
these three weeks training
program with a vision to fill the
knowledge gap between the non
IT people and IT skills. On
completion of this training the
officials will be able to operate
their PC's independently not
only for word processing and
web browsing but also for
preparing animated presentations, work on spread sheets,
manage their E-mail accounts
and perform other related
operations. The course outline
for this training is designed

keeping in view the non IT

background of the participants
and the IT need analysis with a
view to develop much needed
time based IT skills. At the end
of these trainings the trainees
shall be able to figure out IT
based solutions in a real world
scenario
In continuation of the first
training, the second phase of
this three weeks computer
related training was commenced from 16th July 2007
and 48 officials from Lahore
Region are participating in this
training. As the course content
of these training is very
relevant to the actual job
performance, the participants
are displaying an active

continued from page-2

Besides self assessment law,
other changes introduced
through the new tax statute
like the statutory requirement
for maintenance of records by
'all' taxpayers and stipulation
of stiff penalties for those who
violate the law have also gone a
long way in deterring underdeclaration of income and
instilling confidence in tax
personnel in their ability to
detect and bring to tax unre-

ported income. Coupled with

this is the integration of
modern technology, especially
'information technology,' in the
work procedures within the
deptt. This has heightened the
sense of confidence in tax
personnel in the command that
they have over their work
environment and has simultaneously led to an increased
awareness in taxpayers of the
much improved capability of

tax personnel, deterring

taxpayers from routine under
declaration of income in the
Returns of Income filed by them
periodically.
The net effect of the tax reform
measures has been to lead to
the beginnings of an almost
symbiotic relationship between
tax official and taxpayer.
Taxpayers are actually showing
their eagerness to declare good
income in their annual Tax

Returns because they see this

as being effective in keeping the
tax auditor away from them. At
the same time, tax personnel
are eager to show their positive
conduct and enhanced professional capability because they
see these qualities as essential
to an improvement of their
career prospects within the
deptt and an inducement to
taxpayers to declare good
income.

w w w. d g t r d t . g o v. p k

ince 1938, tax

practitioers from all over
the world rely on the
International Bureau of Fiscal
Docu-mentation (IBFD) for
authoritative expertise on
cross-border taxation. IBFD is
the portal to high quality
independent tax research,
international tax information
and education with the aim to
enable customers to do their
work more quickly and
efficiently. The wealth of IBFD
experience and knowledge is
reflected in the make-up of the
organization. IBFD employs
over 50 research specialists and
teacher's staff from around 25

13th Issue

Products and Services, which

covers all publishing, educational, research and consultancy activities, and IBFD
Foundation which executes
several Academic Activities.

different countries. IBFD has

grown from a tax documentation centre into a contemporary
online research institute. It
caters for both the private and
the public sector. It fulfils the
information needs of tax
advisory firms, multinational
enterprises, international
organizations, ministries of
finance, tax administrations,
universities and other tax
practitioners in over 150
countries.

Directorate General of
Training & Research (Direct
Taxes) Lahore (DOT) has
recently joined the Galaxy of
IBFD members. As a good will
gesture IBFD had sent a
complementary invitation to
Central Board of Revenue for
its two days (July 24th to 25th,
2007) course on Corporate
Financing in Kula Lumpur,
Malaysia. CBR nominated Mr.

IBFD operates on a not-forprofit basis and is completely

independent. IBFD organization is divided into IBFD

View from Sky Bridge of Twin Towers (Kualalumpur)

August, 2007

Shahid Bashir Additional

Director (DOT) to participate in
the course and represent
Pakistan in the discussions.
Almost twenty participants
from all over the world attended
the course. This course was
very elaborate and covered
many aspect of Corporate
Financing in a concise and
precise manner. The course
content included topics such as
Types of Corporate Financing,
Debt versus Equity, Thin
Capitalization, Hybrid
Instruments, Derivatives,
Financing Structures etc.

w w w. d g t r d t . g o v. p k

13th Issue

August, 2007

he Directorate General
of Training & Research
[Direct Taxes], DOT has
the honor of facilitating various
functional wings of Central
Board Revenue [CBR] in
providing the necessary
material and infrastructural
support in their various
assignments and tasks.
The Audit Wing, CBR since
last year, initiated a series of
efforts aimed at strengthening
the role of audit in Income Tax
as well as in Sales Tax Group.
Three Integrated Audit
Trainings were organized in our
Directorate which trained 128
audit officers / officials
belonging to Income Tax and
Sales Tax Group in the last
financial year. Through these
trainings, audit officers were
trained in developing their
analytical skills through case
studies, group discussions, spot
tests etc.
Side by side with developing
the skills of audit workforce,
there was a need to develop the
necessary techniques for
conducting successful audits.
In this backdrop, the Audit
Wing, CBR under the

leadership of Mr. Abdur

Razzaq, Member [Audit] held a
three days National Audit
Working Session from 13th
15th December, 2006 in our
Directorate. The purpose of this
Working Session was to arrive
at a consensus for developing a
unified Audit Program
throughout the country. The
importance of developing a
unified audit program
applicable throughout the
country for both Income Tax as
well as Sales Tax Wings of CBR
cannot be over-emphasized. In
wake of promulgation of Income
Tax Ordinance, 2001, Universal
Self Assessment Scheme

[USAS] is available for all

classes of tax-payers. As a
result, strong audit programs
would ensure correct and true
filings of returns by tax-payers
in spite of existing of USAS. The
detailed audit of certain cases
filing returns under USAS
would ensure compliance of
statutory provisions as well as
discourage incorrect /
incomplete declarations.
A strong deterrence in form
of effective audit as applicable
and in all developed economies
is necessary for the success of
any USAS Scheme.
Audit Wing CBR lead by Mr.
Abdur Razzaq, Member (Audit)
has made concerted efforts
through holding of two
consecutive National Audit
Wo r k i n g S e s s i o n s f o r
developing the unified audit
plan. Ms. Yassie Hodges,
Consultant CBR was present on
both occasions and played a
central role in the final
deliberations leading to the
conclusion of these sessions.
The 2nd Audit Working Session
which was held in our
Directorate from 24th 26th
J u l y, 0 7 m a r k e d t h e
culmination of efforts by Audit
Wing, CBR to iron out the final
draft audit plan and draft audit
manual applicable for both
Income Tax as well as Sales Tax

Wi n g . T h i s D i r e c t o r a t e
provided all the material and
infrastructural supports
necessary for organizing this
event successfully.
During this three days working
sessions, the participants after
detailed discussions, submitted
their comments to the draft
audit manual and draft audit
plan prepared by the Audit
Wi n g , C e n t r a l B o a r d o f
Revenue.
In the concluding session of the
2nd Integrated Audit Training
Workshop, Mr. Haji Ahmad, the
Acting Director General,
Directorate General of Training
& Research [Direct Taxes] and
Director General, Regional Tax
Office congratulated both
Member Audit, CBR Mr. Abdur
Razzaq and Ms. Yassie Hodges,
Consultant CBR, in achieving
their objectives of finalization of
a draft audit plan. He also
lauded the efforts of the
Workshop's participants who
showed keen interest in the
deliberations and in
preparation of their
presentations.
At the end, the Chief Guest,
Member [Audit] Mr. Abdur
Razzaq, and Mr. Haji Ahmad
distributed the certificates
amongst the participants of the
Workshop.

w w w. d g t r d t . g o v. p k

13th Issue

August, 2007

he HRM Wing, Central

Board of Revenue led
by the visionary figure
o f M e m b e r H R M , M r.
M u h a m m a d Ta l h a h a s
initiated a series of efforts aim
at enhancing the workforce
capabilities of officers of
Central Board of Revenue.
Introduction of IJP post
positions based upon merit,
renewed efforts for training of
workforce inside and outside
the country, introduction of
MBA Taxation studies in IBA,
Karachi for new entrants to
the Income Tax as well as to
the Customs and Excise
Group etc. are some of the
initiatives undertaken by the
HRM Wing.
Realizing the need for on
job training of middle and
senior level managers through
standardized training
programs, HRM Wing, Central
Board of Revenue signed an
agreement with IBA, Karachi
for developing Capacity
Building Modules for its officers
from Grade-17 to 19.
As a result, the HRM Wing,
CBR has arranged a 6 days
training module for officers
from grade 17-19 in
collaboration with Centre for
Executive Excellence (CEE),

IBA Karachi. These Capacity

Buildings Programs will be
organized at our Directorate
which will be providing the
necessary infrastructural,
instructional and material
support.
This unified and structured
training module is meant for
officers of both Income Tax and
Customs & Excise Groups.
Training in subjects such as
c o m p u t e r t e c h n o l o g y,
communication skills,
presentation Skills etc. is given
through interactive training

sessions. The first three days of

trainings are devoted to hands
on computer training skills and
the next three days focus on
communication skills in official
settings.
Our Directorate has
committed to provide all the
logistics and infrastructural
support for this initiative. DOT
faculty is actively involved in
imparting this training as well
as in preparation of training
manuals designed for this
module.
The inaugural ceremony of
these IBA related trainings was
held on 2nd July 2007 in DOT
Auditorium. Mr. Muhammad
Talha, Member HRM was the
Chief Guest at this occasion.
In his inaugural address he
highlighted the importance of
on job trainings and courses for
enhancing the professional
skills of officers of Central
Board of Revenue. In line with
reforms underway at CBR it
was necessary to develop the
needed human resource
potential to achieve the goals of
automation, professionalism

and quality service. He

impressed upon the officers to
benefit from the opportunity
provided for development of
their skills and capabilities in
form of these capacity buildings
programs. Only officers
possessing the relevant skills
and knowledge would secure a
future based upon quality
service, tax-payer facilitation
and use of computer technology
in an automated office setting.
Mr. M. Muneer Qureshi,
Director General DOT in his
speech welcomed the initiative
taken by the HRM Wing for
providing the officers of both
Income Tax as well as Customs
& Excise Group an opportunity
to benefit from specially
designed training programs
from a reputed and world
renowned institution such as
IBA, Karachi.
In the first batch of this IBA
related Capacity Building
Program 45 Grade-19 officers
belonging to both Income Tax
and Customs and Excise Group
completed their training on 7th
July 2007.

w w w. d g t r d t . g o v. p k

13th Issue

1st batch of IBA related Capacity Building Program

2nd batch of IBA related Capacity Building Program

3rd batch of IBA related Capacity Building Program

August, 2007

w w w. d g t r d t . g o v. p k

he officers of 34th
Specialized Training
Program after
successfully completing their
mandatory training at the Civil
Services Academy, Lahore were
formally welcomed for their
specialized training program at
the Directorate on 27th July,
2007. The Inaugural Ceremony
was chaired by Mr. Haji Ahmed,
Director General (Acting
Charge) DOT and Director
General RTO, Lahore.
In his welcome address, Mr.
Haji Ahmed congratulated the
probationary officers on
successful completion of their
common training program and
welcomed them to the
Directorate.
In his address he
highlighted the importance of
professional training for
becoming successful officers of
the future. He added that the
young officers were lucky to
have entered Income Tax
Service at a time when large
scale structural reforms were
underway. Improvements in
salaries, well equipped
refurbished offices and
automation were some of the
hallmarks of these reforms. On
the other hand expectations of
the tax payers from the tax

13th Issue

August, 2007

collectors in form of provision of

quality services and prompt
response had also increased
manifold.
He stressed the need to take
the specialized training at DOT
in all seriousness for developing
the necessary skills to become
successful officers. Good
discipline and observance of
DOT Rules and Regulations
were the basic requirements
from a young officer under
training. Only those who
applied their faculties and met
the training standards were to
succeed in completing this
professional training.
He outlined the period of
training being spread over more
than seven months. It was
expected of the officers in course
of this period to develop the
necessary skills required for job
performance. He highlighted
the importance of observance of
officer like behavior and service
discipline in course of period of
training at the Directorate
General.
In his concluding remarks,
he wished the young officers of
34th STP a successful and long
career in service.
Senior officers of the Income

Tax Group were present at the

occasion. The batch comprises
of 26 officers from the 34th CTP.
Merit wise list of officers is as
under:
1. Ghulam Hussain
2. Naheed Ahmad
3. Rukhsana Arif
4. Usman Ahmed Khan
5. Ch. Khurram Aziz
6. Usman Ijaz Bajwa
7. Syed Arsalan Qudus
. Bukhari
8. Muhammad Umer Yunus
9. Saher Aftab Butt
10. Amanullah
11. Rais Humayun Abdul
. Hayee

12. Falik Shair

13. Ayesha Ranjha
14. Qadir Nawaz
15. Muhammad Shakil Anwar
16. Agha Nabeel Akhtar
17. Adeel Mahmood Shah
18. Bilal Ahmed
19. Mukhtiar Ahmad Shar
20. Huma Sarwar
21. Javaid Ahmed Kumbhar
22. Irfanullah
23. Riaz Khan
24. Sultan Muhammad Nawaz
. Nasir
25. Bahader Sher Afridi
26. Muhammad Qasswar .
. Hussain

w w w. d g t r d t . g o v. p k

14th Issue

September 2007

INSIDE THIS ISSUE

Celebrations of 60th Independence

Day Anniversary at DOT
Page-4

Chairman FBR's Address to the

Officers of Capacity Building Program
Page-6

Presentation at DOT (DT)

on new Software developed
by Customs Wing (CBR)
Page-3

PATRON
M. Muneer Qureshi
Director General
EDITOR-IN-CHIEF
Amna Faiz Bhatty
Deputy Director
LAYOUT & DESIGN
Asad Ali
Directorate General of
Training & Research
(Direct Taxes), Lahore.
Ph: +92-42-7842710
PABX: +92-42-7830211
Fax: +92-42-7842702
Web: www.dgtrdt.gov.pk
email: dg@dgtrdt.gov.pk

w w w. d g t r d t . g o v. p k

DITORIAL

14th Issue

September 2007

w w w. d g t r d t . g o v. p k

is one year old!

14th Issue

September 2007

w w w. d g t r d t . g o v. p k

14th Issue

at

September 2007

w w w. d g t r d t . g o v. p k

14th Issue

September 2007

Pictorial-Independence Day Celebrations at DOT

w w w. d g t r d t . g o v. p k

14th Issue

September 2007

continued on next page

w w w. d g t r d t . g o v. p k

continued from previous page

14th Issue

September 2007

w w w. d g t r d t . g o v. p k

14th Issue

September 2007

w w w. d g t r d t . g o v. p k

15th Issue

October 2007

INSIDE THIS ISSUE

New initiatives to upgrade
FBR's Training Establishments
Page-1
Electronic Tax Registers
as a fiscal device.
Page - 6

Imam Bukhari (194 265 A.H.)

Page - 8

PATRON
M. Muneer Qureshi
Director General
EDITOR-IN-CHIEF
Amna Faiz Bhatty
Deputy Director
LAYOUT & DESIGN
Asad Ali
Directorate General of
Training & Research
(Direct Taxes), Lahore.
Ph: +92-42-7842710
PABX: +92-42-7830211
Fax: +92-42-7842702
Web: www.dgtrdt.gov.pk
email: dg@dgtrdt.gov.pk

continued on page 2

w w w. d g t r d t . g o v. p k

15th Issue

October 2007

DITORIAL

continued on page 3

w w w. d g t r d t . g o v. p k

15th Issue

October 2007

continued from page 2

continued on page 4

w w w. d g t r d t . g o v. p k

15th Issue

October 2007

Original DOT (DT) Area [1986]

= 6.4 Hectares
Allotted to I & I [Customs in 2006]
= 1.0 Hectare
Allotted to DOT [Customs] (2004)
= 1.0 Hectare
Bal. Land Area under DOT (DT) occupation = 4.4 Hectare
Space Satellite Google Earth View of DOT (DT),
Sutluj Block, Allama Iqbal Town, Lahore.

Tariq Aziz Block

Comp. Lab, Classromms & Library

Prob. (STP) Hostel

Residences

Auditorium

Car Parking

Admn. Block, Class rooms &

Comp. Labs

Residences

DOT (DT)
Sutluj Block
Allama Iqbal Town,
Lahore

w w w. d g t r d t . g o v. p k

15th Issue

October 2007

Schematic Layout of IT Infrastructure at DOT (DT)

w w w. d g t r d t . g o v. p k

15th Issue

October 2007

COMPUTER SYSTEMS AND ESD

Special secure fiscal device for record signed
(SSFDRS) with secure hash algorithm (SHA-1)
Computer
Invoice / Slip Printer

SSFDRS
with SHA-1

ADVANTAGES OF
FISCALISATION
Correct Disclosure turnover.
l

More jobs for technicians

More jobs for software houses

Better control and management of

business by traders

Shorter audit periods by tax

department

Less paper work by traders

More revenue
continued on next page

w w w. d g t r d t . g o v. p k

15th Issue

October 2007

COMPUTER SYSTEM AND

ESD
Electronic Signature Device
Request

PC

Signature
Signed
Invoices,
Receipts etc.

Printer
B4100

OTHER DEVICES

TELECOMS:
Ethernet & Internet / email enabled
cash registers are low cost, stand
alone ETRs.
This device may be used by traders
with a direct connection to CBR Server
to upload their periodical transactions
as agreed between the two.
EDI:
Discussions between CBR and
Pak Telecom on installation of
EDI linkage should take place. The
Pilot program should be for the linkage
of large companies and traders.

w w w. d g t r d t . g o v. p k

15th Issue

Imam Bukhari
(194 265 A.H.)

360 degree view of maqam of Imam Bokhari

October 2007

16th Issue

November, 2007

INSIDE THIS ISSUE

M MUNIR QURESHI
DG(DOT)(DT)

Change in a large, complex

organization, like the FBR, can
be normal, 'evolutionary'
change, over a relatively
protracted timeframe, or can be
deliberate, 'forced' change,
artificially contrived, with the
clear objective of achieving
certain specific ends in a
relatively limited time span.
Since 2000 the present
government has been seized
with the exceedingly difficult
task of revamping and restructuring Tax Administration in
Pakistan. The $ 150 million Tax
Administration Reform
Program (T.A.R.P) launched
with World Bank facilitation in
2002 as a sequel to the indepth
appraisal made by the Shahid
Hussein expert Committee set
up in 2000, is scheduled to
achieve fruition in 2009 _ the so
called 'year of arrival.' It
remains to be seen whether the
objectives will be fully achieved.

PATRON
M. Muneer Qureshi
Director General
EDITOR-IN-CHIEF
Amna Faiz Bhatty
Deputy Director

because endemic departmental

corruption inevitably mean't
bad assessments of income.
One would expect that once
the decision was taken to do
away with the ubiquitous
Department/Taxpayer interface, positive change would
follow as a matter of course, all
corruption would vanish and
efficiency replace inefficiency.
Reality however is rarely that
simple and direct. In actual fact,
the changes were accepted by
most FBR personnel (officers as
well as support staff) grudgingly
and many tried actively to
impede and obstruct their
implementation and it required
all the determination, ingenuity
and steely resolve that top FBR
executives _ like the redoubtable FBR Chairman Abdullah
Yousaf_ could muster to get
TARP going.
The reasons for such
seemingly unjustified resistance to the positive changes
sought through implementation
of TARP are not difficult to
fathom. The fact is that mental
'inertia' is a much more common
trait in most human beings than
one would like to believe. Many
people prefer to continue to
remain in their present state
rather than have to deal with a
largely unknown 'changed state'
even though the change is cited
as a stepping stone to progress,
efficiency and prosperity.
Change_ especially

However, given the daunting

constraints, it would be a
significant achievement even if
the major objectives are largely
achieved.
One of the most important
problems confronting tax
administration in Pakistan is
'managing change' in a way that
FBR personnel at all levels are
able to adjust to the demands of
the new administrative
structures being created based
on functional specialization
coupled with universal self
assessment. Among the most
dramatic changes wrought by
TARP is the decisive decision to
do away with the routine
departmental interaction with
taxpayers. This is probably the
most significant development of
the restructuring program. And
a development that was not at
all easy to accept for the great
majority of FBR personnel.
Regular departmental
interaction with taxpayers gave
FBR functionaries their
legendary 'clout.' The threat of
saddling a taxpayer with huge
monetary liability was enough
to instill fear and awe of the
taxman in the mind of the most
hardened of businessmen. Tax
personnel reveled in the
authority that close contact with
taxpayers gave them. And
misuse of this authority became
the basis of much corruption in
the department. What is more, it
institutionalized inefficiency

LAYOUT & DESIGN

Asad Ali
Directorate General of
Training & Research
(Direct Taxes), Allama
Iqbal Town, Lahore.
Ph: +92-42-7842710
PABX: +92-42-7830211
Fax: +92-42-7842702
Web: www.dgtrdt.gov.pk
email: dg@dgtrdt.gov.pk

Change Management
Page 1
Relational Database Model
Page 2
Database

Table
Table
Column Column

Table

Row
Field

Field

Capacity Building Program on

Management / Leadership Skills
Page 6

A course on
Organizational Development
and Change Management
Page 7
DOT (DT) Charts
Page 8
dramatic, decisive change_ is
often viewed with skepticism,
fear and trepidation. Fear of the
unknown is deeply ingrained in
the human psyche and can only
be overcome with conscious,
intelligent effort. It is this
conscious, well directed effort to
coax FBR personnel to break
with the past and willingly
accept new realities based on
new norms and values that is at
the heart of 'Change
continued on page 4

w w w. d g t r d t . g o v. p k

16th Issue

November, 2007

DITORIAL
October and autumn are
synonymous are to each other in
Pakistan. The gentler October
sunrays and the mild breeze
provide a soothing healing for
the man kind having endured
long torturous summer months.
This year October had a special
relevance in addition to being
the harbinger of changing
season, as the holy month of
Ramazan and Eid-ul-Fitar both
fell in this month.
At DOT the training of the
34th Specialized Training
Program continued in full swing
and the first mid term examination of the 34th STP took place
before the Eid holidays. It is
hoped that probationary officers
fared well in the exams mindful
of the practical challenges
ahead. The Eid break provided
the necessary respite to the
probationary officers before the
commencement of the 2nd and
final term at the Directorate. On
the first day of return from Eid
holidays, a tea party was
arranged for the probationary
officers in the Old Mess.
The second phase of the
IBA, Karachi led Capacity
Building Program for officers in
BS 17-19 also commenced from
22-27th October at our campus.
This module captioned Management /Team Building and
Leadership Skills Module is
the 2nd and last training module
organized in collaboration with
Centre for Executive Education,
IBA, and Karachi. A total of 49
officers both from Income Tax
and Sales Tax participated in
the first batch of Capacity
Building. Program. The second
batch of this training commenced from the 29th October
and shall continue till 3rd
November.
The Director General, Mr.
M. Munir Qureshi represented
our Directorate at a three days
Change Management
Wo r k s h o p o r g a n i z e d i n
Islamabad and presided over by
the Chairman FBR Mr. M.
Abdullah Yusuf from 22-24th
October.

Relational Database Model

T

he relational data base

model represented a
landmark in the history of
database modeling, as it
allowed files to be related to
each other by means of a
common field. In order to relate
any two files to be related to
each other by means of common
filed. In order to relate any two
files, they simply need to have a
common field, which makes the
model extremely flexible.
Formally introduced by Dr.
E.F. Codd in 1970, the relational
model provides a simple, yet
rigorously defined, concept of
how users perceive data. The
relational model represents
data in the form of two dimension tables. Each table represents some real-world person,
place, things, or event about
which information is collated. A
relational database is a
collection of two dimensional
tables.
A basic understanding of the
relational model is necessary to
effectively use rational data
base software such as Oracle,
Microsoft SQL Server, or even
personal database system such
as Access or Fox, which are
based on the relational model.
Relational tables have six
properties:
1. Values are atomic.
2. Column values are of
the same kind.
3. Each row is unique.
4. T h e s e q u e n c e o f
columns is insignificant.
5. The sequence of rows
is insignificant.
6. Each column must
have a unique name.

columns in a table whose values

uniquely identify each row in a
table.
A foreign key is a column or
columns whose values are the
same as the primary key of
another table. You can think of a
foreign key as a copy of primary
key from another relational
table.
Keys are fundamental to the
concept of relational databases
because they enable tables in
the database to be related with
each other. Navigation around a
relational data base depends on
the ability of the primary key to
unambiguously identify specific
rows of a table.

Normalization is a design
technique that is widely used as
a guide in designing relational
database. Normalization is
essentially a two step process
which puts data into tabular
form by removing repeating
groups and then removes
duplicated data from the
relational tables.
After having a basic
understanding of relational
database modeling let's have a
DATA INTEGRITY
look at some of the applications
This means, in part, that you t h a t a r e d e s i g n e d u s i n g
can correctly and consistently relational database modeling
navigate and manipulate the concepts.
tables in the database. There
are two basic rules to ensure
Oracle Database 10g
data integrity, entity integrity, Express Edition.
and, referential integrity.
This is a no-frills edition of
The entity integrity rules the proven Oracle Database
states that the value of the product. It can be installed on
primary key can never be a null any machine, supports up to 4
value [a null value is one that GB of user data, runs on a single
has no value and is not the same process or and uses a maximum
as a blank].
of 1 GB memory.
The referential integrity
rules states that if a relational
Main features
table has a foreign key, then
Available for 32-bet Linux
every value of the foreign key
and Windows;
must either be null or match
the value in the relational table
in which that foreign key is a
primary key.

DATA MANIPULATION
Relational tables are sets.
The rows of the tables can be
considered as elements of the
set. Operations that can be
performed on sets can be done
A relationship is an associa- on relational tables.
tion between two or more
tables. Relationships are
The eight relational
expressed in the data values of operations are:
the primary and foreign keys. A
Union;
primary key is a column or
Difference;

Intersection;
Product;
Projection;
Selection;
Join; and
Division.

Database

Table
Table
Column Column

Table

Row
Field

Field

The Anatomy of a Database

continued on page 3

16th Issue

November, 2007

continued from page 2

May be installed on a
multiple CPU server, but
only executes on one
processor in any server;
May be installed on a
server with any amount of
memory, but will only use
up to 1 GB RAM of
memory.
FACTbroker:
FACTbroker's data-centric
approach powered by the XML
driven framework has lent the
product to position itself in the
forefront in the arena of
business intelligence reporting.
Main features:
on existing
RDBMS knowledge;
Seamless integration with
existing security infrastructure;
uthorization driven user
interface, and;
Intuitive, yet powerful
Control Centre for SML
configuration
.
Kdb database platform:
Kdb is a high-performance
relational database platform for
32-bit architectures.
=R e l i a n c e

Main features

This is a full-featured and

zero administration Java
relational database that enables
software vendors to accelerate
development cycles and reduce
time to market.

Relational database
optimized for fast search;
Unlimited data capacity at
main-memory speeds;
Times series analysis built
in;
Billions of records
analyzed in seconds, and;
32-bit architecture runs on
Solaris, Linux and
Windows.
NRG Global DbVisualiser:
This is a cross-platform
database tool for all major
relational databases.
DbVisualiser enables simultaneous connections to many
different databases through
JDBC drivers.

Main features
Delivers cross-platform
p o r t a b i l i t y, a s m a l l
footprint and comprehensive security;
Offers a low cost, high
results solution to effective
storage of metadata,
application-specific data
or out-of-box tutorials and
demonstration materials,
and;
It can be integrated
directly within your
application making it
completely transparent to
the end-user.

Main features
Browse database structure;
View detailed characteristics of database objects;
Edit table data graphically;
Executive arbitrary SQL
statements or SQL scripts,
and;
Reverse engineer
primary/foreign key
mappings graphically.

Pervasive Postages:
This is a validated and
supported distribution of
Postgre SQL, the world's most
advanced open source database.
Main features
Often support, updates,
and value added tools in a
subscription model, as
well as professional
services for migration and
training, and;
Pe r v a s i v e ' s b a c k i n g ,
support and ser vices
provide the assurance that
enterprises need to
confidently put open
source to work.

Point Base Embedded:

Objects
Tables
Queries
Forms
Reports
VistaDB:
This is an alternative to
Microsoft Jet/Access, MSDE,
and Xbase for building robust
small to midsize .NET database
applications.
Main features
First real alternative for
professional programmers that rely on the
Microsoft Jet engine and
Access databases to store
and mange data, and;
VistaDB is a true RDBMS
specifically designed for
.NET to give developers a
robust, high-speed
embedded database
solution with minimal
overhead.
Solid FlowEngine:
This uniquely combines two
enabling technologies.
Relational data management, and;
Advanced, bi-directional
multi-point synchronization.
It fuses these two elements
into an embeddable distributed
data management platform the
Solid Flowengine. Solid
FlowEngine provides an
underlying foundation for high
performance distributed
applications built to meet
stringent car rier-grade
requirements.
Sahar Majid
[Sci-tech World]

w w w. d g t r d t . g o v. p k

16th Issue

November, 2007

continued from page 1

Management' within FBR.
Human beings are more
prone to accept change when
the benefits of change sought to
be implemented are made clear
in a simple, easily comprehensible manner and also widely
publicized. It is also important
that these benefits be perceived
as significant and directly
relatable to a marked improvement in the human condition of
the affected players.
I n Pa k i s t a n , f i n a n c i a l
compensation at twice the basic
salary for selected, meritorious
FBR personnel is at the heart of
the IJP (Internal Job Posting)
process. It is probably the single
most important factor in
motivating FBR personnel to
accept the changes sought to be
implemented through TARP
.
While this has undoubtedly
boosted morale the fact remains
that FBR salary scales are still
way below what the private
sector has to offer in comparable positions, especially in the
case of officers.'
The major change with
regard to the manner in which
work gets done in the Direct Tax
Department is the reorganization on the basis of functional
specialization. Essentially, what
this means is that whereas in
the old field formations of the
then CBR where jurisdiction
was based on the (contiguous)
'territory' assigned to each
'circle', the office of the Income
Tax Officer (ITO) was where all
aspects of work related to the
levy and collection of income tax
got done _ viz requisition of the
Income Tax return, summons
for case 'hearing,' proceedings
incidental to the determination
of Total Income, levy of due tax,
collection of the tax levied,
determination and issuance of
refunds of tax, penalties for
default, conduct of local
enquiries, conduct of external
'survey,' generation of periodic
reports including reports sent to
appellate authorities etc etc , in
the changed environment of the
reorganized FBR, field forma-

tions deal with a particular,

specialized area of work. Thus
the (exclusive) determination of
total income takes place in the
'Audit' charge. Collection of tax
levied- including levy of
penalties to enforce collectionONLY takes place in the
'enforcement' charge. Similarly,
issuance of refunds of excess
tax collected ONLY takes place
in the Enforcement charge. All
aspects related to interaction
with appellate authorities only
gets done in the Legal charge.
So far as jurisdiction is
concerned, there is now no
concept of contiguous 'territory.'
The ACIT (BS 17 18) equivalent
to the ITO- may now be assigned
any case by the Commissioner
of Income Tax pertaining to any
part of the Region.
And ofcourse universal self
assessment now means that
MOST Returns of Income are
bound to be accepted 'as filed.'
Previously, most Returns were
subjected to Normal Law
Scrutiny which mean't that
there was a steady procession of
taxpayers to the Income Tax
Officers' office.
This drastic reorganization
of the Direct Tax Deptt is
nothing short of a 'sea change'
and the net result of this is that
the individual officer charged
exclusively with assessment of
income, or collection of tax /
issuance of refund or some
other specific area of work has
only nominal interaction with
the taxpayer population and the

great majority of this population

have no interaction whatsoever
with any officer or official as
their Returns are accepted 'in
toto' the moment they are
submitted. The very act of
submission of the Return too is
soon to undergo a dramatic
change as evermore Returns
are filed 'electronically.'
For the individual ACIT, all
this entails a drastic reduction
in his 'authority.' Actually, 'clout'
would be a better expression.
And this dramatic diminution of
'clout' has traumatized many an
officer who joins Government
Service because of the sense of
personal importance that such
Service conveys.
This is where Change
Management assumes enormous significance.
Those individuals of the
FBR workforce who find it
difficult to reconcile with the
changed realities of the post
TARP era, need expert counsel-

ing to convince them through

reasoned argument that the
changes sought to be implemented through reorganization
and restructuring are for the
better for the entire FBR
workforce and also for revenue
collection. They need to be told
of similar changes made in
other jurisdictions worldwide
that have brought about
dramatic improvements in
workforce efficiency. And they
need to be counseled on the
dynamics of mindset change
and the connection between
such change and positive
attitudes that produce results
and overcome obstacles.
FBR personnel also need to
be counseled on the efficacy of
teamwork vis a vis individual
enterprise. Effective Teamwork
harnesses focused effort and
releases synergy that magnifies
the effort put in by individual
team members. However it is
important to know that an ce of

16th Issue

continued from page 4

effective team is not a simple
collection of individuals. A good
team will have a Leader who
understands the potential of the
individual team members and
who is able to unite them in
achieving a common goal. The
composition of the team is also
significant. There has to be a
harmonious balance of requisite
skills pertinent to the objective
that the team seeks to achieve.
Change Management also
seeks specifically to identify the
obstacles to change. These
obstacles may be abstract such
as negative mental attitudes or
something tangible like physical
infrastructure involving the
efficient use of Information
Technology.
T h e Fe d e r a l B o a r d o f
Revenue is fully seized with the
necessity of instilling a sense of
purpose in FBR personnel
without which the achievement
of TARP objectives will be put in
jeopardy. FBR has not hesitated
to seek outside expert assistance to implement an effective
Change Management program.
M/s Gordon Gullan (T & D
Adviser) and Alan Gilmour
(HRM Adviser) are two such
foreign (U.K) specialists
engaged by FBR and from Oct
22 to 24, 2007 they conducted a
Change Management Workshop
at NIBAF, Islamabad, in which
FBR Board- in- Council
Members and DG's DOT (Direct
Taxes & Customs) participated.
In three days of intensive
focused effort the Workshop
participants were organized
into three teams that concentrated their effort in identifying
the obstacles to change sought
to be implemented through the
Tax Administration Reform
program. The teams further
made specific recommendations to overcome the obstacles
identified by them.
There was consensus
among the participants that
the efficient use of
Information Technology has
the potential of generating

Abdullah Yousaf further

emphasized that the imaginative use of ICT in Chile, in
which local software developers played a major part, had
made it possible for Tax
Administration to closely
monitor transactions of all
kinds that had a bearing on
government tax revenues and
the resultant documentation
of the economy had made it
extremely difficult for
potential taxpayers to evade
due tax or understate due tax
liability in the Returns filed.
Chile was thus an excellent
role model for Pakistan and
the best practices there could
be usefully emulated by
Pakistan in it's own effort to
modernize tax administration.
Chile's experience in
modernizing it's tax administration as narrated forcefully
by
Mr Abdullah Yousaf has
very important lessons for
Pakistan and FBR would do
well to take immediate notice
of how critical ICT is to lift tax
administration on to a new,
significantly higher, threshold
of performance.
The participants also agreed
that monitoring of TARP needed
to be significantly improved so
that the various projects could
be implemented synchronously.
The use of Timelines (GANTT
Charts) to ensure efficient

enough momentum to FBR's

TARP effort to overcome the
negative effects of the many
obstacles that were in the way.
Rather than try and 're-invent
the wheel' needless to say, a
futile exercise- there was
consensus that world wide
'Best Practices' in the field of
I n f o r m a t i o n a n d
Communications Technology
(ICT), be identified and
adopted by FBR.
M r A b d u l l a h Yo u s a f ,
Chairman FBR who, along
with Mr Usman Khalid Mirza,
Member, Direct Taxes, came
to participate in the Workshop
straight from a hectic tour of
Latin America, drew attention
to the remarkable progress
made by Chile in the use of
ICT in Tax Administration.
Coupled with doing away
completely, literally in a single
dramatic move, all exemptions from income tax hitherto
clad in the garb of so called
fiscal incentives, the efficient
use of technology has made it
possible for an extremely lean
workforce of a few thousands
only to deal with a taxpayer
population more than twice
the size of Pakistan's, which,
given the huge differences in
the total population of the two
countries, translates into a
very impressive tax base
indeed. Concomitantly, the tax
to gdp ratio has also registered a significant surge. Mr

November, 2007

monitoring of project implementation was strongly

recommended. It was also
recommended that
Benchmarking be used to judge
and evaluate performance in
different areas.
FBR Member (Administration), Maj Gen Muhammad
Yaseen , drew the participants
attention to the pressing need to
use Training Needs analysis to
design effective training
programs at the 2DOTS.
Mr Muhammad Talha,
FBR's Member HRM,
practically demonstrated how
a good team leader could
effectively mobilize team
resources and come up with
innovative solutions to
complex problems. 'Team-B'
led by him was cited as the
best of the three teams
participating in the Workshop.
Finally, towards the end of
the Workshop sessions, M/s
Gullan and Gilmour impressed
on the participants the pressing
need to evolve atypical
approaches to problem
resolution. ['Out of Box' thinking
and 'Lateral Thinking'].
All in all, an extremely useful
learning session indeed!
Gordon Gullan and Alan
Gilmour deserve full credit for
the inspired thinking that is
clearly reflected in the very well
s t r u c t u r e d de s i g n o f t h e
Workshop.

w w w. d g t r d t . g o v. p k

16th Issue

November, 2007

Capacity Building Program on

Management / Leadership Skills
Organized By Centre for Executive Education, IBA, Karachi 22-27th October

he
HRM, Wing ,
Central Board of
Revenue, has initiated
a series of training and
development programmes
aimed at fulfilling the training
requirements of the in- service
officers in the post reforms
phase of CBR. In addition to the
regular
Capacity Building
Programs organized by the
Directorate Generals of
Training & Research ( both
Direct as well as Indirect
Taxes), the HRM, Wing has
signed memorandums of
understandings with the two
premier Business Schools of
Pa k i s t a n n a m e l y L a h o r e
University of Management
Sciences(LUMS) and Institute
of Business Administration ,
(IBA) , Karachi for imparting
training to its officers. The
purpose of above programmes
is to better equip the CBR work
force in a post reform
environment based upon
automation and transparency.

module of this programme was

conducted by the DOT faculty.

While LUMS will handle the

training of senior officers in
grade 20-21, IBA, Karachi shall
be responsible for the training of
officers in grade 17-19 of Income
Tax as well as of the Customs,
Sales Tax & Excise Groups of
CBR.

The second and the final

phase of the IBA, Karachi
related Capacity Building
Programme has commenced
from 22-27th October at our
Directorate. The six days
module is captioned
Management / Team
Building
and Leadership
Skills. The topics of study
include Change Management in
Government Sector, Motivating
f o r P e r f o r m a n c e ,
Organizational Vision &
Culture, Conflict Management
etc.

The first phase of IBA ,

Karachi related Capacity
Building Programme
commenced at our Directorate
from June this year. The first
module comprised of topics
such as Computer skills,
Presentation& Communication
skills. Through a series of seven
separate training programmes ,
a total of 269 officers of both
Income Tax as well as Customs
groups were exposed to
concepts such as listening skills
, presentation skills etc. Our
Directorate provided all the
necessary infrastructural and
logistic support for this phase of
the Training. In addition, a part
of computer related training

Eminent speaker, federal

minister and Chairman
National Commission for
Government Reforms (CNGR)
Dr. Ishrat Hussain addressed
the participants of the course on
the second day. He highlighted
the background, scope and
objectives of NCGR . The global

challenges of effective and

responsive governance have
imposed an imperative task
u p o n t h e b u r e a u c r a c y.
Government must respond to
the challenges ahead for the
uplift of the common man. The
proposed reforms are thus
necessary for making the
Pakistani Civil Ser vice
responsive to the needs of the
t i m e s . D r. I s h r a t t h e n
highlighted the priority areas of
reforms along with the
proposed strategy for the way
forward.
His lecture was
followed by a lively Q & A
session.
It is hoped that the officers of
CBR have derived maximum
benefit from the two modules of
the IBA, related Capacity
Building Program and shall
practically utilize the training in
the coming implementation
phase of the reform agenda of
CBR.

16th Issue

November, 2007

A course on Organizational Development and Change Management

Dr. Yasmin Fatima
Deputy Director

c o u r s e
o n
Organizational
Development (OD) &
Change Management (CM)
arranged by Establishment
Division, Management Services
Wing at Secretariat Training
Institute, Islamabad from 3rd to
th
8 September, 2007.
Out of 133 candidates about
38 were selected by the
Establishment Division. The
Course was designed for the
Public sector officers of BS-19 &
above. But I was amongst the
few young officers who were
selected for the course. At the
end of the course I & an officer
from Air Force were declared as
the Potential talent in future
for their Organizations.
Topic of the course was very
relevant with the growing
importance of Reform &
Privatization in the Public
Sector of Pakistan. Hence, The
Director General of the institute
Mr. Muhammad Shahid Siddiqui
has professionally designed,
managed & supervised the
course in a manner to optimize
its utility. Organizational
Development & Change
Management were inculcated in
the mind of the participants
through interactive sessions,
revision/ recapitulation
sessions of the previous day
proceedings, case studies &
group exercises in the form of
group discussion & presentations. The course was inaugurated by Zafar Ahmad Khan,
Chairman Pakistan
International Airlines
Corporation (PIAC) & Sheikh
Naseer-ul-Haq, Additional
Secretary Establishment
Division.
T h e Tr a i n i n g c o u r s e
comprise Six modules, In first
module an overview of OD&
C M , C h a l l e n g e s &

Group executive Human

Resources & Organizational
Development Habib Bank
Limited.
Fourth module was about
OD through Skill enhancement
by Sahibzada Naveed Jan,
Director HRM, NADRA and
Role of HRM in OD & CM by
Kusro. P Malik, Professor CASE
.
University.
D r. I s h r a t H u s s a i n
Chairman, National
Commission for Government
Reforms despite his hard
pressed commitment had taken
out some time to discuss OD
challenges in Public Sector of
Pakistan. Many bold but apt
questions were asked by the
participants of the course
regarding reform processes in
different Public sector organizations in Pakistan.
In Fif th Module two
success stories each from the
Public & Private Sector was
narrated by Muhammad Talha,
Member HRM, Federal Board of
Revenue & Mr. Zouhair Khaliq
C E O, M o b i l i n k P a k i s t a n
Limited. It is a matter of pride
for FBR to act as the Role-model
for the other aspirants of
Reform, Organizational
Development & Change
Management in Public Sector.
In the Sixth & last Module
two case studies were discussed
vigorously by Mr. Ahsan Kamal,
Director HRM, State Bank of
Pakistan Karachi & Dr. Mirza
Abrar Baig SEVP & Head HR
National Bank of Pakistan,

Opportunities during transformation from Public to Private

Sector & Gender Diversity in the
Organization were discussed by
some of the distinguished
Speakers like Zafar Ahmad
Khan, Chairman (PIAC), Mr.
Akram Durrani, Executive
Director Karachi Electric
Supply Corporation & Dr. Syed
Ta u q i r H u s s a i n S h a h ,
International Labor
Organization, Islamabad.
Second Module of the
course emphasized on Global
aspects of OD & CM, future
challenges & Issues in the OD &
CM through group presentations. Presentations were
evaluated by the panel of
e x p e r t s M r. Ya s i n Ta h i r,
Director General IPO &
Sahibzada Naveed Jan,
Director Human Resources
National Database and
Registration Authority
(NADRA) valuable observations/suggestions were given by
the experts as well as by the
participants.
Third module was related
to Organizational Planning,
Exter nal Inter nal Issues,
Change management strategies/Planning organizational
development interventions and
Tools. This was ably handled by
Mr. Naeem-ul-Haq, Member
National Reconstruction
Bureau, (NRB), Prof Dr. Anees
Ahmed, Vice chancellor
RIPHAH University, Islamabad
& Mr. Zafar Aziz Osmani, Senior
Executive Vice President/

followed by certificate distribution ceremony.

The crux of the training can
described as under:
Organizations are like
natural persons they grow &
mature in healthy environment
(organizational culture). Fall
sick or even die in unhealthy
environment.
The remedy for the sick &
stunted organization is to bring
about transformational change
(Institutional & systematic)
rather than transactional
(personality dependant &
e p h e m e r a l ) . Fo r t h e
Organizational Development,
change should also be managed
appropriately & simultaneously.
M o u n t a i n o f Pa t i e n c e i s
required by the top brass of the
organization in the transitional
phase of change to combat
resistance to change, mind set &
status quo. Change should be
brought about in a very methodical, well planned manner by
employing professionals of
relevant fields.
For an effective reform
process i.e Organizational
Development & Change
Management, strong leadership
is integral. Leaders ensure
consistency & continuity of
Policies and maintenance of the
pace of change. Mr. Zafar
Ahmad Khan, Chairman
Pakistan International Airlines
Corporation (PIAC) was of the
view, Leadership should not
be brought in but evolved from
within the Organization.

continued on page 4

w w w. d g t r d t . g o v. p k

16th Issue

November, 2007

Training Activities at DOT (Hqs), Lahore. July - Dec 2007.

Timeline
Training Activity

July, 2007

August, 2007

September, 2007

October, 2007

November, 2007

December, 2007

1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 20 21 22 23 23 24 25 26 27 28 29 30 31 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 20 21 22 23 23 24 25 26 27 28 29 30 31 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 20 21 22 23 23 24 25 26 27 28 29 30 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 20 21 22 23 23 24 25 26 27 28 29 30 31 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 20 21 22 23 23 24 25 26 27 28 29 30 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 20 21 22 23 23 24 25 26 27 28 29 30 31

43th STP
IBA Capacity Building Phaes-I
IBA Capacity Building Phaes-II
Staff Foundation Courses I
Staff Foundation Courses II
Staff Foundation Courses III
Staff Foundation Courses IV

34th STP Training Schedule

July

Timeline

Subjects

August, 2007

September, 2007

October, 2007

November, 2007

December, 2007

27 28 29 30 31 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 20 21 22 23 23 24 25 26 27 28 29 30 31 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 20 21 22 23 23 24 25 26 27 28 29 30 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 20 21 22 23 23 24 25 26 27 28 29 30 31 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 20 21 22 23 23 24 25 26 27 28 29 30 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 20 21 22 23 23 24 25 26 27 28 29 30 31

Income Tax Foundation

Accountancy Foundation

Audit - II
TMS

Eid Holidays

Enforcement

Country Study Tour

Sales Tax & Other Acts

Eid Holidays

1st. Term Exam

Audit - I

Extension Lectures
Syndicate

DOT(DT)- 34th STP

80

70

70

70

70
60
Hours

50

55

57

59

70

65

66

66
Lecture Hrs. allocated

60

40

Lecture Hrs. completed

till 31-10-2007

46

41

30

33

20

25

10

20

0
ITFC AFC
Aud-I IP/
TMS
Subjects

ST

Aud-II ENF
8

SYN

Key:
ITFC
AFC
Aud-I
IP/TMS
ST
Aud-II
ENF
SYN

: Income Tax Foundation Course

: Accountancy Foundation Course
: Audit-I
: Information Processing/TMS
: Sales Tax & Other Acts
: Audit-2
: Enforcement
: Extension Lectures

Final Term Exam

Information Processing

17th Issue

Training Methodologies
at DOT(DT)

M MUNIR QURESHI
DG(DOT)(DT)

ecture based instruction

had been the norm at DOT
(DT) since its inception_ as
in most training institutions in
the country. And training of
probationar y officers was
mostly restricted to technical
instruction in subjects like
accountancy, tax laws, office
procedure etc. These are the
areas that officers inducted into
the Income Tax Department
were expected to be mostly
engaged in during the course of
their career in government
service and it was reasonable
that they be prepared to play
their role as tax officers by
teaching them the subjects
relevant to their occupation.

PATRON
M. Muneer Qureshi
Director General

Since 2002 a comprehensive

tax reform policy has been put
into play to revamp and
restructure the organization
charged with the assessment
and collection of all federal tax
levies. As a result, the CBR
[now FBR] has gradually
undergone a sea change in the
way that it transacts business
i.e. the assessment and
collection of direct and indirect
taxes.
Besides a new tax code [the
Income Tax Ordinance of 2001]
and changes in the work
procedure and structure of the
organization, changes in the
manner in which officers newly
inducted in service are trained
have also become necessary.
This is because in order to work
effectively in the new work
environment a new breed of
officer is required, one far
removed from the ITO of
yesteryears. The new breed of
FBR officers are of course
required first of all, to be
professionally competent. But
that is not all. They now have to
have a whole new mindset

that entails a mix of qualities

not easily defined but
nevertheless required if they
are to discharge their new
responsibilities efficiently.
One of the key objectives of
tax reform in Pakistan has been
to instill confidence in the tax
paying public in the
governmental machinery
charged with the assessment
and collection of taxes.
Universal self assessment
faithfully put into practice in
letter and spirit has gone a long
way in building such confidence.
The change in the mindset of
departmental functionaries_
officers and subordinate staff_ is
however the most important
quality that will, when all is said
and done, impact on the world
view of the tax paying public vis
a vis the FBR.
As pointed out above,
mindset is not easily defined.
However it does involve a mix of
mental attributes that officers
must have in the new post
reform environment in which
they are placed. One pf these

EDITOR-IN-CHIEF
Amna Faiz Bhatty
Deputy Director
LAYOUT & DESIGN
Asad Ali
Directorate General of
Training & Research
(Direct Taxes), Allama
Iqbal Town, Lahore.
Ph: +92-42-7842710
PABX: +92-42-7830211
Fax: +92-42-7842702
Web: www.dgtrdt.gov.pk
email: dg@dgtrdt.gov.pk

Role Play session in progress

December, 2007

INSIDE THIS ISSUE

Training Methodologies
at DOT(DT)
Page 1
Mahasil Technology as
Force Multiplier
Page 5
Our CST experience
Page 6

Message by Mr. Mumtaz Ahmad

Member Legal, FBR
Page 8
attributes is to understand and
emphasize with the tax paying
public. In order to do that
officers must build bridges that
will enable them to reach out to
the public and involve them
willingly in the entire process of
recourse mobilization. This is
easier said than done because
role play is not something that
is in-born in everyone. It is both
continued on page 2

17th Issue

DITORIAL

s the Specialized
training of the 34th
STP draws towards its
conclusion, it was time for the
Country study tour arranged in
the last quarter of the term. The
tour is meant both for an
exposure to the working of the
FBR headquarter and various
FBR units as well as an opportunity for excursion and mental
stimulation. With these
objectives in mind, a 5 days tour
was organized commencing
from 5th November. After the
successful conclusion of this
memorable tour, the probationary officers are expected to
complete the remaining STP
with due diligence and seriousness necessary for the development of career officers.
The pace of work at the
Directorate in the meantime
remained busy. Four successive
IBA related Capacity Building
Modules were organized in the
month of November.
This
module is captioned Team
building/Management skills
module comprising of six days
of interactive learning.
In addition to above IBA
related trainings, the Business
Process and Re-engineering
(BPR) team of FBR also
launched the training of its new
software Mahasil at our
Directorate. Mahasil in
addition to having the Tax
Management System (TMS)
capabilities is simpler and more
user friendly, having capability
of being web based. The
Directorate in order to facilitate
the simultaneous organization
of both above
trainings in
addition its own Specialized
Training of the 34th STP,
managed all the infrastructural
resources in a way that all
modules proceeded smoothly to
the satisfaction of all organizers.
The DOT administration led by
the Director General Mr. M.
Muneer Qureshi, deserves a
well earned kudos for all the
above efforts.

December, 2007

continued from page 1

an art and a science that
needs to be mastered by a great
deal of effort and a willingness
to change and take on a new
role.
Such acting skills are of
course best imparted in a
professional institution
dedicated to work in the theatre.
And DOT (DT) has certainly no
intention of preparing FBR
personnel for any such
deployment!! But as has been
aptly said, the whole world is a
stage and we are all actors
playing out our respective roles.
Given such a context, it is
imperative that public
functionaries acquire personal
communication skills to help
them interact effectively with
members of the taxpaying
public and to enable them to
improve public perception of
FBR.

Role Play sessions as part

of a training routine help
participants acquire the sort of
skills that are necessary for
FBR functionaries in the post
reform era. At DOT (DT) such
sessions are now part of the
training imparted to
probationary officers of the
Income Tax Group. In Oct. 2007
the probationary officers of the
34th STP went through a role
play exercise in which the
probationers were divided into
four groups of two teams
representing Pakistan and
India and they were tasked with
negotiating a treaty to resolve
outstanding disputes between
the two countries, including the
seemingly intractable,
Kashmir dispute. Background
documentation was researched
largely in the DOT (DT) library
and the internet and a briefing

session was also held by DR

Hassan Askari Rizvi,
authoritative political
commentator and noted
columnist, who has a number of
well received publications to his
credit as well. The final treaty
session was held on the 1st of
Nov. 2007 and the parleys
were video recorded. There was
a great deal of posturing- and
some angry gesticulating as
well!! -by the participants and it
all appeared quite natural and
shows the human capacity for
adaptability
and resilience.
Both teams were able to
negotiate a peace treaty- and
maintain good humor as well!
Hopefully, the real players will
also be able to do that someday
in the not too distant future !

Briefing session by DR Hassan Askari Rizvi

17th Issue

December, 2007

34th STP - Role Play Session_ Pakistan India Peace Parleys

Pictorial of Group A

Group A - Commencement of final day of Negotiations

Group A - Signing of Treaty and exchange of documents

Briefing session by DR Hassan Askari Rizvi

Group A - Pakistan: Treaty Parleys

Group A - Pakistan: Treaty Parleys

Group A - India: Treaty Parleys

Group A - Press Conference

17th Issue

December, 2007

34th STP - Role Play Session_ Pakistan India Peace Parleys

Pictorial of Group B

Group B: Signing of treaty and exchange of documents

Group B: Press Conference

Group B - India Peace Parleys

Press Conference

Group B - Pakistan Peace Parleys

Group B - Peace Parleys

17th Issue

December, 2007

Mahasil Technology as Force Multiplier

By FBR, BPR Team

Mahasil, the new enhanced

version of the already existing
official software of Central
Board of Revenue (CBR) Tax
Management System (TMS)
was released this month by TMS
development team. TMS is
given the name Mahasil
because it has been developed
indigenously by the officers
from CBR and PRAL. Mahasil in
addition to having the Tax
Management System (TMS)
capabilities (which provided
end to end solution to all
business processes of the
Income Tax), is simpler and
more user friendly, having
capability of being web based
and is going to be maintained on
a centralized server. It supports
scanned and other documents
paving the way to a complete
automated and paper less
environment. Mahasil is also einteractive and the taxpayer can
directly communicate under
statutory provisions to the
department in the form of
declaration, applications or
explanations to any statutory
notices by connecting to his user
through his user ID allotted to
him and vice versa.
Mahasil has been successfully

implemented in LTU, Lahore as

a pilot project and is planned to
be implemented in all Income
Tax field formations throughout
Pakistan. Thus, there was a
need of a committed team of
Master Trainers that could
impart the required training at
their respective stations to
ensure the success of Mahasil's
smooth and timely
implementation.
A comprehensive training
session of Mahasil Train the
Trainers Programme was held
at DOT, Lahore from 12th to the
14th of November, 2007. The
objective of the program was to
introduce domain officers to the
more user friendly version of
the TMS and to train them on
the additions made in the latest
version so that they would be
able to impart training to all
users at their respective RTOs
and LTUs.
Twenty two domain officers
from Income Tax Department
ranging from BPS-16 to BPS-19,
selected from all over the
country, attended the program.
On the first day of training, the
participants were given a
detailed overview of Mahasil.
They reviewed the fundamental
modules of the system and its
basic working. The participants

were explained the detailed

theme of workflow and
practiced the business
processes of Declaration,
Refund and Amendment. On the
second day, the modules and
processes including
amendment, record transfer,
record management, profile
management, performance
management, rectification,
Audit, MIS and Help etc were
explained, discussed and

practiced. The participant's

feedback showed that they were
very comfortable with the new
system and after the two days of
training believed that they had
the capability to transfer the
expertise to the other users
gained from the programme. All
the processes were revised by
the participants on the third day.
This training program was a
major step towards the
implementation of the software
and hence, the automation of
CBR. DOT has also planned to
conduct a similar program to
train the Database
Administrators (DBAs) from
Pakistan Revenue Automation
Limited (PRAL) selected from
all over the country, from 19th to
21st of November, 2007. The
domain officers and the DBAs
will complement each other
while imparting training during
the implementation of Mahasil.

17th Issue

December, 2007

Our CST experience

By SaherAftab Butt
34th STP

ften we encounter such

days, which leave a great
impact on our lives. Our
recent 5 days country study tour
was the most unforgettable one
for all 27 of us. The entire trip
was a wonderful learning
experience. It also provided us
with a much awaited break from
the hectic and demanding
routine of DOT.
Our group comprised of 27
probationers accompanied by
Mr. Imran Kazmi , Mr. Attiq and
Ms. Yasmeen Fatima from the
DOT faculty.
We left Lahore on a bright
sunny morning on Monday, 5th
of November around 10.30 am.
Our first stop was at Mirpur
where a briefing followed by
lunch had been arranged by the
District administration of
Mirpur. Later we visited Mangla
Dam. The boating in one of the
lakes of Mangla dam was one of
the most exciting experiences
everAyesha Ranjha along
with Madam Yasmeen Fatima
were seen riding a water
scooter with great enthusiasm

and resisted giving any other

probationer the chance of riding
it (and they did succeed in doing
so )
From there we headed to
Islamabad and went straight to
the National Police Academy for
a brief visit and an overview of
the functions and
responsibilities assigned to the
academy. This was followed by a
lavish tea arranged for us by
our batch mates from the Police
Service.
Next morning, we visited the
Federal Board of Revenue
(FBR) for our meeting with the
C h a i r m a n , F B R , M r. M .
Abdullah Yusuf. A long walk to
the FBR all the way from the
Parliament Lodges helped in
the digestion of the heavy
breakfast we had at our hotel.
First of all we were briefed on all
the functions and
responsibilities of various

divisions within FBR followed

by an introduction to all the
Functional and Line Members
of FBR.
The Chairman FBR,
Abdullah Yusuf took time out of
his busy schedule and briefed
the probationary officers on
reforms measures underway at
FBR. He informed the officers
that their induction into the
Income Tax group was very
timely as the new system based
on functional division was under
implementation which had
brought about some

fundamental changes in the old

system. Previously one officer
was assigned a wide range of
functions from assessment to
collection and the subsequent
imposition of penalties. Under
refoms, functionalization has
been introduced where different
jobs were being assigned to
different people resulting in
specialization of functions and
t r a n s p a r e n c y. T h e w o r k
environment in the newly
created RTOs and LTUs was
extremely conducive to
producing quality output at a

17th Issue

greater pace. Similarly all

internal taxes were being
brought together under one roof
in RTO and LTUs for improved
administration and facilitation
of the taxpayers. He impressed
upon the young officers for their
commitment towards their

future careers. At the end of the

discussion, the Chairman, Mr.
Abdullah Yusuf and Member
HRM , Mr. Muhammad Talha
answered the queries of the
probationers. Our visit ended
with a lunch arranged by the
FBR authorities.

After this meeting , we

headed for Muree. Throughout
the journey Umer Yunus,
Usman Bajwa and Ghulam
Hussain chattered incessantly
and pleased everyone with their
amusing jokes.
In the evening we reached
our destination. Our hotel had
the most beautiful interior and
the scenery around was
breathtaking.
In the morning we went to
Patriata Resort and enjoyed our
chairlift rides. In the evening we
went shopping to the famous
Mall Road of Muree.
Next day the group went to
Nathiagali where we toured the
4km walking track of Ayubia
Park. Our lunch was at Greens
Retreat Hotel, a beautiful place
where we thoroughly enjoyed
our meal.

December, 2007

The bus ride from Muree to

Abbotabad included singing by
the probationers in the most
hideous voices imaginable.
However, the show was stolen
by Umer Yunus who sang the
most tragic songs one could
think of.
Our journey back to Lahore
was also full of surprises.
Exhausted souls took their
seats in the bus but it was not
over yet . Along with the
immensely enjoyable company
of Ms. Yasmeen and Mr. Imran
Kazmi , we visited almost all the
intriguing places during our
entire tour. The impressions left
on our sub conscious cannot be
expressed in words. Overall, the
entire CST was a great
experience to reckon and our
group harmony was exemplary.
Accolades are reserved for DOT
administration for arranging
such an event for us.

17th Issue

December, 2007

Message by Mr. Mumtaz Ahmad

Member Legal, Federal Board of Revenue
By MumtazAhmad
Member (Legal)

he Federal Board of
Revenue, is a reformed
and vibrant revenue
collecting organization and is
conspicuously very different
from the one of the yesteryears.
Lack of trust, between the
taxpayer and tax collector, for
number of reasons in the past
hindered development of proper
tax culture, made tax collection
a difficult task with not so
impressive achievement of
budgetary targets.
2.
In order to tackle the
multidimensional
problems, ranging from
trust deficit between the
public and the tax
machinery to loss of
revenue, poor performance
level etc, the Government
initiated a comprehensive
strategy to completely
reform the apex tax
collection agency of
Pakistan through the Tax
Administration Reform
Programme.
3. In order to overcome the
technical and legal
difficulties in implementing
the Tax Administration
Reform Project and also
considering the global
advancement in tax laws
and to achieve the reform
objectives, inter alia,
relating to adequate
autonomy in administrative
and financial matters it was
necessar y to enact a
comprehensive statute to
replace the three sections
CBR Act, 1924. The

comprehensive statute was

passed to come in existence
from 1.7.2007 and provision
of law except section 1, case
into forth from November 1,
2007.
3.1.
A comparative analysis
of both laws show that
the FBR Act, 2007 has
immensely widened
the scope of the Board
related activities and
functions empowering
it to better achieve
reform objectives such
as developing tax
payer friendly culture ,
creating investment
and business friendly
environment thereby
accelerating the
economic growth of the
country and increasing
efficiency of work force
etc
3.2.
The FBR Act, 2007 has
provided space for
enhancing the capacity
of the tax system to
collect due taxes
through application of
modern techniques ,
providing assistance to
taxpayers , building a
motivated satisfied ,
dedicated and
c o m p e t e n t
professional workforce
that is required to
perform at an
enhanced efficiency
level.
3.3.
Its objectives can now
be more easily
achieved such as to be
a modern, progressive,
effective, autonomous
a n d c r e d i b l e
organization providing
quality services and
promoting compliance
with tax laws, while
practicing values such

3.4.

4.

4.1.

4.2.

4.3.

a s i n t e g r i t y,
professionalism, team
w o r k , c o u r t e s y,
fairness, transparency
and responsiveness.
The new Act, has
widened the role of the
FBR to regulate
matters relating to
fiscal and economic
p o l i c i e s ,
administration
m a n a g e m e n t ,
imposition and
collection of duties and
taxes.
The Federal Board of
Revenue while remaining a
government department
will be provided with
greater autonomy in
determining its own
policies and strategies in
relation to salaries ,
investment and operation
methods.
increased use of
i n f o r m a t i o n
technology will
further increase
administration
efficiency and ensure
benefits of shared
information such as
higher levels of
compliance.
improvements of the
productivity of the
FBR personnel
t h r o u g h
a
comprehensive
Human resource
d e v e l o p m e n t
programme has
started through
training, monitoring,
restructuring etc.
refurbishment of
accommodation ,
equipment and
resources to
accommodate the
new processes and

5.

6.

7.

8.

programmes is
already being
reflected in the RTOs
and LTUs etc.
The Federal Board of
Revenue is now a modern,
progressive effective and
credible organization for
optimizing revenue by
providing quality service
and promoting tax laws
compliance through the
availability in the FBR Act,
2007 of comprehensive
provisions pertaining to
powers, functions,
activities, incentives etc.
At the national level change
for the better in perception
of tax payers and general
public has already been
achieved and should be
continued relentlessly.
Reduction in corruption
has been acknowledged by
t h e Tr a n s p a r e n c y
International Report. The
OICCI one of the important
tax-payers organization in
its recent sur vey has
observed that the CBR has
further improved its
performance this year. This
is a result of timely reforms,
consistency in policies and
professional management
of the regulatory. And the
ultimate result is that the
FBR has surpassed the
revenue targets in the five
consecutive years from
2001-02 to 2006-07.
A lot more is to be done, to
achieve a booming
economy and prosperous
homeland, the Federal
Board of Revenue is now
better equipped than ever
to efficiently manifest these
goals.

18th issue

January, 2008

D.O.T (DT)
By:
M. Muneer Qureshi
DG DOT(DT)

he Directorate General
of Training & Research
(Direct Taxes) is FBR's
principal training establishment for it's Direct Tax personnel. It's predecessor, the
Directorate of Training from
which the acronym, DOT,
derives, was set up as a separate
functional unit in 1954 and for
the first time it found specific
mention in the then tax statute.
The Income Tax Act of 1922 (as
adapted in 1947 in Pakistan).
Prior to that, training was
mainly on the basis of informal
arrangements like mentoring
by senior officers after the
officers joined the Income Tax
Department on the basis of
competitive civil ser vice
examination conducted by
FPSC.

PATRON
M. Muneer Qureshi
Director General

Till 1976, DOT was situated

at Karachi in rented premises.
In 1976 it moved to Lahore
again to rented premises. In
1986 it finally moved to it's
present , custom built, permanent location in Allama Iqbal
Town. In 1986, DOT's 'training'
mandate was enlarged to
include 'Research.' Till 1988
DOT was headed by a 'Director'
a grade-20 officer and thereafter
by a Director General, a grade21 officer.
While the main DOT campus
is at Lahore, it also has two sub
offices at Islamabad and
Karachi. These are smaller
establishments each headed by
an Additional Director.
The DOT campus at Lahore
is situated in a sprawling 6.4
hectare area and the main
administrative block, I.T Labs,
classrooms, Library, syndicate
rooms, auditorium, Conference
room, gym, faculty residences,
plant nursery, green belt and
two hostels, with capacity to
house 54 resident trainees,
actually occupy some 4.4
hectares. Out of the total DOT

area, two plots of one hectare

each have been allocated to
DOT(Customs) in 2005 and to
Customs, Intelligence &
Investigation Wing in 2006.

The total expenditure

budget for DOT including the
two sub-offices- aggregates
Rs 64.343 mill in fiscal 200607 out of which Rs. 44.263 mill
relates to the main campus at
Lahore.
Over the years FBR CBR of
yester years- has made a
significant investment in
building up necessary infrastructure incidental to it's
training activities. Presently it
has three, state of the art, I.T
Labs equipped with 90 Hewlett
Packard Pentium IV, dual core
PC machines and TFT display
in a fully networked environment backed by three dedicated
servers, two UPS units of 15
KVA & 30 KVA capacity and an
independent electricity power
generation plant of 210 KVA
capacity. High speed, DSL
internet connectivity soon to be
upgraded to Broadband- is
available for the entire DOT

campus.
All classrooms, I.T. labs,
auditorium and Conference
Room have multimedia
projection facility and public
address system. The Library
has four, internet ready PC
workstations with loaded
proprietary software to access
Income Tax case law and, since
2007, also the vast, online data
base of the 'Bureau of Fiscal
Documentation' [IBFD] at
Amsterdam, Holland, after DOT
acquired full membership
rights.
continued on page - 2

EDITOR-IN-CHIEF
Amna Faiz Bhatty
Deputy Director
LAYOUT & DESIGN
Asad Ali
Directorate General of
Training & Research
(Direct Taxes), Allama
Iqbal Town, Lahore.
Ph: +92-42-9260347
PABX: +92-42-9260341-2
Fax: +92-42-9260346
Web: www.dgtrdt.gov.pk
email: dg@dgtrdt.gov.pk

18th issue

DITORIAL

he editorial team of the

DOT Gazette wishes its
august readers a very
new year. May the year 2008
bring much desired peace and
prosperity to our homeland. It is
time now to tread the path of
national reconciliation and
work collectively for achieving
the national goals of development and social justice. Our
nation born out of fierce
opposition and challenges shall
negate all counter claims to its
existence and solidarity.
The year 2008 commenced
at the Directorate General with
a farewell organized for the
outgoing 34th Specialized
Training Program (STP) on
Wednesday, 2nd January. Mr. M.
Abdullah Yusuf Chairman FBR/
Secretary Revenue Division
was the chief guest at the
occasion. The ceremony was
attended by the senior officers
of the Income Tax group as well
as by the family members of the
probationary officers especially
invited for the occasion. Ms.
Arooj Mehwish Rizvi was
declared the best probationer of
the 34th STP. The formal
ceremony was followed by a bon
fire lit dinner in the spacious
DOT lawns.

January, 2008

continued from page 1

The entire built up area is
air-conditioned.
DOT Lahore has a fleet of 11
vehicles including one coaster,
two Vans and 9 saloon motorcars.
The DOT (main campus)
workforce comprises 11 faculty
members headed by a Director
General. It also has 116 support
staff.
The entire DOT workforce
main campus and two sub
offices comprises 143 support
staff personnel and 16 faculty
members. All faculty members
and some support staff enjoy a
special compensation package (
double the basic salary) after
they have qualified in a rigorous
selection procedure. All DOT
faculty appointments are made
by FBR in exercise of express
statutory stipulation and as per
a transparent, Internal Job
Placement Policy based on
competitive selection.

training at the Finance Services

Academy, Lahore and later, the
Common Training at the Civil
Services Academy, Lahore. Any
other training activity was seen
as incidental to this basic
function. After 2002 and the
launch of the far reaching CBR
( l a t e r F B R ) Ta x R e f o r m
Program under World Bank
auspices, training acquired a
whole new meaning and came to
be seen as a crucial factor in the
performance of FBR in terms of
revenue mobilization capability.

DOT was originally set up

mainly to impart specialized
training to Income tax officers
inducted to the department of
Income Tax of the then CBR
after they had completed initial

Beginning 2005, after the

probationary Income Tax Group
officers have completed their
STP training at DOT(DT),
Lahore, they are then required
to under go training at the
Institute of Business

Administration, Karachi after

they have completed
Specialized Training Program at
DOT, leading to an MBA degree
in Tax Administration. For
admission to the IBA MBA
program it is essential that the
probationers clear the STP
Internal Exam held at the end of
the probationar y officers'
second term at DOT. The two
terms that the Income tax
Group officers spend at DOT
constitute one term for the IBA
MBA degree program. The
syllabi and curricula at DOT is
thus now finalized in consultation with IBA, Karachi. A total of
21 credit points are awarded for
the DOT training segment. To
date, the 31st, 32nd and 33rd STP
batches have completed
training at IBA and most of the
continued on page - 3

The officers of 34th STP

shall now leave for IBA, Karachi
for one year MBA in Tax
Management. The DOT gazette
wishes the young officers of
34th STP best of luck in their
future careers as tax professionals.

DOT Gazette
wishes
all its readers
a very happy
New Year
2

18th issue

January, 2008

trainees have been successful and have been awarded MBA

degrees.
Af ter the probationar y
officers have appeared in the
STP Internal Exam at the end of
the probationar y officers'
second term at DOT(DT),
Lahore, they are also required
to appear in a Final Passing Out
Exam (FPOE) conducted by the
Fe d e r a l P u b l i c S e r v i c e
Commission. Their position in
this exam has a bearing on their
i n t e r- s e s e n i o r i t y i n t h e
Common Training Program,
Income Tax Group Batch in
which they are placed and is also
an essential pre-requisite to
their confirmation in the regular
Income Tax Group and the end
of their probationary status.
Failure to clear the FPSC FPOE
can lead to a termination of their
appointment in Government
Service.
Another major change has
been the enlargement of the
DOT training mandate to
include the training of FBR
support staff especially the
clerical staff and departmental
Inspectors.
Over time this has acquired
ever increasing significance
and this is evident from the fact
that in 2007 some 1500 support
staff have received training at
DOT,man campus, Lahore and
the two sub-offices, especially in
I.T. and communication skills.

Since 2002, a mandatory

capacity building program for
departmental field officers was
also implemented at DOT.
Initially, the departmental field
officers underwent two weeks of
capacity building training at
DOT. Subsequently, this was
modified so that the skill
development of the capacity
building program spread over
one week was implemented at
DOT while the concept development segment of the program
was implemented at IBA,
Karachi. Finally, beginning 2006
the capacity building program
for all departmental officers is
carried out in it's entirety at IBA,
Karachi and LUMS, Lahore.

The Target Population for

DOT is some 750-1000 direct tax
officers of the FBR placed in BS
17-20 and some 5000 support
staff personnel who qualify for
various kinds of training under
the tax reform program.
Although the Capacity
Building program is now
designed and implemented by
IBA , Karachi and LUMS,
Lahore, in it's entirety, for
officers placed in BS 17-19
posted in the Punjab and the
NWFP IBA uses DOT, Lahore,
,
premises and facilities to impart
training.
Notwithstanding the fact
that capacity building is no
longer a DOT responsibility,

nevertheless specialized
training for field officers has
been started at DOT. Thus
specialized training in the
conduct of Audit
including
Audit conducted jointly by sales
tax and income tax group
officers- is being conducted at
DOT since 2006.
DOT has also become the
preferred venue for the launch
of many important learning
initiatives by FBR. In this
context it is important to
mention the launch of the
h u g e l y s i g n i f i c a n t Ta x
Management System [TMS] in
2006 at DOT. TMS was the first
significant I.T. based initiative in
automation on the Direct Taxes
continued on page-4

18th issue

January, 2008

continued on page -

side since the launch of the

Tax reform Program in 2002.
TMS was seen as especially
significant because it represented also the first 'in-house'
software development initiative
as all the programming was
done at PRAL CBR's wholly
owned corporate entity
dedicated to revenue automation. A core group of officers was
trained at DOT to become
master trainers in TMS.On the
express directions of the
Chairman, CBR, STP participants were also given training in
TMS by DOT technical personnel. However, TMS had many
teething problems and has now
been superseded by an
improved version called
'Mahasil.' This new, improved
version of TMS has also been
launched at DOT and a core
group of instructors trained in
it's use. Although 'Mahasil' too
will eventually be superseded by
I -T M S [ I n t e g r a t e d Ta x
Management System] being
developed by a foreign developer, 'Mahasil' will nonetheless
provide extremely useful 'hands
on' experience to departmental
direct tax personnel in automation of the work cycle.
Since 2005 an international
dimension to DOT's training
capability has been in evidence.
In 2005 direct tax officers from
t h e A s s o c i a t i o n o f Ta x
Authorities of Islamic countries

[ 20 countries in all with

Turkey participating as an
'observer'] attended an
intensive two weeks training
course in revenue forecasting at
DOT using software developed
by IRS Canada consultant, Dr
Anil Gupta, who came over to
personally conduct the simulation exercises. This was
followed in March 2007 with the
first ever conference of Heads of
ATAIC direct tax training
establishments. In 2008 DOT
hopes to play host to members
of the Economic Cooperation
Organization [ECO] conducting
a specially designed capacity
building program for them.
Various training methodologies have been put to use at DOT
to impart training. The traditional in-house faculty lecture
based training method is still in
use but is being increasingly
supplemented and even
superseded by more advanced
methodologies like the conduct
of syndicate sessions, role play
sessions, simulation exercises
using proprietory computer
software, extension lectures by
specialists and hopefully soon
by other more advanced
methodologies using video
conferencing and dedicated elearning modules. This new
'multi-dimensional' training
methodology is of considerable
significance in the dynamic
environment in which FBR

personnel can realistically

expect themselves to be placed
in the years to come in which
they would be required to
interact intensively and
extensively with members of the
tax paying public. Expertise in
communication skills is
especially important in this
context.
Although DOT has a great
deal of independence with
regard to the conduct of training
programs nonetheless DOT
does function under FBR
oversight and especially with
regard to the design of training
programs for various categories
of FBR personnel consultation
with FBR through the Member
(HRM) is essential. The
Member (HRM) in fact plays a
key role in the selection of all
DOT personnel as he oversees
the selection process for ALL
FBR personnel. The Member
(HRM) also provides guidance
to the DG(DOT) on all STP
related training initiatives and
is closely associated with
Specialized Training initiatives
such as Audit Training. Also
with regard to the MBA
program for FBR Income Tax
Group probationary officers, all
interaction with IBA Karachi is
through the Member (HRM).
It is thus clear that DOT has
come a long way from the once,
dedicated, training establishment for Income Tax Officers
ONLY. As many as 3052 FBR
personnel in all categories [
officers as well as support staff]

received training of some kind

at DOT in 2006-07. This is a 67%
improvement over the immediately preceding year.
DOT
hopes to further
augment it's capabilities by
setting up a specialist Forensic
Investigation L ab on it's
premises, by enlarging it's
faculty and by imparting
advanced training to faculty
members in training centers of
excellence abroad. In this
context a presentation has
already been before a World
Bank Team and the initial
feedback appears to be encouraging.
Once the required improvements in infra structure have
been carried out, DOT aims at
becoming a regional training
hub in which ATAIC and ECO
tax personnel as well as tax
personnel from non member
countries come to DOT on a
regular basis to receive training
in a quasi commercial context
so that the payments made by
foreign participants not only
cover costs but also a modest
surplus to help fund further
i m p r o v e m e n t s a t D O T.
Furthermore, by 2010 DOT also
hopes to be able to award the
MBA degree to Income tax
Group officers by conducting a
Business Administration
program of it's own. There will
then be no need to send
departmental officers to outside
institutions like the IBA for an
MBA degree.

18th issue

January, 2008

Pictorial - 34th STP Pass Out

21st Issue

Asymmetric Initiatives
for Revenue Mobilization
M Muneer Qureshi
DG(DOT)(DT)

evenue mobilization is a
taxing proposition in the
best of times. Given an
extremely narrow base, poor
tax consciousness, serious
anomalies in the underlying
legal framework, corruption,
(largely) manual work procedures, workforce 'mindset'
problems, a huge, very poorly
understood, informal sector,
inadequate workforce compensation, deficient automation in
the workplace, highly skewed
sectoral tax contribution to the
exchequer etc the task is made
that much more difficult.
However, that is not to say that
nothing can be done to increase
government revenues. Infact
looking to the peculiar environment of developing countries,
apart from the routine initiatives like tinkering with tax
rates and exemptions and

support staff, which is an

unprecedented development as
in the past support staff hardly
ever had any access to the
regular training establishments
of the then CBR for training
purposes.
For the new entrants, training
does not end with the specialized training program [STP].
Since 2003 probationary officers
of both the Income Tax and the
Customs, Federal Excise and
Sales Tax groups go on to the
Institute of Business
Administration at Karachi to
complete the customized MBA
in Tax Administration, getting
credit for the training received
at the Civil Services Academy
[Common Training Program
CTP] and the Income Tax and
Customs, Federal Excise and
Sales Tax Directorates General
of Training and Research
[ D O T ( D T )
a n d
D O T ( C u s t o m s , Fe d e r a l
Excise & Sales Tax] at Lahore
and Karachi, respectively.
Beyond the IBA MBA, there is
the Capacity Building program
for officers at IBA Karachi and
LUMS (Lahore). Additionally,
t h e r e i s t h e m a n d a t o r y,
promotion related training [for
ALL Civil Servants] at the
National Institute of Public
Administration [NIPA] and the
National Management College,
p r e v i o u s l y, t h e Pa k i s t a n
Administrative Staff College,
Lahore.
All in all, on the face of it, this is a
pretty stiff training regime that
should turn any raw recruit into
an accomplished tax sleuth. But

enacting new tax levies,

unconventional measures can
and should be taken to bring
about fundamental changes in
the underlying causal factors
seen as germane to revenue
mobilization in a holistic
context.

What can be done:

Invest in training the
workforce.
An army is as good as the quality
of its' fighting men. Proper
training is hugely important. In
a complex environment in
which tax evasion is a significant issue, those who evade
taxes are getting ever more
sophisticated in the techniques
that they employ to dodge the
tax authorities. They have
access to top flight tax counsel
and usually also have good
connections within the establishment which they often use to
telling effect through pressure
tactics that are very difficult for
the taxman to counter. The only
way the tax officers can deal
with the problems that beset
them is through good training.
There has undoubtedly been a
significant improvement in the
quality of specialized training
provided by the training arms of
FBR [the 2DOTS] to it's
workforce on both the direct and
indirect taxes side. Training
methodologies have improved,
as has the content, and information technology is being used
much more systematically than
ever done before as a teaching
aid for both officers as well as

April, 2008

Asymmetric approaches
to Revenue Mobilization
Page - 1
Training cum Workshop
on Audit of Direct Taxes
Page - 4

Abd al-Rahman b. Muhammad

Ibn Khaldun
Page - 8
is that really the case?
Unfortunately, hard facts do not
support such a conclusion.
Many of the problems that beset
tax administration in Pakistan
like the chronically poor, tax to
GDP ratio are relatable, to a
significant extent, to deficiencies in high level training that in
turn are the result of weaknesses in training infrastructure. Take for instance, the art
and science of forensic investigation in cases involving tax
fraud and in the use of computers by taxpayers to store tax
relevant data [computer
forensics]. Presently there are
n o s p e c i a l i z e d Fo r e n s i c
laboratory facilities at the
2DOTs. There is no specialized
Simulation Lab to recreate real
life scenarios in a simplified,
artificial, 'virtual', environment,
using dedicated software and
hardware.
Countries like Malaysia that
have made great advances in
enhancing the effectiveness of
their Tax Administration, have
continued on page 2

-ICT prowessDuring fiscal 2006 the IRS (USA) electronically processed 168,808,955
Direct Tax Returns [All categories] collecting $ 2.2 trillion in taxes
net of refunds issued. This translates into a tax base of 56% + !
1

21st Issue

April, 2008

continued from page 1

he DOT administration
has always prioritized the
genuine needs and
requirements of the staff
associated with this institution.
Since the initiation of process of
Internal Job Postings (IJP),
some officials of DOT had not
been selected for IJP pay
positions. The DOT organogram
as prepared by the HRM wing,
FBR recommended a certain
officers to staff ratio. This ratio
fell short of the actual staff
requirements for a sprawling
campus like DOT. It was through
the personal efforts of the
Director General DOT, Mr. M.
Munir Qureshi that the HRM
wing was convinced of the
reasonable staff/officers ratio
needed to run the administration effectively. Thus, a major
achievement in the month of
March was the IJP selection of
the support staff at DOT through
the tireless efforts of the DOT
administration. It is hoped that
the support staff continue to
perform their duties diligently
and honestly.
Meanwhile the training
calendar at the Directorate
remained busy with two
successive computer training
programs for officials (BS 5-16)
p o s t e d a t R T O, L a h o r e .
Similarly a three days training
cum workshop on AUDIT OF
DIRECT TAXES was held from
24th-26th
March 2008 at the
Directorate. In this training cum
workshop officers from the
Audit wing of the Audit &
Accounts Department and
I n c o m e Ta x g r o u p w e r e
sensitized to the changes
brought through reforms
introduced in FBR. This training
was arranged by DOT (DT)
Lahore in collaboration with the
Direct Taxes Audit wing of Audit
& Accounts Department and
was a successful effort in
collaborative interface between
two different departments.

invested hundreds of thousands

of dollars (US) in setting up such
specialized facilities and they
continue to invest in improving
the quality of their specialized
technical infrastructure.
Ofcourse, highly developed
countries like the United States
take such facilities for granted.
But as the example of Malaysia
shows, even countries that are
not as highly developed also
recognize the importance of
building up their prowess in
imparting meaningful training
to their tax personnel in these
new areas seen as very important to enhancing their skills at
detecting tax evasion.
The difficulties of training tax
personnel in Pakistan effectively
are compounded by the fact that
we continue to induct generalists into the Civil Services
through the Central Superior
Services [CSS] Exam conducted
by the FPSC. Many of the new
entrants have no technical
background at all in Economics,
Accountancy or Business
Administration having earned
their Master's Degree in
subjects like History, Political
Science, Literature etc [and
many have only a Graduate
Degree the minimum entry
level requirement] and have a
hard time coping with the rigors
of going through these technical
subjects for the first time at the
t r a i n i n g a c a d e m y. Tr u e ,
generalists can be trained as tax
specialists but in order to be able
to do so effectively in a reasonable timeframe, modern, state of
the art training infrastructure, is
a condition precedent. Second
best is just not good enough.
And, as explained, in Pakistan,
presently, we do not have these
specialized facilities at all.
But, given continued, strong,
executive support, this could
change in the near future.
The Tax Administration Reform
Program [TARP] launched in
2002 has World Bank funding
[long term soft loan] of $ 150
million expressly to modernize
Tax Administration in Pakistan.

GROWTH OF THE INFORMAL SECTOR IN PAKISTAN

(Percentage of GDP)
60

54.52%

50
39.03%

40

35.27%

34.76%

38%

37.25%

35%

28.75% 28.54%
30

23.51%
20%

20
10
0
1973

1978

1983

1988

1993

1998

1999

2000

2001

2002

Source: Mr. Ali Kemal, Underground Economy & Taxation in Pakistan. A critical evaluation..

And there can be no better use of

these resources than to acquire
the latest training infrastructure, notwithstanding the
skepticism that still exists in
some quarters as to the need
and more importantly, the
efficacy, of (expensive) modern
technology in improving Tax
Administration.
Forensic and Simulation Labs
are not the only areas in which
investment is required to
upgrade FBR's training
establishment. Faculty and
Program development are
equally important. We need
adequate numbers of well
qualified teaching staff.
P resently, DOT(DT) main
campus at L ahore has a
teaching faculty of [14] in allincluding the Director General
and the Director and two
'visiting faculty members from
the private sector- , out of which
[3] are permanent faculty
members while the rest are
departmental officers on
temporar y assignment or
visiting faculty from private
sector professional institutions.
Only two faculty members have
had any foreign training of
significance. And although
DOT(DT) faculty enjoys an
enhanced compensation
package (double the basic
salary), it is still nowhere near
the market salary for equivalent
positions. Contrast this with the
[100] strong permanent,
teaching faculty at the

2006
(Est.)

Malaysian Tax Academy- all

highly trained ( many of them
abroad) and recruited expressly
as Instructorsat market
salaries.
Besides reasonable numbers of
suitably trained permanent
faculty, specialized training
programs for trainees at the
academy are essential in order
that they derive optimum
benefit from the specialized
facilities referred to above.
These programs include
financial investigative techniques course, financial
forensics techniques training
program, digital evidence
acquisition specialist training
program, computer network
investigation training program,
transfer pricing, international
taxation courses and workshops
and management courses
including leadership and
motivational courses.
Naturally, physical infrastructure would also be required to
install the specialized laboratory facilities. Classrooms,
hostel and mess facilities, gym
and other sports and recreational facilities, conference
room, admin block etc would
also be required. While all this
will take up significant
resources there can hardly be
any doubt that these are all
necessary for a training
institution to have any credibility.
Monitor Financial Data.
There are more than [80] million
continued on page 3

GROWTH OF TAX REVENUES IN PAKISTAN

Deal decisively with the

Informal Sector.
The informal sector, characterized by 'unreported,' undocumented or more aptly, improperly documented- (business)
transactions, robs the exchequer of much needed tax
revenue that has increased
significantly over time.
Pakistan has a burgeoning

201

1994-95

77.40 99.5 100

59.18
89.87
72.29
1990-91

1978-79

30.70

1982-83
1983-84
1984-85
1985-86
1986-87

9.76
1972-73

6.98
1965-66

3.45
1960-61

1949-50

1947-48

(Rs. in billion)

There is practically no systematic monitoring of financial data

in Pakistan. In the United States
all financial transactions above
$ 10,000 are
monitored and
details logged
in a central
900
data base to
800
build up a
700
profile and
c o n d u c t
600
analysis.
500
Besides, Banks
400
are required by
law to formally
300
report all
200
suspicious
100
deposits and
1.25
they do send
0
p e r i o d i c
reports. In
Pakistan, the
State Bank of
Pakistan requires Commercial
Banks to report similar deposits
under a Know Your Client
[KYC] policy but there has
hardly been any significant
reporting to date.

ties. FBR must be empowered

to look at a great deal more of
the financial data held by the
banking system than is presently possible. This is not to say
that such empowerment will
automatically lead to investigations being launched in the case
of the many millions operating
bank accounts who do not file
Returns of Income. But over
time intelligent automated
systems, may be used to
gradually generate profiles that
could eventually suggest
whether or not taxable income
is indicated in an individual
case. A blanket amnesty for past
years will decisively remove the
fear of being saddled with huge

informal sector whose size has

variously been estimated at
between 35 to 50 percent of GDP
and even higher by some
economists. All this unreported and undocumented
income is a veritable treasure
trove for the plethora of
commercial banks that dot the
economic landscape in Pakistan
currently. The horde of black
money entrepreneurs placed
in the vast and growing informal
sector do not stash their liquid
wealth at home as some of us
are wont to believe. They do not
have to do so. Laundering of
black moneyis a profitable
enterprise and has many
facilitators, institutional and

tax liability for any tax evasion in

those years while maintaining
deterrence in the future.
Presently, the data required to
be appended with the Return of
Income in the case of noncorporate taxpayers, who form
the great majority of the
taxpayer population, is, at best,
'minimal' and will thus generate
ver y few leads for tax
authorities to follow. In the
Pakistan environment, it is
certainly not advisable to
demand copious data to be
appended with the Return of
Income. However a meaningful
reporting of data is essential if
any meaningful analysis is to be
conducted.

otherwise. Courtesy a legal

embargo, details of bank
accounts of even existing
taxpayers cannot be routinely
requisitioned by the income tax
authorities. And those who do
not exist on the tax rolls, live
blissfully, secure in the knowledge that out of sight- of the
FBR- (usually) also means, out
of mind.
An effective way of dealing with
the informal sector is to create
systems that make some form of
documentation inevitable for as
many economic transactions as
possible. And using technology
and the law, the system has then
to be policed by the tax authori-

Use Technology to monitor

Turnover.
Information and communications technology is the great
force multiplier of our times
and tax people must learn to put
it to use effectively.
The wholesale and retail sector
in Pakistan contributes more
than 17% to GDP and just over
4% by way of tax revenue to the
federal exchequer. A major loss
to revenue here emanates from
the systematic underreporting
of turnover. The underreporting
is especially serious in the case
of major wholesale and retail
outlets. One way of dealing with
the problem that is already in
use in as many as [18] countries
at the present
time is the
installation of
electronic tax
847
registers
[ETR] in select
wholesale and
retail outlets.
This device is a
variant of the
402
o r d i n a r y
electronic cash
register [ECR]
with which we
are all familiar
and is already
being used in
many retail
outlets. The
ETR has a
special, so called, secure, fiscal
memory chip that records all
tax relevant transactions and
displays tur nover on the
machine as each transaction is
made. The 'fiscal memory' itself
can only be directly accessed by
the tax authorities to download
particulars either in real time or,
periodically, at the end of a given
timeframe. The device in
conjunction with suitable
additional, peripheral equipment, authenticates all
transactions using a secure
hash algorithm and stamped
with this electronic signature,
copies of the sales invoices
2006-07

continued from page 2

bank accounts of individual
customers in Pakistan and only
[2.2 million] taxpayers who file
annual Returns of Income.
While it is not at all axiomatic
that anyone who operates a
bank account would definitely
be earning taxable income, and
one individual may be maintaining several bank accounts, it is
indeed very odd that there are
so few bank account holders out
of the total population of [80]
million who do earn taxable
income in Pakistan.

April, 2008

2001-02

21st Issue

continued on page 6

21st Issue

April, 2008

Training cum Workshop on Audit of Direct Taxes

at DOT (DT), 24th March to 26th March, 2008
Internal Control, Importance of
Internal Controls, assessment
of control risks, which
processes to be selected for
sampling, how to draw samples
from population, financial
reporting manual, accounting
policies and procedures etc.
were covered by resource
persons coming from the Audit
& Accounts department.
Similarly important topics
s u c h a s I T b a s e d Ta x
Management System (TMS), an
overview of audit of direct taxes,
desk audit of tax profiles, and
amendments through Finance
Act, 2007 relating to Direct
Taxes which the auditor must
know for effective tax audit were
dealt with by the Income Tax
side. Surprisingly! Resource
persons from both sides were
young & energetic, another sign
of Reform.
The closing session, of this
training session cum workshop
was chaired by Director
General (DOT), Mr. M. Munir
Qureshi. In his speech he,
highlighted the importance of

Taxes Audit Wing of Audit &

Accounts Department from 24th
to 26th March, 2008.
By:
Dr. Yasmin Fatima
Deputy Director

ith the implementation

of Tax Administration
Reform Program
(TARP), Federal Board of
Revenue has emerged as an
automated, modern and
transparent organization. One
proof of the above claim is that
Transparency International in
its latest report has lowered the
ranking of FBR in its list of
corrupt departments. FBR
however like all other
Government departments is
liable to regular audits by the
Federal Audit Wing. For the
effective Audit of a reformed
organization like FBR it was,
essential to update and reform
the audit methodology. Hence, a
training cum workshop was
arranged by DOT (DT) Lahore
in collaboration with Direct

The workshop was

inaugurated by the Mr. Usman
Khalid Mirza, Member Direct
Taxes, FBR. In his speech he
praised the effort made by both
the departments and
appreciated the innovative idea
of an Interactive workshop. He
then highlighted some of the
important features of the
Income Tax Ord. 2001, such as
introduction of Universal Self
Assessment Scheme (USAS),
and systematic audit of selected
cases. Mr. Omer Farooq (DG
LTU), Lahore, Mr. Anwar-ulHaq (Commissioner Audit LTU,
Lahore), Mr. Javed Athar
(Commissioner Enforcement)
were amongst the guests in the
inaugural ceremony. It was a
first ever interactive session in
which auditors were trained not
only from the Audit and
Accounts department but also
from the Income Tax Group.
Important areas like

collaborative workshops among

related government
departments for exchange of
knowledge & skills. Syed Imtiaz
Hussain Bukhari, DG Income
Tax Audit, was also present at
the occasion and gave his
feedback regarding the
workshop. He thanked the DOT
Administration for its indelible
support for the workshop. In the
end Mr. Khalid Ali Shah
(Director General Training
Audit & Accounts) distributed
the certificates among the
participants. Mr. Zafar Ullah
Khan (DG Revenue Receipts),
Mr. Tahir Mahmood (Director
Audit & Accounts Training
Institute, Lahore) were among
the guests at the closing
ceremony.
It is hoped that this effort by
DOT DT shall pave the way for
further collaborative workshops
to improve the understanding
amongst Government
departments.

21st Issue

April, 2008

Pictorial - Training cum Workshop on Audit of Direct Taxes

21st Issue

April, 2008

continued from page 3

issued can be safely admitted in
audit and presented as reliable
evidence before the tax
authorities or a court of law, if
the need so arises. Significantly,
a real time video link can also be
installed along with the ETR to
ensure that the machine is
actually used to record all
transactions.
The statute (in Pakistan, the
Income Tax ordinance 2001) will
have to be amended to empower
the Commissioner to order
installation of such a device in a
particular wholesale or retail
outlet and amendments will also
have to be made in the income
Tax Rules. On- line access of the
data stored on the machine by
tax authorities can be enabled
by linking it to a dedicated,
secure, large area network
[LAN].
This technology which is fairly
straightforward will impose no
great burden on the exchequer
as it will be required to be
'purchased' by the outlet
suspected of underreporting
turnover and it would be
possible for such business to
claim depreciation on the
machine, including accelerated
depreciation. The machine itself
will be sold by authorized
dealers only at nominal markup
over cost price and may be paid
for in installments thereby
imposing minimal burden on

the purchaser. Alternately, the

tax department may keep such
machines in stock and install
them, as need be, on a rental
basis.
It should not be necessary to
order the installation of such
machines on a very large scale
and it is the deterrent effect that
is significant. The experience of
those countries that are using
the technology is positive and it
appears to have had a salutary
effect in curbing underreporting
of turnover. And the use of such
machines need not be restricted
to wholesale and retail outlets
only. They can be easily
modified for use by professionals like practicing doctors many
of whom are known to have
thriving private practices but do
not declare income consistent
with the scale of their practice.

FEDERAL RESOURCES IN PAKISTAN 2007-08.

Privatization Proceeds
5%
Bank Borrowing
8%

Change in Provisional Cash

Balance
3%
Self Financing of PSDP
by Provinces
8%

External Receipts
16%
Net Revenue Receipts
56%

scheme of self assessment as

is in vogue in Pakistan at the
present time- it is not possible to
take up each and every case for
detailed scrutiny (audit) and
moreover such personal
expenditure as may be reported
[expenditure on education of
children including education
abroad, on public utilities,
private clubs, stay at hotels,
airline travel, travel abroad,
purchases through credit cards,
on personal transportation etc ]
is not properly collated on an
institutional basis by the tax
authorities making it extremely
difficult, if not impossible, for
any quick comparison of
expenditure with declared
income to be made.

Monitor personal expenditure.

For obvious reasons, Income
Tax Law lays down a great deal
of emphasis on the earning of
income. That is quite understandable given the nature of
the enactment. However, it is a
fact that in many cases an
individuals' personal expenditure is not consistent with the
Total Income reported in the
Return but the mismatch
generally escapes the scrutiny
of tax authorities. In a universal

Given the fact that we are

committed to a fully integrated

Illumination DOT (DT)

Illumination DOT (DT)
23rd March, 2008
23rd March, 2008

Net Capital Receipts

4%

tax management system for

FBR, it should be possible to
deploy suitable technology to
collect and collate information
from institutional sources on a
continuous basis [from educational institutions, banks, clubs,
airlines, hotels etc] on a regular
basis and compare the same
with Income and expenditure
declared on the Return of
Income . Any mismatch in either
/ both areas would throw up a
red flag and the matter can then
be taken up for scrutiny by the
tax authorities.
Income and expenditure are
really two sides of the same coin
and by looking at expenditure
carefully it should be possible to
make a much better assessment
of income. In the most glaring
cases, thousands of Pakistanis
travel abroad and in quite a few
cases fail to report any extraordinary expenditure at all in
many cases they may even fail to
(deliberately) intimate 'any
detail' of the trips made. Now
with the advent of machine
readable passports, every exit
from Pakistan to a foreign
destination is electronically
logged and it should be possible
to transmit details of the same
to the FBR data base in real
time. Once this is done on a
regular basis, it would be a
powerful deterrent to
underreporting / non- reporting
of expenditure on foreign travel.

21st Issue

April, 2008

continued from page 8

Ibn Khaldun is well known
for his explanation of the nature
of state and society and for being
'the founder of the new discipline of sociology.'
Ibn Khaldun fully realised
that he had created a new
discipline, 'ilm al-'umran, the
science of culture, and regarded
it as surprising that no one had
done so before and demarcated
it from other disciplines. This
science can be of great help to
the historian by creating a
standard by which to judge
accounts of past events.
Through the study of human
society, one can distinguish
between the possible and the
impossible, and so distinguish
between those of its phenomena
which are essential and those
which are merely accidental,
and also those which cannot
occur at all. [30]
Ibn Khaldun's contributions
to the field of history must also
be noted.
He analysed in detail the
sources of error in historical
writings, in particular partisanship, overconfidence in sources,
failure to understand what is
intended, a mistaken belief in
the truth, the inability to place
an event in its real context, the
desire to gain the favour of those
in high rank, exaggeration, and
what he regarded as the most
important of all, ignorance of the
laws governing the transformation of human society. [31]
On the development of the
state, and the relationship
between the state and society,
Ibn Khaldun believed that
human society is necessary since the individual acting
alone could acquire neither the
necessary food nor security.
Only the division of labour, in

For Ibn Khaldun, history is a

constantly changing cycle, with
essentially two groups of people,
nomads and townspeople, with
peasants in between. He
characterizes each group:

and through society, makes this

possible. The state arises
through the need of a restraining force to curb the natural
aggression of humanity. A state
is inconceivable without a
society, while a society is wellnigh impossible without a state.
Social phenomena seem to obey
laws which, while not as
absolute as those governing
natural phenomena, are
sufficiently constant to cause
social events to follow regular
and well-defined patterns and
sequences. Hence a grasp of
these laws enables the sociologist to understand the trend of
events. These laws operate on
masses and cannot be significantly influenced by isolated
individuals. [32]

Nomads are rough, savage

and uncultured, and their
presence is always inimical to
civilization; however, they are
hardy, frugal, uncorrupt in
morals, freedom-loving and selfreliant, and so make excellent
fighters. In addition, they have a
strong sense of 'asabiya, which
can be translated as 'group
cohesion' or 'social solidarity'.
This greatly enhances their
military potential. Towns, by
contrast, are the seats of the
crafts, the sciences, the arts and
culture. Yet luxury corrupts
them, and as a result they
become a liability to the state,
like women and children who
need to be protected. Solidarity
is completely relaxed and the
arts of defending oneself and of
attacking the enemy are
forgotten, so they are no match
for conquering nomads. [34]

Ibn Khaldun proposed that

society is an organism
that obeys its own inner laws.
These laws can be discovered by
applying human reason to data
either culled from historical
records or obtained by direct
observation. These data are
fitted into an implicit framework
derived from his views on
human and social nature, his
religious beliefs and the legal
precepts and philosophical
principles to which he adheres.
He argues that more or less the
same set of laws operates
across societies with the same
kind of structure, so that his
remarks about nomads apply
equally well to Arab Bedouins,
both contemporary and preIslamic, and to Berbers,
Turkomen and Kurds. These
laws are explicable sociologically, and are not a mere
reflection of biological impulses
or physical factors. To be sure,
facts such as climate and food
are important, but he attributes
greater influence to such purely
social factors as cohesion,
occupation and wealth. [33]

With regard to the political

and social cycle, Ibn Khaldun
suggests the following
sequence of events:
Nomads conquer territories
and their leaders establish a
new dynasty. At first the new
rulers retain their tribal virtues
and solidarity, but soon they
seek to concentrate all authority
in their own hands. Increasingly
they rule through a bureaucracy
of clients - often foreigners. As
their former supporters lose
their military virtues there is an
increasing use of mercenaries,
and soldiers come to be more
important than civilians.
Luxury corrupts ethical life, and
the population decreases.
Rising expenditure demands
higher taxes, which discourage
production and eventually

result in lower revenues. The

ruler and his clients become
isolated from the groups that
originally brought them to
power. Such a process of decline
is taken to last three generations, or about one hundred and
twenty years. Religion can
influence the nature of such a
model; when 'asabiya is
reinforced by religion its
strength is multiplied, and great
empires can be founded.
Religion can also reinforce the
cohesion of an established state.
Yet the endless cycle of flowering and decay shows no
evolution or progress except for
that from the primitive to
civilized society. [35]
Ibn Khaldun acknowledges
that there are turning points in
history. He wrote that in his
time, he believed the Black
Death and Mongol invasions
were turning points, as was the
development of Europe.
Ibn Khaldun's observations
and research focused on the
etiology of civilizational decline,
the symptoms and the nature
of the ills from which civilizations die. [36]
Ibn Khaldun's thesis, that
the conquered race will always
emulate the conqueror in every
way, [37] and his theory about
asbyiah (group feeling / party
spirit) and the role it plays in
Bedouin societies is insightful.
The genius of this work is his
study of the science of human
culture, the rise and fall of
empires, Ibn Khaldun termed
this the science of umran
(civilization), and it contains
many pearls of wisdom. His
Introduction is his greatest
legacy, left for all of humanity
and generations to come.

[Center for Islam and Science]

http://www.cis-ca.org/
voices/k/khaldun_mn.htm

21st Issue

April, 2008

Abd al-Rahman b. Muhammad Ibn Khaldun

(1332 - 1406 A.C.E. / 732 - 808 A.H.)

bn Khaldun was born in

Tunis on May 27, 1332 A.C.E.
(Ramadan 1, 732 A.H.). [2]
He received a traditional
education that was typical for
one of his family's rank and
status. He learned first at the
hands of his father, who was a
scholarly person, not involved in
politics like his ancestors. He
memorized the Qur'an by heart,
learned grammar, jurisprudence, hadith, rhetoric,
philology, and
p o e t r y. H e
reached a
c e r t a i n p r o f iciency in these
subjects and
r e c e i v e d
certification in
them. In his
autobiography,
he mentions the
names of the
scholars with
w h o m
h e
studied. [3]
Ibn Khaldun
continued his
studies until the
age of nineteen,
when the great
plague swept
over the lands
from Samarkand
to Mauritania. It
was after this
plague that Ibn
K h a l d u n
received his first
public assignment, marking the start of his
political career, and forever
changing his life. [4]
HIS MAGNUM OPUS,
AL-MUQADDIMAH.
Ibn Khaldun's magnum
opus, al-Muqaddimah can be
divided into three parts. The
first part is the introduction, the

second part is the Universal

History, and the third part is the
history of the Maghrib. In this
section, I concentrate on the
first part. The second part is
similar to the standard histories
of Muslim historians, and there
does not seem to be much
divergence. The third part,
which is concerned with the
history of the Maghrib, is
considered a primary source
work. [27] Much of the informa-

months. [28] It can be divided

into six parts as follows:
1. Human society ethnology
and anthropology
2. Rural civilizations
3. Forms of government and
forms of institutions
4. Society of urban
civilization
5. Economic facts
6. Science and humanity

including history and historiogr a p h y. H e r e b u k e s s o m e

historical claims with a
calculated logic, and discusses
the sciences of his time. He
w r o t e a b o u t a s t r o n o m y,
astrology, and numerology, and
dealt with chemistry, alchemy,
and magic in a scientific way. He
freely offered his opinions and
well documented the facts of
other points of view. His
discussion of tribal societies and
social forces is
t h e m o s t
interesting part
of his thesis. He
illuminated the
world with deep
insight into the
makings and
workings of
kingdoms and
civilizations.
The following quotation
describes his
philosophy of the
historical
process of
civilizations,
including, for
example, the
role of economics.

tion in this section is from Ibn

Khaldun's personal travels and
contacts in the area, and is
replete with first hand accounts.
An additional work that is not
usually considered a part of this
book is an appendix, which is an
autobiography of the author.
The first part, the Introduction, is popularly known as alMuqaddimah; Ibn Khaldun
wrote this in a span of five

This impressive document

is the essence of Ibn Khaldun's
wisdom and hard ear ned
experience. Ibn Khaldun used
his political and first-hand
knowledge of the people of
Maghrib to formulate many of
his ideas. This document
summarizes Ibn Khaldun's
ideas about every field of
knowledge during his day. He
discusses a variety of topics,

in the field
of economics,
Ibn Khaldun
understands
very clearly the
supply and
demand factors which affect
price, the interdependence of
prices and the ripple effects on
successive stages of production
of a fall in prices, and the nature
and function of money and its
tendency to circulate from
country to country according to
demand and the level of activity.
[29]
continued on page 7

22nd Issue May, 2008

TAX ADMINISTRATIONINTERNATIONAL BEST PRACTICES

M Muneer Qureshi
DG(DOT)(DT)

he effectiveness of Tax
Administration is
evidenced by a) the
quantum of tax collection
expressed as a percentage of
GDP; b) the financial cost of tax
collection for every Rupee of tax
brought in; c) the extent of the
tax base; d) the efficacy of fiscal
policy in achieving specific
socio-economic objectives [ like
reducing inequalities in the
distribution of income; bringing
in foreign investment; reduction
in the size of the informal
sector]; e) the workforce
required to assess and collect
tax ; f) the extent of tax compliance [Total Tax Returns filed vis
a vis the total number of
taxpayers borne on record and
g) how equitable is the sectoral
contribution of tax payment.

Benchmarking is a useful way of

comparing standards achieved
by our own tax administration
against specific parameters
referred to above and the
standards set by other administrations. To illustrate, in the
case of tax collected as a
percentage of GDP in Pakistan
,
it is just over 10% whereas it is
much higher in most countries
that have levels of development
broadly similar to Pakistan's viz
Turkey [32.3%] and Malaysia
[24.8%].. Again, in Pakistan the
tax base is 1.3% of population as
against 20% in Malaysia and 10%
in Turkey. In the case of tax
collection cost, in Pakistan it is
0.7% of total revenue collected
which is very low compared to
all developed countries and is
also low compared to most
developing countries. However
this does not translate into
'efficiency' of our tax administration because the 'apparent'
better performance is due to an
abnormally depressed compensation package for tax employees. As regards income
inequalities, Pakistan scores
30.6 on the gini index as against
36.3 for Indonesia, 36.8 for India,
43 for Turkey, and 46.1 for
Malaysia- which means that
income inequalities in Pakistan
are less than that prevalent in
these countries - the lower the
index the lesser is the extent of
inequality. [ The most equitable
income distribution in the world
is in Sweden which is placed at
23 on the gini index. ]
Generally speaking, the
performance of tax administration reflects the quality of it's
workforce, the effectiveness of
fiscal policy and the systems in
place for processing and

collating tax related data.

The simplest way to improve tax
administration would be to
adopt [ and in some cases
'adapt'] international best
practices rather than try and
experiment with different policy
regimens and design everything anew from scratch.
If it is acknowledged that the
better performance of tax
administration is directly
relatable to a significant degree
to the quality of training
imparted and the policies and
systems in place for the
assessment and collection of tax
then it follows that these areas
in Pakistan need to be looked at
critically and it needs to be seen
how far these arrangements
stand comparison with the
arrangements in place in other
countries.
In the case of training arrangements, we see that the more
successful tax administrations

Tax Administration
International Best Practices.
Page - 1
The IBFD connection
Page - 6

IBFD
Inaugural of three week
Train the Trainer Course
Page - 8
with which we can reasonably
compare ourselves have
elaborate training facilities and
well structured programs for
training their tax personnel.
They have dedicated and well
equipped campuses and well
qualified and permanent faculty
in sufficient numbers in all the
different areas that are
germane to the training of a tax
administrator. They also use
specialized methods of instruc
continued on page 2

SEQUENCE OF TRAINING AT DOT(DT), PAKISTAN

Induction on the basis of CSS Exam.
by FPSC (for University Graduates)
MBA Program for Income Tax Group Officers
16 Credit Hours

33 Credit Hours

C.S.A., Lahore
C.T.P
(10 months)

DOT (DT), Lahore

S.T.P
(5 months)

IBA, Karachi
MBA Final Phase
(12 months)

Foundation Courses
(6 weeks)[ English writing
skills, Public Speaking,
Research Methodology, IT]
4 Core Subjects:
(28 weeks, 4x7)
1. National Issues of
Pakistan & Contemporary
issues of Islam
2. Public Admin. &
management.
3. Economics & Public
Finance.
4. Govt. Functioning in
Pakistan &
Office Management.

21 Credit Hours

1. Income Tax Foundation

Course
2. Accountancy Foundation
Course
3. Audit-I
4. Audit-II
5. Information Processing
6. Enforcement
7. Sales Tax Other Acts

1. Analysis of Financial
Statements
Business Maths. & Stat.
Audit
Financial Management
Business Policy/Stragic
Management
6. Business Process Reengineering
7. International Trade
8. Financial Accounting
9. Management Accounting
10. IAS Financial Reporting
Systems
11. Business Laws
12. Public Economics
13. HRM
2.
3.
4.
5.

Capacity Building
Training
(Annual)
BS-19/18/17
at DOT (DT)
Conducted by IBA
2 Cohorts
6 days each
PC, Communication, and
Presentation Skills Module.
Management / Leadership
Skills Module

22nd Issue May, 2008

continued from page 1

Board Malaysia [IRBM] is
carefully planned to inculcate
skills in a phased manner
throughout the career path of
the individual.
A similar situation obtains in
Japan. Extremely well equipped
training institutions staffed by
well qualified faculty and very
well structured programs of
study and evaluation to instill
basic and advanced level skills in
the workforce is the norm.

high at [111] [ as against [12]

faculty].
International best practices
would appear to suggest that in
order to ensure effective
training of tax personnel
adequate numbers of permanent instructors and a well
structured training program are
a necessary requirement in
order to achieve optimum
results.
TRAINING METHODOLOGY

In Pakistan we are woefully

deficient in terms of adequate
permanent teaching faculty at
the training academy for FBR's
direct tax personnel, the
Directorate General of Training
and Research, [DOT(DT)] at
Allama Iqbal Town, Lahore.
DOT(DT) main campus at
Lahore has a faculty of [12] only
-that includes the Director
General and Director; ( [3]
permanent faculty; [7] temporary faculty- regular officers of
the Income Tax Group and
PRAL temporarily posted at
DOT(DT)-; [2] visiting faculty
from the private sector professional institutions). The
deployment of support staff at
DOT(DT) is disproportionately

How we impart training is

fundamental to it's practical
efficacy in instilling skills in the
workforce. The traditional
'lecture' based training methodology is now being increasingly
supplemented by other methodologies and one very promising
approach is that of 'simulation'
and in Malaysia we find that the
simulation method of imparting
training has shown it's practical
effectiveness in building and
enhancing the skill level of direct
tax personnel.
Simulation seeks to recreate
real life situations in an artificial
class room environment.
Complex scenarios are duplicated using computer program
continued on page 3

FBR induction _ Direct Taxes

Promoted in BS-16 from
Departmental Ranks
as Income Tax Officers

MBA Program for Income Tax Group Officers

Common Training Program

(10 months)
16 credit hours

Exam.

Specialized Training Program

(5 months)
21 credit hours

Specialized Training Program

(5 months)

F.P.O.E. by F.P.S.C.
IBA, Karachi

Employed through FPSC in BS-16,

as Income Tax Officers
for University Graduates

Exam.

MBA Final phase

(12 months)
33 credit hours

Exam.
BS- 20, 19, 18, 17, 16
Short Term Training
Programs

BS- 20, 19, 18, 17, 16

Short Term Training
Programs

BS- 20, 19, 18, 17, 16

Short Term Training
Programs

Short Term
Training
Programs

DOT (DT),
Lahore

Civil Services
Academy,
Lahore

Employed through F.P.S.C. in BS -17,

after passing C.S.S. Exam.
for University Graduates

DOT (DT)

he May issue of the DOT

Gazette coincides with
the swirling heat waves
sweeping across the country
and the blazing sunlight. If the
extremity of weather is not
enough to test human endurance, add to this the pressure of
attaining budgetary targets
towards the end of each financial
year. Hence the job of a tax
collector is never an easy one!!
The preoccupation of most
tax collectors at the end of
financial year 2008 with achieving the desired targets is thus
understandable. The
Directorate and its sub offices at
Islamabad and Karachi had to
postpone week long training
modules on Effective
Monitoring & Collection of
Withholding Taxes to be
initiated simultaneously at all of
these venues due to reasons
cited above by the field offices.
This module is based upon
practical aspects of monitoring
of withholding taxes using case
laws and hands on training on
e-portal. It has been decided to
postpone this training to July
2008 to derive maximum utility
from this module.
In the meantime the Audit
wing Federal Board of Revenue
(FBR), led by Member Audit Mr.
Abdur Razzaq has decided to
organize a standardized
training program for all officers
posted in the Audit Wing
through out the country.
In the first phase a group of
thirty (30) officers from the
Income Tax and Sales Tax
groups shall be trained to act as
Trainers for future training
modules. Commencing from
28th April 2008, this training
module for co-trainers shall be
conducted by PAC (Professionals' Academy of Commerce) at
DOT Campus, Lahore. The
module is based upon discussions, case studies especially
developed for FBR personnel,
industrial visits etc.

tion like simulation learning to

reinforce the classroom
teaching. Furthermore, they
have also introduced automation in a big way.
Malaysia is one country that has
received a lot of attention in
Pakistan because of the rapid
strides that it has made in
economic development
generally and in improving tax
administration particularly. It
set up it's training academy, the
Malaysian Tax Academy (MTA)
in 1995 on a sprawling [15.10
hectares] acres campus and
today (march 2008) it has a
permanent faculty [full time
teaching professionals especially recruited for the purpose]
of
[100] in
Management
studies, International &
Research studies, Taxation
studies, Information Technology
and e-learning . Besides the
permanent faculty there are [92]
support personnel [
Administrative Staff [30] ;
Logistic, domestic, maintenance & security [62] ]. The
training regimen devised for
specialist career professionals
inducted into the workforce not
as generalists through a general
civil service exam but recruited
separately by Internal Revenue

22nd Issue May, 2008

continued from page 2

ming and information technology and trainees are then placed
in this abstracted and simplified
'virtual world' - as opposed to
the very complex real worldand asked to make decisions
given different variations of the
basic theme in a particular area
in which training is being
imparted.
At the heart of the simulation
methodology is a dedicated
'simulation centre' where the
information technology
essentials are located including
the 'data base' on which the
simulation exercises are to be
based as well as the training
area where the trainees
participate in the simulation
exercise in a 'work group'
environment.
In Malaysia the simulation
technique is being used to
impart instruction in Tax Audit
and Bookkeeping. Tax Audit
simulation training is also
included in the General tax
Administration Course (GTAC)
and the Tax Enforcement
Course both of which include
participants from tax administrations outside Malaysia.
It is proposed that a similar
simulation centre be set up at
DOT(DT) main campus at
Lahore.
Besides simulation learning, e-

learning is also in use in all

major tax jurisdictions. Once
the learning module has been
developed only a PC or laptop is
sufficient to start e-learning and
regular 'coaching' and instruction and elaborate lab facilities
are not required. It is therefore
an economical and effective
training methodology but is not
a substitute for classroom
instruction through lectures or
simulation learning in a lab
environment where such
methodologies are necessary. It
is best used to reinforce training
already given through other
methodologies.

Sequence of Training - Malaysian Tax Academy

Elementary
Elementary
Level
Level

1 to 3 years from
appointment
Induction course
Basic taxation course
Basic management
course

Organization Chart, N.T.C., Japan

Research
Research
Department
Department
Tax Museum
Tax Museum

Wako Campus
Wako Campus

Executive
Executive
Director

Education
Education
Department I
Department I
Education
Education
Department II
Department II

President
President

Campus office
Campus office

Vice
Vice
President
President

Training Centers in charge of

Training Centers in charge of
all Primary Courses and the
all Primary Courses and the
Basic Training for Beginners
Basic Training for Beginners
(3 centers)
(3 centers)
Tokyo, Nagoya, Osaka

12 Regional
12 Regional
Training Centers
Training Centers

Accounting principals

and concept
Principals & rationale to
decision made under
Malaysian & other
countries law cases
Income Tax Act 1969

problems posed by manual

systems is the use of business
process reengineering and
information technology to study
work processes, eliminate
redundant processes, optimize
the work cycle in processes
deemed most important and
useful to achieving the task in
hand and then put information
technology to use to speed up
the work cycle and manipulate
vast amounts of data with
complete accuracy.
3) In the case of I.T. Systems, the
rule of thumb is to adopt a fully
integrated system that has a
proven record of effectiveness.
Attempts at experimentation
and development of a 'new'
system from scratch on an adhoc basis should be avoided as
they are usually counter
productive and expensive in
terms of time and financial
resources and only delay the
introduction of new technology
and systems.
4) The most advanced I.T. based
system in the world in the area
of taxation is in the United
States. Well over 100 million tax
returns are processed electronically and data appended
thereon matched with that
available on a comprehensive
data base. Any mismatch
automatically throws up a red
flag and is then available for
detailed scrutiny and evaluation. However every red flag

1) Manual procedures to collect,

collate and disseminate tax data
are inimical to efficiency as they
are slow, cumbersome and
prone to error, besides being
vulnerable to manipulation with
ulterior motive. The risk
increases directly with the
increase in the scale of operations undertaken and the
complexity of the task in hand.
2) An effective solution to the

Central
Central
Institute
Institute

3 to 10 years from
appointment
Advance Tax Course:

Specialize Training
PLAS
PULADIT
PULATEM
BPO

I N F O R M A T I O N &
COMMUNICATIONS
TECHNOLOGY AS 'FORCE
MULTIPLIER'
The United States of America as
model.

Kasumigaseki
Kasumigaseki
office

Intermediate
Intermediate
Level
Level

Training Centers in charge of

Training Centers in charge of
all Course in the Comprehensive
all Course in the Comprehensive
Training Program (5 centres)
Training Program (5 centres)
Sapporo, Sendal, Kanto Shinetsu
Sapporo, Sendal, Kanto Shinetsu
Hiroshima, Kumamoto
Hiroshima, Kumamoto
Training Centers in charge of
Training Centers in charge of
Courses IV of Comprehensive
Courses IV of Comprehensive
Training Program (4 centers)
Training Program (4 centers)
Kanazawa, Takamatsu, Fukuoka
Kanazawa, Takamatsu, Fukuoka
Okinawa
Okinawa

Advance //
Advance
Specialist
Specialist
Level
Level
More than 10 years
Transfer Pricing
Forensic Computer
Criminal Investigation
Advance Auditing
Advance Stamp Duty
Higher Level financial
& management skills

Transaction
Level

5 to 2 years before
retirement
Psychological counseling
& planning for retirement
Employments Dividend Fund
responsibilities towards
emoployees retirement
Nutrition & healthcare
management
Financial & investment
Management
Business opportunities &
second career after retirement

does not necessarily lead to a

taxpayers audit.
5) The selection of taxpayers
cases for audit is an art in itself.
The random method of selection
is now thoroughly discredited as
it is statistically heavily biased
in favor of those cases that are
most numerous
which are
invariably not the type of cases
that are expected to be most
fruitful in terms of the possibilities of realization of additional
tax revenue over and above that
declared along with the return
of Income filed.
6) The method of choice for case
selection for audit is parametric
selection. However the identification of the parameters is
problematic and requires great
deal of expertise in economics,
tax law and accounts. Once the
parameters are identified the
next task is to develop a
mathematical equation in which
the parameters identified are
placed and an algorithm is then
developed to search the
taxpayer data base to pick up
cases in conformity with the
parameters identified. The
required number of cases is
then short listed and notified for
audit.
7) The United States employs
top flight economists, financial
experts and mathematicians to
identify parameters and

continued on page 4

22nd Issue May, 2008

continued from page 3

This was not an 'integrated' all
Pakistan Report even for tax
collection.
10) The Tax Management
System (TMS) developed by
CBR's BPR Team and PRAL in
2006 and it's subsequent alleged
improved variant 'Mahasil'
developed in 2007-08 have been
praised as FBR's automation
solution in the direct tax area.
However by now the realization
appears to have sunk in that
both TMS and Mahasil are
partial ad-hoc solutions that are
not part of a fully Integrated
ICT System for the FBR
11) Unlike Pakistan, the Tax
Deptt in Turkey has put in place
a fully integrated system
basically modeled on the U S
IRS system adapted for it's own
use. The result has been a
quantum jump in efficiency.
Today 70% of the total Returns
of Income- not merely the
corporate Returns- filed in
Turkey are through e-channel
and the tax base has almost [7]
million taxpayers.
Furthermore, they are fast
moving towards making a
'paper less office' a practical
reality and are already saving a

Sequence of Training at the National Tax College, Japan

Those employed through National
Tax Expert Service Examination

(High School graduates)

(University graduates)

Primary Course (1 year)

Work experience (1 year)

Basic Training for Beginners

Work experience

Basic Training
(4 months)

Exam

Work experience (2 year)

Advanced Course I (1 year)

Exam

Advanced Course II (7 months)

Selection

Selection

International Tax Seminar

Basic Course

International Tax Seminar

Advanced Course

(2 months)

(4 months)

Specialized Training

Comprehensive Training

Courses based on Work

Accounting

Tax accounting

English I, II

huge amount of expenditure by

completely eliminating paper
work entirely in many areas.
12) If Turkey can show such
impressive results with I.T. and

Research Course
(15 months)

Short Term
Training
Programs

Central Institute

(a minimum of 7 years)

Long -Term Programs

(3 months)

Comprehensive
Training Courses

Regional
Training Centers

Those employed through the Principal

Classes III Entrance Examination (Taxation)

Central Institute
& Regional Training Courses

develop the equation referred to

supra. This pool of experts
remains anonymous and the
equation that is finally to be
adopted is assigned a very high
level of secrecy [ level 3, U S
Deptt of Defense ].
8) At first glance it might appear
odd that the system and
procedures used by the United
States are recommended to be
used in Pakistan. However it is
my very carefully considered
opinion that when it comes to
I n f o r m a t i o n a n d
Communications Technology
Systems only the best systems
are good enough and it would be
a grievous mistake to adopt a
second best system [ or third
best for that matter] on the
ground that for a developing
country [like Pakistan] the best
system is 'too good.' When much
of the technology is in the 'public
domain' and is commercially
available at a competitive price
there is no reason why the same
should not be put to use even in a
'developing economy' like
Pakistan. If any part of the
technology is not in the publicdomain like the latest 'super
computer' for example that may
be put to use to 'crunch' the vast
amount of raw data in the IRS
database, it does not really
matter that much for a country
like Pakistan as we do not have
that much data to deal with and
do not need the latest super
computer. To that extent
therefore we are free to 'adapt'
the U S IRS Model to our own
peculiar needs. Conceptually
however it still has to be an
advanced system modeled on
that used by the US IRS as it is a
proven, fully integrated, very
high performance system.
9) In Pakistan we have had an
approach that is precisely the
opposite of what is stated above.
Although computer based data
processing was first put to use
by CBR in the mid 1970's that
was only an ad hoc solution used
for tabulating local collection of
direct taxes and generating a
periodic tax collection report.

automation there is no reason at

all why we cannot do so too.
adopted is assigned a very high
level of secrecy [ level 3, U S
Deptt of Defense ].

22nd Issue May, 2008

PICTORIAL - INAUGURAL OF THREE WEEKS TRAIN THE TRAINER COURSE

22nd Issue May, 2008

The IBFD connection

I

t was on the initiative of the

Directorate General of
Training and Research
(Direct Taxes) in 2006 that FBR
first took a close look at IBFD
and eventually gave the go
ahead for Full Membership for
DOT(DT) in March 2007 when
the first ever International
Conference of the Heads of
Training Institutions (Direct
Tax) of the Association of Tax
Authorities of Islamic Countries
(ATAIC) took place at this
Directorate General. However,
full membership mean't as
many as five access points to
IBFD's vast on-line data base.

Tw o a c c e s s p o i n t s w e r e
retained by DOT(DT) at it's
main campus at Lahore, two
were allocated to FBR (Members HRM & FR&S) and one
given to DOT(Customs) at
Karachi.
Unlimited access to IBFD's
data base has led to a quantum
jump in FBR's capacity to i)
prepare position papers on
issues of fiscal significance, ii)
make recommendations on
fiscal policy issues and iii) to
carry out research.
The IBFD is an independent
not-for-profit research and
educational foundation,

Mr. M. Muneer Qureshi DG(DOT)(DT), presenting memento to Dr. V. Van Kommer,

Manager, Government Consultancy, Holland, at DOT(DT), Lahore, March 13,2007.

established under the laws of

the Netherlands in 1938 by the
founders of the International
Fiscal Association. Its mission
is to research, develop, process
and disseminate information
and insight in the fields of
international and comparative
taxation and foreign investment
legislation.
The IBFD is completely
independent, both organizationally and financially. This is
essential when providing
objective and unbiased content
on research and educational
projects. The organization's
professional research group
includes multilingual lawyers
and economists from 45

Dr. V. Van Kommer with Mr. Aurobindo Ponniah, at DOT(DT), Lahore, March 13, 2007.

countries, supported by a
worldwide network of correspondents who monitor, report
on and evaluate the latest tax
changes and trends. Research
findings are published in the
IBFD's publications, incorporated in training programs,
included in the IBFD's Library
and Information Center, and on
its Web site and CD-ROMs.
The IBFD has clients in 150
countries, including governments and tax administrations,
international organizations
such as the OECD and
European Commission,
internationally operating
enterprises, accounting and law
firms, international tax
continued on page-7

IBFD
IBFD, Your Portal to Cross-Border Tax Enterprise

22nd Issue May, 2008

continued from page 6

consultants, law and
business schools and libraries,
as well as individuals with
international interests.
The IBFD publishes more
than 5,000 international tax and
social security treaties, as well
as supporting documents.
Based in Amsterdam, the
Netherlands, the IBFD serves
the needs of the world's leading
accounting and law firms
dealing with, amongst other
things, the intricacies of
international treaties on crossborder taxation and social
securities.
The IBFD offers a unique
service to a demanding group of
professionals who need the
right information, at the right
time, in the right form
Since 1938, tax practitioners
from all over the world rely on
the International Bureau of
Fiscal Documentation (IBFD)
for authoritative expertise on
cross-border taxation. IBFD is
the portal to high quality
independent tax research,
international tax information
and education with the aim to
enable customers to do their
work more quickly and effi-

ciently. The wealth of

IBFD's experience
and knowledge is
reflected in the
make-up of the
organization. IBFD
employs over 50
research specialists
and teacher's staff
from around 25
different countries.
IBFD has grown
from a tax documentation centre into a
contemporary online
research institute. It
caters for both the
private and the
public sector. It fulfils
the information
needs of tax advisory
firms, multinational
enterprises,
international organiza- Mr. M. Muneer Qureshi DG(DOT)(DT), with Mr. Aurobindo Ponniah, IBFD Country Head,
Malaysia, at DOT(DT), Lahore, March 14,2007.
tions, ministries of
finance, tax adminisMondriaan and Rietveld remain still influences many art and
trations, universities and other two of its most famous ambassa- design forms. Both 'De Stijl' and
tax practitioners in over 150 dors.
Bauhaus use clarity of form and
countries.
Closely related to the colour to express modernity and
The design used in IBFD's Bauhaus style, this movement timelessness.
brochures, website etc. is was truly international and
(Contributed)
inspired by 'De Stijl', a style started only two decades before
developed in the Netherlands in IBFD was founded in 1938. This
t h e e a r l y 2 0 t h c e n t u r y. style has remained relevant and

DOT (DT) at Pakistan Center for Philanthropy Workshop

at Avari, Lahore on 26th Feb. 2008

DOT (DT) Fairwell luncheon for Mr. Haji Ahmad DG, RTO
Lahore on his Retirement on 24th April, 2008

22nd Issue May, 2008

INAUGURAL OF THREE WEEKS

TRAIN THE TRAINER COURSE
for Master Trainers arranged by Audit Wing FBR in collaboration with DOT(DT) & PAC
by
Amna Faiz Bhatty
Deputy Director

he Income Tax
Ordinance 2001 is based
upon a Universal Self
Assessment Scheme (USAS)
enjoyed by all categories of
taxpayers. Side by side with
USAS, the Ordinance envisages
a strong Audit regime to act as
deterrence against misreporting and understatements of
incomes by taxpayers. Audit
Wing Federal Board of Revenue
(FBR) has therefore assumed
an important role in the post
reform phase in FBR.
This wing headed by
Member Audit Mr. Abdur
Razzaq (himself a Chartered
Accountant) has initiated a
string of efforts aimed at
strengthening the Audit
function in wake of reforms
underway. Last year the Audit
Wing FBR in collaboration with
the Directorate General of
Training & Research (Direct
Taxes), and a professional
Chartered Accountant training
academy organized the first
ever Integrated Audit Training
Program for officers of both

Income Tax and Sales Tax

Groups. A total number of 128
officers were trained in modern
Audit techniques through this
program. The Audit Wing also
spear headed a series of
working sessions resulting in a
National Audit Plan for
introduction of standardization
of steps / procedures involved in
conducting meaningful audits.
Realizing the need to further
develop the skills and capabilities of Audit Officers to conduct
effective audits, the Audit Wing
led by the visionary Member
Audit Mr. Abdur Razzaq has
decided to organize a standardized training program for all
officers posted in the Audit Wing
through out the country.
In the first phase a group of
thirty (30) officers from the
Income Tax and Sales Tax
groups shall be trained to act as
Trainers for future training
modules. The aim of this 3 week
long training is to train in house
FBR personnel as future
trainers. This training module
for co-trainers shall be conducted by PAC (Professionals'
Academy of Commerce) at DOT
Campus, Lahore. The module is
based upon discussions, case
studies especially developed for
FBR personnel, industrial visits
etc. The profile of officers

selected for this training reveals

that they professionally
competent officers having
educational qualifications such
as MBA,
M. Com, Masters in
Economics etc.
In the 2nd phase a massive
training scheme for officers
posted in the Audit Wing of
Income Tax and Sales Tax
Groups shall be launched.
Commencing from July 2008, a
specially designed training
module titled Accounting and
Au d i t Tr a i n i n g s h a l l b e
conducted in different stations
namely Karachi, Lahore,
Islamabad, Multan, Hyderabad,
Pe s h a w a r, G u j r a n w a l a &
Faisalabad. Comprising of 2
weeks long training, these
twenty six (26) especially
tailored courses shall continue
till February 2009 in different
locations. The departmental
trainers trained earlier shall
assist the teaching faculty from
PAC in conducting these
modules.
It is hoped that the ambitious Audit training program
envisaged by the Audit Wing
shall be successful in training
the field audit officers in the
much required skills needed to
conduct result oriented audits.
The Directorate General

remains committed to provide

all the material and logistic
support to the Audit Wing FBR
and PAC for this venture.
The inaugural ceremony of
the Train the Trainers
segment of this training was
held on 28th April in the
Directorate General. Chairman
Federal Board of Revenue Mr.
M. Abdullah Yusuf was to be the
chief guest at the occasion but
he could not attend the ceremony due to his official commitments. However Member
(HRM) Federal Board of
Revenue Mr. Muhammad Talha
and Member (Audit) Federal
Board of Revenue Mr. Abdur
Razzaq graced the occasion
with their presence. In his
speech Mr. Abdur Razzaq
impressed upon the trainee
officers to derive maximum
benefit from the training
module specially designed for
officers of FBR. Director
General DOT Mr. M. Munir
Qureshi in his address highlighted the significance of
effective audits in detection of
concealments and under
statements of incomes. Member
(HRM) Mr. Muhammad Talha
reiterated the need to develop
work force capabilities necessary for audit officers to perform
their jobs efficiently.

24th Issue

July, 2008

The

Federal Budget
_ some loud thinking.

The Federal Budget

_ some loud thinking.
Page - 1

It's clearly a Budget.

It's got a lot of numbers in it.
_ George W Bush.

M Muneer Qureshi
DG(DOT)(DT)

es, for the average

Pakistani, that is precisely
what the Federal [or for
that matter, any of the provincial] Budget(s) are - a lot of
numbers. Things like the size of
'The Public Sector Development
Program,' or the magnitude of
'The Federal Deficit,' or how that
[yawning] deficit is proposed to
be filled in, do not bother him a
great deal. That is not to say of
course that this is a good thing.
It is not. But given the average
Pakistani's multiple distractions and many seemingly
intractable problems, his

'apparent' disinterestedness in
the Budget is quite understandable. Subconsciously however,
he does 'wish' that there would
be 'something' in it for him something 'good' that would give
him some relief from the dead
weight of his many problems especially those that entail a
monetary outlay. This would be
especially true if he were told
that a 'Poor Man's Budget' is
being announced.
There is indeed a pressing
need to 'de-mystify' the budget
document. Understanding the
Budget should not be seen as
'the art of the occult.' The lack of
formal education for many of
our citizens is certainly a
limiting factor in this regard but
still, no justification for ignorance so profound as to render
the budget completely meaningless. Indeed it is the job of
government to 'educate' the
public even when a great chunk
of that public is bereft of the
benefits of formal education of
any significance.
Surprisingly, there are
aspects of the Budget that are
not properly understood even by
those who have had the benefit
of formal education. Here
probably apathy is more to
blame than anything else.
Take for instance, the
'budget deficit.' Many of us
cannot recall when last we came
across a 'balanced budget' [in
Pakistan, that is]. A 'surplus'
federal budget is an even
greater rarity. For most of us
there is something quite sinister

about a budget deficit while a

balanced budget is seen as an
ideal that we have failed to
achieve. A surplus budget is
viewed as the prerogative of
only the most affluent of
societies and hence forever out
of our reach. The economics
behind all this is barely understood even by those who may be
categorized as 'literate.'
Much of our conception of
the budget has to do with the
role we assign it in the economic
life of the nation.
Traditionally, the budget has
been given, what we may call, a
'governmental housekeeping'
role. The federal budget is seen
as performing largely the same
functions as a family's budget.
The government had certain
functions to perform which had
been assigned to it by society:
maintaining order, distributing
dak, running the courts,
providing a monetary system,
regulating commerce between
the provinces and with foreign
countries, maintaining the
armed forces. A responsible
government will ensure that in
carrying out these functions it
would live within it's means, a
feat of good housekeeping
comparable with that of the
prudent household. Taxes were
levied only to provide the
revenue needed for the
performance of the services
which society required. If
special circumstances - most
commonly a war- obliged the
government to borrow funds,
this was to be viewed as an

Workshop on international tax

avoidance & evasion.
Page - 5
Pictorial Post Budget Seminar.
Page - 6
Profile of an Unusual Taxpayer.
Page - 8
unfortunate but temporary
expedient. The sooner the debt
was extinguished, the better. To
produce a surplus at the end of
the fiscal year, which could be
put to use to clear the outstanding debt was viewed with special
appreciation.
This conception of the
budget as a device which
disciplined a government to
strive systematically to live
within it's means, year by year,
took such firm hold of the
popular imagination that the
few professional criticisms
leveled against it were scarcely
heard.
The ground for professional
criticism of this housekeeping
conception of the federal budget
lay in the limited view which it
took of governmental functions.
It conceived the government's
economic role in the same
terms as it would any other
economic unit, private or public:
private business performed
certain economic functions,
such as providing goods;
households performed other
economic functions such as
performing labor services, and

continued on page 3

24th Issue

July, 2008

From the Editor's Pen

he July issue of the

DOT Gazette, being
the 24th issue holds a
special significance for the
Editorial Board as well as for
the readers.
This issue coincides with
the completion of two years of
continuous publication of this
literary effort. The idea of an
informative journal detailing
the training initiatives and
activities of this Directorate
General was conceived by our
Director General, Mr. M Munir
Qureshi. The transformation
of this vision into a reality was a
feat accomplished by the first
editorial board comprising of
the probationary officers of the
33rd STP The editorial board
.
was fortunate to have able
guidance from Dr. Hamid
Ateeq Sarwar (Additional
Director/staff advisor) who
had to his credit a long history
of association with literary
pursuits. The combination of
all these positive factors paved
the way for the launch of the
first issue of DOT Gazette the
August 2006-issue. Officers of
the 33rd STP Mr. M. Ijlall Khan
(the first Chief Editor), Editor
(English) Rafia Illyas Awan
and Aisha Dilshad, Editor
(Urdu) Asam Aftab and Aamir
Ilyas and Azher Jehangir
(Design & Layout) deserve
special mention for their
efforts in materializing this
project into a reality.
DOT Lahore Campus bid

farewell to the officers of 33rd

STP in January 2007 who then
left for IBA Karachi in order to
pursue a degree in Masters in
Tax Management. The January
2007 issue (6th issue) of DOT
Gazette was the last issue
published under the editorship
of 33rd STP The following
.
eighteen (18) issues have been
published under the editorship
of faculty members with
contribution from office of 34th
STP to ensure continuity of the
whole exercise.
This publication overtime
has evolved into a credible
resource house of tax related
discussions and fiscal issues
invading the Pakistan economy.
The google search engine on
internet recognizes this
potential source by making
available articles on issues
such as Universal Self
Assessment Scheme USAS
under Income Tax Ordinance,
2001, Fiscal Evasion etc.
through DOT's Official web site
www.dgtrdt.gov.pk.com
Some other topic covered in
the 24 (twenty four) issues
included The Taxation of
Agricultural Income in
Pa k i s t a n , Ta x a t i o n o f
Business Profits, Direct
Taxation of Income in Pakistan,
1947-2006 an overviews, Tax
B a s e B r o a d e n i n g , Ta x
Reforms and Mindset Change
in Tax Personnel & Taxpayers,
Change Management,
Automating the Taxman's

workplace in Pakistan, Tax

Administrative International
Best Practices etc.
In addition book reviews,
interviews with senior tax
managers in Pakistan,
International tax consultants
such as Dr. V. Van Kommer
( M a n a g e r, G o v e r n m e n t
Consultancy, IBFD Holland), Ms
Yassie Hodges (Consultant
FBR), Mr. Lee M. Niederman
(Tax Administration Advisor,
U.S Department of Treasury)
and economists have also been
regularly featured in some of the
issues.
In a span of just two years
DOT gazette has come to be
recognized as a standard
journal highlighting the taxation
issues confronting the country
as well as the strategy implementation underway through
reforms at FBR to tackle the
economic woes of our times.
Chairman FBR Mr. M. Abdullah
Yusuf, Member FATE Mr. Kawar
Khurshid Butt, Former Member
HRM Mr. Muhammad Tallha
are some of the names having
high praise for this literary
contribution by DOT.
In short the horizon of DOT
Gazette has not been restricted
to only reporting the training
activities centered at DOT
Campus. In the domain of
training the preceding 24
months superceded all past
training records of this institution.
In the year 2006-2007 a total

number of 3052 FBR personnel

were trained through 168 training
programs. Out of these, 72
training courses were organized
for FBR officer through which a
total number of 1671 officer from
BS-16 to BS-19 were trained in
different disciplines. Similarly a
total number of 1381 officials were
trained through 96 different
training programs specially
designed for each category of
officials.
In the year 2007-2008 a total
number of 2643 FBR personnel
were trained through 170 training
programs. Out of these, 39
training courses were organized
for FBR officer through which a
total number of 1188 officers from
BS-16 to BS-19 were trained in
different disciplines. Similarly a
total number of 1455 officials were
trained through 93 different
training programs. It is worthwhile to mention here that during
the current financial year there is
renewed focus on training
programs for officials to be posted
in newly created reform units.
DOT organized crash computer
training courses at its Lahore
campus commencing from
December 2007 which went up till
April 2008 for officials in BS-7 to
BS-16. The purpose of these
trainings was to make the support
staff computer literate for
working productively in automated office environments at
LTU's and RTO's.

24th Issue

July, 2008

continued from page 1

s i m i l a r l y, t h e f e d e r a l
government performed still
other economic functions. The
federal budget was the largest of
all budgets, to be sure but this
was a difference in degree and
not in kind.
Or was it? Was there
something about the government's budget that distinguished it from a regular family
budget or the budget of a
corporate entity engaged in
business? Was there some
special function connected with
it which gave it a purpose other
than the economical provision of
particular services? There was
indeed, said a school of economists, whose minority voice
failed to attract much notice
until the late 1930's, when John
Maynard Keynes became it's
spokesman. Their view gained
ascendancy largely as a
consequence of the Great
Depression, which lingered on
until finally dispelled by
wartime activity, and memories
of which provided the emotional
undertow on which full employment policies rode to legislative
approvals in post-war Western
Europe and North America. The
second stage of budgetary
history was thereby ushered in.
PROSPERITY MADE TO
ORDER
The second-stage school of
economic theorists looked on
the budget as performing not
just one function proper federal
housekeeping - but two. The
second function was to preserve
the economic health of the
nation as a whole. It was the
government's duty, said this
group, to see that the nation
remained prosperous, a duty no
less important than maintaining
law and order and maintaining
courts and other such timehonored governmental
services. The nation's economic
health was the business of the
government because no other
agent or institution could serve

as doctor.
The doctor's instruments
were not only monetary policy making money cheaper to use in
depressions so that businesses
and households would use more
of it, hopefully returning the
nation to prosperity; the
instrument kit of the federal
government as economic doctor
included it's budget as well. In
times of depression, it could
spend more than it took in,
thereby directly putting people
and plants to productive use. It
did not have to wait for businesses and households to
become optimistic enough to
borrow money at lower rates of
interest. It could put money in
their pockets directly by cutting
it's tax cake, or it could itself
spend on a variety of projects, or
it could increase the amount of
money it transferred to people
who could be counted on to
spend it. All these ways would
put the government budget in
the red, but it would increase the
nations economic activity. It
would put people and plants to
work whose services would
otherwise be irretrievably lost.
All very well, said more
traditional economists, but how
long could this go on? How many
times could the medicine be
repeated? If the government
persisted in deficit spending, it's
debt would double, it's credit
would crumble, and it would find
no buyers for it's buyers. Fiscal
responsibility could not be
evaded. The balanced budget
was not a luxury to be dispensed
with under pressure but a
necessity of a solvent government.
BUSINESS 'CYCLES' &
REMEDIAL ACTION BY
GOVERNMENT
The 'discovery' of 'business
cycles' - alternating phases of
'boom' and 'bust' [depression]
provided another 'solution' to
the problem of exercising 'fiscal
responsibility' solely through

the medium of a 'balanced

budget.' The upward phase of
the 'business cycle' brought in
it's wake inflationary pressure
and the governmental prescription for that was to take in more
then it spent and use budget
surpluses to restore economic
normality. On the other hand, in
the downward phase of the
cycle, 'depressed' prices and
economic activity are the
problem and the prescription
for this malady is the opposite spend more than the government takes in and use budget
deficits to bring the economy
back to normal. It was thus not
really necessary to 'balance' the
budget annually on a continuing
basis. Rather, it made much
more sense to balance it over
the period of the business cycle.
Annual balancing was an error
since it ignored the cyclical
rhythm of the nation's health.
Outgo and income could be
matched over an appropriate
span of years, in which the
minuses of some were wiped out
by the pluses of others.
This 'solution' too however
was not really an answer. For
one thing, the nation's needs
seemed to expand with time, so
that the federal budget tended
to rise in good years as well as
bad. For another, the 'cycle' was
really a myth especially in terms
of it's regularity.' And then there
were many 'cycles' - inventory
cycles, building cycles, short
cycles, long waves etc etc.
Which one of these to adopt as a
reference point for initiating
'corrective action' was hugely
problematic. Some other
'explanation' had to be found and
with it a different policy
prescription.
PLANNED BUDGET
DEFICITS
A policy of regular budget
surpluses in good times
matched by budget deficits in
bad times so that the one
cancelled the other over the full

phase of a business cycle though

attractive as a theoretical
proposition was not really a
viable 'answer' to the 'problem.'
For one thing, what precisely
was a 'good year' - when the
budget may be kept in 'balance'
or even in 'surplus?' Casual
observation and hearsay could
obviously not be relied on to
initiate 'corrective measures' in
an 'ad-hoc' manner. And then,
what was to be the 'scale' of
these corrective measures?
Again one needed a much more
rigorous set of criteria to
determine precisely 'how much'
corrective action was called for
to appropriately deal with a
problem properly quantified on
a given scale.
After mulling over the
problem, economists found that
'full employment' came close to
what one could reasonably
expect in a 'good year.' But full
employment did not usually
mean 100 percent employment
of every able bodied (adult) man
and woman making up the
nation's labor force. An English
economist, A.W Philips, ran a
correlation of unemployment
and price levels in England as
far back as 1861 and found that
when unemployment dropped
below 2.5 percent of the labor
force, prices rose. Similar
statistical studies showed that
the ' Philips effect' operated in
the United states as well,
though not in exactly the same
manner - the upward pressure
on prices came earlier than in
England.
Given these parameters the
implication was that if we
wanted to avoid unemployment
and inflation we could do so only
in terms of a marginal trade off
of one for the other. At what
degree of 'full employment'
would the upward pressure on
prices still be tolerable? A
compromise point could be
selected on the 'Philips curve' say a 3 percent rate of unemployment accompanied by a 2

24th Issue

July, 2008

continued from page 3

percent rise in prices, or a 4
percent rate of unemployment
with perhaps only a slight price
creep.
Balance the budget? Of
course, but what budget? The
answer which is now being
given is the full employment
budget. At levels short of full
employment this means
balancing not an actual but a
hypothetical budget, the budget
as it would be if we were
operating at potential GNP This
.
is not a matter of running in the
red in a vague hope that this will
do the economy some good, as
the bloodletting of earlier days
was expected to restore a
patient's health. It is the
incurring of deficits in an
amount which is guided by
calculations of potential GNP
,
which in turn is based on
computations of the level of
acceptable compromise
between unemployment and
price increases.
As recurring budget deficits
add to the national debt there is
a perception that such a
national debt creates a burden
on future generations for the
self gratification of the present.
Aside from failing to grasp that
present gratification was not the
object, but only the removal of a
budget barrier to future
economic progress, those of this
persuasion persisted in
believing that future generations would somehow have to
pay off that larger debt to
someone else. This is certainly
true in the case of the proportion

of the national
debt held
abroad. Other than that
however, future generations will
not have to pay someone else
but only themselves. All will pay
taxes to the government in
varying amounts, and some will
receive interest from the
government on the bonds which
they hold. Some will pay more
and receive less than others,
proportionately, and vice versa,
but what is involved is a
redistribution of the income at
that time and not a transfer
among the generations.
The discussion supra should
clear some of the popular
misconceptions about budget
deficits in general. However one
cannot help but observe that
much of the economics that has
been formulated would appear
to be more applicable to a
'developed economy' like the
United States or Britain and less
so to a 'developing economy' like
ours. Budget deficits in developed countries are taken in
stride because the economic
managers are confident that
given the size and depth of the
formal economy that dwarf's the
size and depth of the informal
sector the residual capability of
the economy to eventually
generate resources sufficient to
offset the consequences of
budget deficits is hugely
significant. This of course is not
so in a developing economy like
Pakistan where the informal
sector may be anywhere
between 35 - 60 percent of the
GDP - if not more. Then again

huge expenditure on 'unproductive' areas, like Defense, means

that if the budget deficit caters
to such areas disproportionately it is of no help to the
economy. The ability of government to mobilize revenues in
developing countries is also
severely restricted. Not that
there is not enough 'income' to
yield the required tax. As
pointed out, a large chunk of the
economy is placed in the
informal sector generating
significant 'income.' But such
income is largely out of reach of
the federal authorities. Tax
administrations in third world
countries generally lack the
expertise required to deal
effectively with the burgeoning
informal economy. To make
matters worse, the formal
economy too makes no meaningful contribution to the federal
exchequer as the woefully
inadequate tax to GDP ratios
bear out so vividly - only 10
percent in the case of Pakistan,
when it ought to be in the region
of 18 - 25 percent at least. As
pointed out, 'ad nauseam,' only
2.2 percent of the population of
165 - 170 million is registered as
taxpayers. This of course
translates into an exceedingly
narrow tax base.
Given executive will,
revenues can and should be
increased dramatically. The
'problem areas' are well known.
The anomalies identified. With
strong executive support a
revamped, modernized and well
trained, I.T. savvy tax adminis-

tration must deal with the

problem 'head on.' There are no
short cuts. Effective legislation
to plug the loop holes has to be a
starting point. Once this is
achieved, progressive expansion of the tax base should follow
and in it's wake, significantly
increased revenues and an
escalation in the tax to GDP
ratio.
Besides the ramifications of
recurring budget deficits what
everyone needs to understand
is that the key to a 'dream'
budget is adequate resources,
which in our particular context,
would be, mosly tax revenue.
All said and done, a 'dream'
budget for me would be that
which can steer the economy
towards full employment. One
budget will not do that in
Pakistan's case. But if resources
enough [ ie taxes] are forthcoming then we will be headed
towards full employment and
successive 'dream' budgets
mobilizing adequate revenues
can take the economy towards
full employment - or very close
to that objective.
The people of Pakistan will
only get what they desire when
they are willing to 'pay' for the
things that they yearn for. This
'payment' is through taxes.
Handouts from foreign sources
will never succeed in making
the economy self sufficient. And
there is only so much that the
country can mobilize through
contracting loans abroad and
the dead weight of such loans is
already daunting.

In a lighter vien.
The budget is like a mythical bean bag. Congress votes
mythical beans into it, then reaches in and tries to pull real
ones out..
_ Will Rogers
The only way you can do that [decrease taxes, balance the
budget, and increase military spending] is with mirrors...
_ John B. Anderson
The defense budget is more than a piggy bank for people
who want to get busy beating swords into pork barrels.
_ George H. W. Bush

As fighting in Iraq intensifies, President Bush delivered his

supplemental war budget to Congress. The money will
cover 30 days of fighting, then well be sent one war every
other month until we cancel our subscription.
_ Craig Kilborn
A billion here, a billion there sooner or laterit adds up to
real money.
_ Senator Everett Dirksen

24th Issue

July, 2008

WORKSHOP ON INTERNATIONAL TAX AVOIDANCE & EVASION

HELD IN MEXICO CITY, MEXICO FROM 2nd 6th JUNE, 2008

he Organization of
Economic Cooperation &
Development (OECD)
held a 5-days workshop on
International Tax Avoidance &
Evasion in Mexico from 2nd -6th
June 2008. The delegation from
Pakistan included Mr. Shahid
Bashir, Director DOT, Mr. Faiz
Illahi Memon, Additional
Commissioner of Income Tax,
RTO Karachi and Mr. Shabihul-Aijaz, Deputy Commissioner
of Income Tax (LTU Lahore).
The focus of this workshop
was to examine some common
techniques used by enterprises
and individuals to evade and
avoid taxes. The emphasis was
on tax avoidance and evasion in
international transactions and
cross border situations. The
workshop specially dealt with
avoidance and evasion using
Tax Haven jurisdictions,
preferential tax regimes,
transfer pricing techniques,
thin capitalization, cross border
leasing arrangements, hybrid
structures and other financial
market innovations.
The forum also provided an
opportunity to the participants
to look at common responses
introduced by government in
the domestic laws, international
and national tax treaties to
counter inter national tax
avoidance and evasion. The
common responses discussed
in the workshop were as under:

- Improving access to bank

and other information.
- General antiavoidance/
anti-abuse rules
- Controlled foreign
company and foreign
investment fund
legislation
- The arm's length principle
- Rules addressing treaty
shopping
- Thin capitalization rules
- Rules to deal with certain
financial market
innovations, and
- Effective international
exchange of information.
The panel of experts
addressing the workshop
included Mr. Karsten Fluchter,
Event Leader (OECD,
Ms.Maria Garcia, Program
Manager ( Internal Revenue
Service, Ecuador), Mr. Carlos
Serrano, Coordinator (Spain)
a n d M r. J o r g e L i b r e r o s
Calderon (Mexico).
List of countries participating in the workshop included
Argentina, Chile, Ecuador,
Guatemala, Panama,
Venezuela, Morocco, Jamaica,
Pakistan and Mexico. Director
DOT, Mr. Shahid Bashir in his
presentation discussed in detail
tax evasion and avoidance
provisions introduced in
Pakistan through the Income
Ta x O r d i n a n c e , 2 0 0 1 . H e
explained to the participations

Pakistani delegates with Instructors

Pakistani delegates at the workshop

that the legislative frame-work
applicable in Pakistan until the
year 2002 did not include
provisions to ensure proper
incidence of taxation on nonresident and foreign controlled
entities. With the introduction of
Income Tax Ordinance, 2001
provisions relating to transfer
pricing, arm's length transaction, thin capitalization and the
concept of permanent establishment (PE) were made part of
local taxation legislation. He
further explained the role of
double taxation treaties entered
with 54 countries by the
Pa k i s t a n G o v e r n m e n t t o
encourage international trade
and commerce.
Mr. Shahid Bashir also
highlighted the infrastructure
and function of the Directorate
General Training & Research
[Direct Taxes], Lahore in
providing quality training to the

workforce of Federal Board of

Revenue , Pakistan. He invited
the participants to utilize the
training infrastructure and
facilities available at DOT for
o r g a n i z i n g i n t e r- c o u n t r y
taxation seminars and workshops. He specially invited the
organizer of the event i.e. OECD
to DOT for exploring avenues
for future international
seminars.
This seminar was a great
success in bringing together
members OECD countries for
constructive debate and
discussions on important issues
such as international tax
avoidance and evasion. It also
gave the Pakistani delegation an
opportunity to present to the
participants an over-view of
large scale reforms underway
at FBR for improving the tax
collection machinery of the
country.

Mr. Shahid Bashir Addressing the participants

24th Issue

July, 2008

24th Issue

July, 2008

24th Issue

July, 2008

Profile of an Unusual Taxpayer

1970 as a Grade-17 officer

with starting salary of
Rs.450, per month. He
continued to serve the
government for 25 years
and his terminal salary at
the time of seeking premature retirement in 1995
was around Rs.15,000, per
month. Assuming that his
average monthly emoluments throughout his
period of service were
around Rs.8,000 (a generous assumption), the total
emoluments received by
M r. J a v e d M a s u d him from government
joined the Civil Service during his entire service
(Income Tax Group) in do not exceed Rs.2.5 m.
skeptic once
defined a taxpayer
as one who works
for the government
without having to appear
for the Civil Ser vice
Examination. Again,
according to popular
perception, public functionaries lead luxurious
lives at the expense of the
poor taxpayers. It is in
this background that Mr.
Masud's story is unusual
and interesting.

After obtaining premature retirement, Mr.

Masud became the chief
executive of a private
company (Pakistan Credit
Rating Agency Limited)
and worked in that capacity till the end of 2007.
During this period, the
total direct income tax
paid by him to the government amounts to
Rs.14.5m*. This means
that what Mr. Masud
received from the government in 25 years, he paid
back almost 6 times as
much to the government.

In other words, not only

did he devote the best
years of his life to the
government without any
compensation, he has
paid a substantial amount
merely for the privilege of
carrying the honorific title
of a 'retired government
servant'.
Here is a person
belonging to our service
who should make us all
proud and should be
considered as role model
for the taxpaying public.

Mr. Javed Masud graduated from Government College, Lahore and

obtained his Master's Degree in Economics from Punjab University in 1967. He
remained an average student throughout this period. However, the only point of
distinction was perhaps his varied interests: dramatics, debating and sports. He
was a member of Government College Tennis Team in 1962-63 and captain of
the Punjab University Squash Team in 1967. During his period of government
service, he got the opportunity to study abroad and obtained Master's Degree in
Finance & Economics from Boston University in 1977 (passing with distinction).
While his stay in the Income Tax Department covered only the initial three
years of service, he acquired a very diverse and enriching experience by
serving in different economic ministries of the Federal Government (Finance,
Planning, Production). He also served on the faculty of Civil Service Academy
for three years. Mr. Masud held a diplomatic assignment for four years as a Consul General / Commercial
Counsellor in South Korea. Given his strong background in Finance, he was also deputed to a DFI
(Bankers Equity Limited) for four years as SEVP in the regional office in Lahore. Mr. Masud's last
assignment in government was Member of the erstwhile Corporate Law Authority (a Grade-21 position).
Mr. Masud has also distinguished himself through his various publications and papers published and
presented, both locally and internationally. From time to time, he also worked as an international
consultant with organizations like the World Bank and IFC. He has been invited as a guest speaker at
various local training institutes including the NDC, the Administrative Staff College and NIPA, Lahore.
Mr. Masud is currently leading a blissful retired life but remains a Civil Society activist. He is also the
Chairman of IGI Finex Securities Limited, member of the Board of Advisors for the Centre for Public Policy
& Governance (F.C. College, Lahore). He continues to be a member of the Punjab Finance Commission.