EVERY year, in the month of May, a familiar ritual begins to play itself out. With the approach of the end of the fiscal year, the tax authorities begin to ramp up their efforts to extract as much revenue from as many parties as they possibly can. They use tactics such as holding up refunds, blocking company accounts against frivolous tax notices that everyone knows will be eventually overturned, and serving up equally petty orders in pending disputes that will inevitably be shot down in appeal. But for the moment, till the announcement of the budget speech and the compilation of the fiscal numbers, every effort will be made in May to show as much performance as possible, with the knowledge that later these orders and encumbrances placed on accounts will have to be reversed. But ‘later’ is another matter.

This time around, a new ingredient appears to be asserting itself. The provincial revenue authorities, also under pressure to increase revenues, appear to be jumping in as well. In Sindh, but particularly in Punjab, where the majority of big companies are headquartered, outlandishly large tax bills are beginning to arrive in the offices of big corporate enterprises. One is left wondering whether the timing is coincidental as it is right at the end of the fiscal year when the revenue performance of each of the authorities is going to be tallied up. This rhythm has become so familiar to many enterprises that they begin preparing for it months in advance. Sometimes the resultant battle turns nasty, with offices being sealed and accounts being frozen, but most of the time it is negotiated between the parties and a settlement amount agreed upon. Much of the country’s tax effort is, in fact, negotiated, showing the fundamental weakness of the tax authorities to conduct proper assessments. This is a sad ritual, and the fact that the notices are served ferociously but later quietly overturned shows that many of them are meant only as a secondary revenue exercise, albeit creating a temporary inflow for the state. On top of the more routine delays in refunds, which severely hamper the liquidity position of firms, this annual exercise speaks to the broad dysfunctions that plague our tax machinery. Inability to assess incomes and the misuse of coercive powers given to the tax bureaucracy create the stage for this theatre of the absurd.

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“What we need in this country today is more courage and more belief in the things that we have.”- Thomas J. Watson