Contents

S No Title Page
1 Interview 1
2 ‘Train the Trainers.’ 3
3 Workshop on developing a unified training strategy 3
4 Performance of DOT in 2005-06 4
5 The Underground Economy in Pakistan 4
6 On Campus 5
7 Book Review 6
8 What is ……………..the Laffer Curve 6
9 Interview 9
10 31st STP- Passing Out Ceremony 11
11 Pakistan’s Tax Conundrum 14
12 DR Ishrat Hussain Visit’s DOT 17
13 CBR’s New Model Army 18
14 The skewed distribution of Income in Pakistan 20
15 Article- Taxation of Business Profits 23
16 Book Review 27
17 Latest Int’l Fiscal Research 28
18 Article- Message of the Quran 29
19 3rd ATAIC Technical Conference 31
20 Chairman CBR visits DOT 35
21 Article- The Design of Tax Incentives 36
22 33rd STP- Passing Out Ceremony 39
23 DOT Report Card, 2006 41
24 DOT TimeLine - 2006 42
25 Direct Taxation of Income in Pakistan, 1947 – 2006 – an overview 45
26 CBR’s Integrity Management Statement 49
27 Article- ‘Ibn e Khaldun.’ 49
28 Yassie Hodges- CBR Consultant 51
29 ‘Kenwood Green’- A DOT Landmark 52
30 Tax Incidence 55
31 Integrated Audit Training 57
32 Capacity Building & Staff Training Program 58
33 Preparation for 1st ATAIC Conference of Heads of (Direct Tax) Training 59
Institutions

34 Article- The taxation of agricultural income in Pakistan 60

35 A trip down memory lane 62
36 Inauguration of DOT(DT) Gymnasium 66
37 1st ATAIC Conference of Heads of (Direct Tax) Training Institutions 67
38 Interview 75
39 A trip dow memory lane 77
40 Interview- 80
41 Tax Awareness Workshop 81
42 Article- Tax Base Broadening 83
43 Interview 87
44 DOT performance report 90
45 Reflections o n the Federal Budget 2007-08 91
46 2006-07 Highlights 92
47 Article- ‘Moonsplit.’ 96
48 Post-Budget Seminar 2006-07 97
49 Tax Reform and mindset change 99
50 Computer related staff training 101
51 IBFD Training Course 102
52 2nd National Audit Working Session 103
53 Inaugural of IBA led Capacity Building 104
54 34th STP_ Inaugural 106
55 Developing Strategic Change Leadership 107
56 Software presentation at DOT(DT) 109
57 60th Independence Day Celebrations at DOT(DT) 110
58 Chairman’s address to participants of IBA Capacity Building program 112
59 Islamic Calligraphy 114
60 New initiatives to upgrade FBR’s Training Establishments 115
61 Technology as ‘Force Multiplier.’ 120
62 Imam Bokhari 122
63 Change Management 123
64 Relational Database Model 124
65 IBA led Capacity Building Program 128
66 Organizational Development & Change Management 129
67 Training activities at DOT(DT) Lahore, July – Dec 2007 130
68 Training Methodologies at DOT(DT) 131
69 ‘Role Play’ as a training aid. 133
70 ‘Mahasil.’- Technology as Force Multiplier. 135
71 Probationers country study tour 136
72 Message from Member ( Legal), FBR 138
73 DOT(DT) 139
74 34th STP pass out 143
75 Messages for the probationers of the 34th STP 146
76 Automating the taxman’s workplace 147
77 Article- ‘Muslims and the renaissance.’ 150
78 Visit of Member (FATE), FBR to DOT(DT), Lahore. 152
79 Training initiatives for support staff at DOT(DT) 154
80 Employees Workshop 2008 155
81 Looking to the future 160
82 I.T Learning at DOT(DT) 162
83 Asymmetric initiatives for revenue mobilization 163
84 Workshop on Audit of Direct Taxes 166
85 Ibn e Khaldun 170
86 Int’l best practices in Tax Administration 171
87 ‘Train the trainer’ course at DOT(DT), Lahore. 175
88 The IBFD Connection 176
89 Article- The ‘t2gdp’ enigma 179
90 Interview 183
91 Mid-Career Management Course 184
92 The Federal Budget – some loud thinking 187
93 From the Editor’s pen 188
94 DOT(DT) Faculty participation at Int’l Workshop in Mexico 191
 DOTGazette
RESEARCHARTICLE generated by tariff protection,
monopoly, inflation etc. The
high marginal rate emerges in

Taxation of Business Profits such situations usually through

the interplay of multiple tax
rates on income, principally
through an excess profits tax
Realignment of tax burdens among different business entities which is levied in addition to
the income tax. The need for

D
ifferent Legal en- varying tax burdens for given greatly the design of optimal such a levy can arise due to
tities are treated levels of income. In addition the marginal rates of taxation-opti- new revenue needs such as for
variously by cur- corporate form is further differ- mal in a manner as to balance special purpose development
rent tax law. entiated between Private and revenue yield with equity. The activity or even during
Thus the propri- Public limited companies. Also, objective ought to be to identify wartime. In the economic de-
etory (Individual)/Association Banking Companies are taxed a "small business" not on the velopment context, high mar-
of Persons [AOP] /URF/HUF differently. basis of arbitrarily contrived ginal rates can be theoretically
and the corporate forms of In Pakistan, the present legal form but on the basis of in- justified on the ground that
business organization suffer treatment of different legal come size and ownership char- they would encourage employ-
forms appears not to have been acteristics. ers with abnormally high in-
designed to differentiate the Implications of a High Mar- come to lower prices for their
In this Issue tax load according to any ginal Rate of Tax: products or, in the alternate, to
1 Research Article : clearly discernible criteria. In order to appreciate all raise wages. Thus where the
Taxation of Business Profits A uniform system for taxing facets of the problem it should tax takes a high proportion of
4 Book Review : business enterprise with spe-
cific relief features for small
be recognized that there can be
situations in which a high mar-
each additional unit of earning,
deductible expenditures are
Aesthetics of Incompleteness
business, irrespective of the ginal rate of tax can serve spe- cheap and additional net earn-
5 Latest Fiscal Research legal form of the business, cific fiscal objectives such as ings have little appeal.
6 Message of the Quran would facili- when it is the intention to mop Furthermore, a high mar-
Patron tate up supernormal earnings ginal rate can serve as a sym-
M. Muneer Qureshi of business bol of the government’s resolve
(Director General) to take excessive profits
>>>>
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.
>>>>
 DotGazette
EDITORIAL
T
he November issue
of DOT Gazette, like
its preceding issues,
not only attempts to
highlight the events at DOT
during the month but also at-
tempts to provide an impetus
to the thoughts of the readers,
acting as a catalyst in an at-
tempt to explore new vistas of
knowledge and wisdom.
With TMS and case studies
of 33rd STP going in full
swing, the training has en-
tered 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 indica-
tive of our endeavor to ap-
prise 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 advan-
tages of a high marginal tax
rate in certain situations, it is
also a fact that in a peacetime
economy dedicated to expan-
sion and troubled by inflation-
ary pressures, a high marginal
tax rate injects evident in-
equities, incentives to waste
cheap tax currency and disin-
centives to growth and effi-
ciency. 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 applica-
tion of the progressive ability to
pay principle that encourages
fragmentation and discourages
the growth of business enter-
prises.
Tax Rate Structure in Pak-
istan- An Overview:
In Pakistan the corporate
sector has been characterized
by three distinct types of com-
panies- 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 Com-
panies has become evident and
Tax Year 2007 will see all dis-
tinctions removed and all three
'types' will be taxed at 35% flat.
Besides the corporate tax-
payer, 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 mini-
mum 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 cate-
gory of taxpayer is not cited in
the Income Tax Ordinance
2001. Interestingly, Firms com-
prising Professionals have
been exempted from levy of
Super Tax.
The [non-salaried] Individual
taxpayer [as well as AOP/ URF
/HUF /] has suffered levy of in-
come 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 cor-
porate 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 prefer-
ential treatment by allowing for
either taxation at a lower tax
rate or a lump sum 'ad hoc' tax
deduction and such preferen-
tial 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 thresh-
old limit, with limited capital in-
vestment and located in certain
specified areas, were taxed at
an adhoc lump sum amount of
Income Tax. No Return of In-
come was required to be filed
and normal law assessment
procedure was dispensed with
and qualifying businesses -
general small shopkeepers-
could deposit due tax as noti-
fied by CBR in the Post Office.
This Scheme was discontinued

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 ob-
vious merits from the stand-
point of simplicity and
consequent administrative effi-
cacy. Nevertheless, the fact re-
mains 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 struc-
ture and at the same time re-
duce the burden of taxation. A
true unitary system would
mean doing away with imputa-
tion of corporate income. This
could then mean loss of signifi-
cant revenue from this area. In
fact, for private limited compa-
nies this is the only area of rev-
enue significance as far as the
exchequer is concerned, as in
Pakistan, only nominal corpo-
rate profits are disclosed by the
Pvt Ltd Co almost "as a rule."
(Because the company has a
separate juristic entity it is rec-
ognized as a 'person' apart
from its directors. Thus the
tax, under the present system,
falls on both the company and
its directors. Piercing the 'cor-
porate 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 di-
rectors merges into that of the
company. It is the company
that in the final analysis pays
the tax both for itself and its di-
rectors. In this view of the mat-
ter, imputation of its income
subjects the Company to multi-
ple rates of taxation. A true
unitary flat rate system would
therefore necessitate doing
away with imputation). The
corporate ability to retain earn-
ings 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 supernor-
mal earnings of the larger en-
terprises would not be mopped
up by government which in the
long run would exacerbate in-
DotGazette
equalities in income distribu-
tion. 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 enter-
prises 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 tomor-
row.
While the need to accord
some sort of relief for the small
business enterprise is a gener-
ally accepted proposition, yet it
has been argued that there
does not really exist a good
economic case for the prefer-
ential treatment of small busi-
ness. It is pointed out that the
truly small business is eco-
nomically inefficient and it
does not make much sense to
tax subsidize the inefficient. It
is also pointed out that small
business already enjoys, di-
rectly 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 war-
rants 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 subsi-
dies.
The countervailing argu-
ments 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 busi-
ness depends heavily on inter-
nal funds for growth, some tax
forbearance is essential. Fur-
thermore, it may not be at all
practical to attempt identifica-
tion of "New business" vis a vis
the small business. An existing
small business in existence for
a number of years could con-
ceivably become a new busi-
ness through change in
ownership. Clearly this is not
the sort of "new business" that
the statute would like to sup-
port 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 ded-
ication of Amina Hassan , the writings might have been lost for good.
Reviewed by: M Muneer Qureshi
T
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 impor-
tantly, 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 ex-
ample 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 refer-
ring to some of the titles cited in
the books' 'Contents:' -
-Darwin and collapse of
judeao Christian world view, Po-
litical cannibalism, The poetry
of primitivism, Secular sermons
from history, Of Tolstoy's Rus-
sia, Of Machiavellianism, The
life and love life of Dickens, Aes-
thetics of incompleteness, Wis-
dom without pillars, Of
absurdity in profundity,
Anatomy as destiny, Public
squalor, private affluence, A
farewell to book culture, Ghosts-
real and metaphors, So spake
Zarathusthra, Saints and un-
saintly 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 ani-
mal circus, Of things falling
apart.
The English language plays
an increasingly important role
in the 21st century. It is the lan-
guage 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 pre-
ferred language in education es-
pecially 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 bil-
lion human beings on this planet
today and of these about 400 mil-
lion can fairly be said to be "na-
tive speakers" of the English
language. Yet English is today
widely accepted as an "interna-
tional language." What is more,
many of the non native English
speakers - and writers- have ac-
quired a proficiency in the use of
the language that exceeds that
of the native English. Who has
not heard of Joseph Conrad au-
thor of 'Lord Jim', 'Nostromo' &
'Heart of darkness' - among
many other masterpieces- who
could not even speak English till
age 21 and yet is today acknowl-
edged as an extraordinary tal-
ent 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 Con-
rad. But he is not far behind. I
am sure that had he truly ap-
plied himself seriously to writ-
ing as a career he would today
be in the English Language Hall
of Fame.
The autobiographical section
of the book is a treat. Though in-
complete, it is a snapshot that is
not easily forgotten. I was espe-
cially intrigued because going
through the autobiography, I
had a sense of 'déjà 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, La-
hore Cantt- especially the ac-
count of life in England in the
early fifties and the [return] voy-
age 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 tal-
ent at work and had it not been
for the dedication of Amina Has-
san , the writings might have
been lost for good.
Notwithstanding his huge tal-
ent, Shoaib Bin Hassan is
clearly a humble man, self effac-
ing 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 suc-
ceeded 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 obvi-
ously been published over an ex-
tended timeframe in various
newspapers / magazines but
these are not expressly identi-
fied and no dates are cited. I
hope this will be remedied in a
subsequent edition of this book
as a 'Time Line' is very impor-
tant 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 Has-
san!
 DotGazette
THE LATESTINTERNATIONAL FISCAL RESEARCH
Taxation and the Evolution Tax Structure in Developing other policies would sensibly be high-tax one, and if the tax is
used to offset these tax distor- the statutory or effective aver-
of Aggregate Corporate Countries: Many Puzzles tions. Tariff protection for capi- age one. There is also evidence
Ownership Concentration and a Possible Explanation tal-intensive firms is one. that countries' own tax rates
Inflation, imposing a tax on the are reduced by liberalization of
Mihir A. Desai, Dhammika Roger Gordon and We Li cash economy is another exchange controls in other
Dharmapala, and Winnie NBER Working Paper No. countries.
Fung NBER Working Paper 11267 April 2005,
No. 11469 June 2005 Capital Account On the Undesirability of
Liberalization and Commodity Taxation Even
ABSTRACT ABSTRACT Corporate Taxes When Income Taxation is
Michael Devereux, Ben Lock- Not Optimal

L T
egal rules, politics ax policies seen in
and behavioral fac- developing coun- wood and Michela Redoano Louis Kaplow
tors have all been tries are puzzling Department of Economics, NBER Working Paper No.
emphasized as ex- on many dimen- University of Warwick & 10407 March 2004
planatory factors in analyses sions. To begin with, CSGR, University of Warwick
of the determinants of the con- revenue/GDP is surprisingly CSGR Working Paper No. ABSTRACT
119/03 First version: July 2002

centration of corporate owner-
ship and stock market
participation. An extension of
standard tax clientele argu-
ments demonstrates that
small compared with that in de-
veloped economies. Taxes on
labor income play a minor role.
Taxes on consumption are im-
portant, but effective tax rates
A
n important result
This version: March 2003 due to Atkinson and
Stiglitz (1976) is that
ABSTRACT differential commod-
ity taxation is not optimal in the

changes in the progressivity of
taxes can also significantly in-
fluence 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 quantita-
tively test for the role of taxes
in shaping ownership concen-
tration. The index of owner-
ship concentration is
characterized by considerable
time series variation, with sig-
nificant diffusion of ownership
in the post WWII era and
reconcentration in the late
1990s. Analysis of this index in-
dicates that the progressivity
of taxation significantly influ-
ences corporate ownership
concentration and equity mar-
ket participation as predicted
by the model. This evidence
supports the intuition of Berle
and Means (1932) that taxa-
tion can significantly influence
patterns of equity ownership.
vary dramatically by firm, with
many firms avoiding taxes en-
tirely by operating through
cash in the informal economy
and others facing very high lia-
bilities. Taxes on capital are an
important source of revenue, as
are tariffs and seignorage, all
contrary to the theoretical liter-
ature.
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 fi-
nancial sector. Through use of
the financial sector, firms gen-
erate 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 sec-
tor, presumably capital-inten-
sive firms. Given the resulting
differential tax rates by sector,
T
his paper studies
whether exchange
controls, particularly
on the capital ac-
count, affect the choice of cor-
porate 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 cor-
porate tax rate calculated from
the actual parameters of the
tax systems: (ii) by allowing ex-
change controls to affect the in-
tensity 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 con-
trols, and (ii) that strategic in-
teraction in tax-setting
between countries is increased
by liberalization. These effects
are stronger if the country is a
presence of an optimal nonlin-
ear income tax (given weak
separability of utility between
labor and all consumption
goods). This article demon-
strates that their conclusion
holds regardless of whether the
income tax is optimal. In partic-
ular, given any commodity tax
and income tax system, differ-
ential commodity taxation can
be eliminated in a manner that
results in a Pareto improve-
ment. Also, differential com-
modity taxation can be
proportionally reduced so as to
generate a Pareto improve-
ment. In addition, for commod-
ity tax reforms that do not
eliminate or proportionally re-
duce differential taxation, a
simple efficiency condition is of-
fered for determining whether
a Pareto improvement is possi-
ble.
Complete articles can be
downloaded from:
www.nber.com
 DotGazette
MESSAGEOFTHE QURAN
C
onsider the profound
insights contained in
the verses of the Holy
Quran:
1. "With power did We con-
struct the heavens…verily, 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 uni-
verse as an expanding entity.
Most people then, including men
of learning, thought that the
earth was the center of the uni-
verse and the sun and the plan-
ets 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 un-
lettered 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 cen-
tury. Astrophysicists have now
established through rigorous re-
search based on the light spec-
trum of distant stars [the so
called "red shift" phenomena]
that galaxies are moving away
from each other and the uni-
verse is expanding at a rate
called the "Hubble Constant".
Also, energy released by dying
stars at the very edge of the uni-
verse [quasars, pulsars] is being
monitored and their "red shift"
studies lend strong support to
the idea of an expanding uni-
verse. We also know now that
this expansion will one day [bil-
lions 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 be-
fore 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 revolution-
ary. It was widely accepted then
that the earth was flat as it did in-
deed '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 signifi-
cant 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 re-
mained 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 it…and becomes empty.
[AL QURAN Inshiqaq ; 84:3-4]
Astrophysicists today are gen-
erally 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 gravita-
tional 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 cen-
turies. In 1950 the now well
known 'big bang' theory was put
forth by physicists Ralph Alpher,
Hans Bethe and George Gas-
mow that in essence postulated
that in the beginning the uni-
verse was a super dense mass
reduced to less than the size of a
pinhead - the so called 'singular-
ity' [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 con-
tinued 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 en-
closure (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 cre-
ation". [AL QURAN Al Momi-
noon; 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.
DotGazette
December Issue.qxp 12/30/2006 11:54 AM Page 1

DOTGazette
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.

A
four day Interna- the Association of Tax Authori- ance and Shariah Taxation pects having a bearing on re-
tional Conference, ties of Islamic countries [zakat]. Mr. M. Muneer source mobilization was high
the Third Technical [ATAIC], was held at Islam- Qureshi, Director General, lighted. It was agreed that con-
Meeting, of some 20 abad from November 22 to 25. DOT, Lahore, was appointed sidering the shortfall in Gov-
Islamic countries , members of A select group of Income Tax Conference Rapporteur. Coun- ernment Finances in most
Group officers received the del- try papers were presented, countries, and the consequen-
egates and represented Pak- views exchanged and ques- tial, recurring, fiscal deficits,
In this Issue istan in the conference. tions answered by the various there was a pressing need to
1 The Third ATAIC Chaired by Mr. M. Yusuf Abdul- delegates and there was broad significantly improve the Tax
Technical Confernce lah, Secretary General (Rev- consensus on the need to move to GDP ratio. Successes
enue Division) and Chairman , ahead with tax reform meas- recorded by Turkey in improv-
2 Editorial Central Board of Revenue, ures already initiated by most ing the Tax to GDP ratio and by
4 Chairman CBR Visits Dot Government of Pakistan, the countries in the region. Malaysia in Tax Base Broaden-
5 The Design of Tax Incentives delegates to the conference
discussed Resource Mobiliza-
Progress made in various
countries on reduction in tax
ing evoked much interest. Pak-
istan stressed the need to
Patron tion in the Region with special rates, both corporate and per- repose trust in the taxpayers
M. Muneer Qureshi reference to Improvement in sonal, the (imaginative) use of and bridge the credibility gap
the Tax to GDP ratio, Tax Base Information Technology, Tax- between Tax Administration
(Director General)
Broadening, Voluntary compli- payer Facilitation and other as- >>>>
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.

1
December Issue.qxp 12/30/2006 11:54 AM Page 2
December Issue.qxp 12/30/2006 11:54 AM Page 3

DOTGazette
EDITORIAL
T
he December issue of
DOT Gazette is with
you. This month we
had the honor of playing host
to the Chairman CBR, Mr. Ab-
dullah Yusuf, who especially
visited DOT in order to ad-
dress the probationary offi-
cers 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 con-
genial environment of DOT do
not seem to abide by this rule
of nature. DOT remains as
hectic as ever. It’s rather been
a bit more hectic as the train-
ing program for the 33rd STP
enters the final phase. The
probationers are now fast ap-
proaching the DOT STP
Exam and the FPSC FPOE
after which they will report to
IBA Karachi for the specially >>>> to control the unhindered the concluding session, the con-
designed Tax Management and Taxpayers. Pakistan's com- growth of the informal sector ference adopted three Reports
MBA program. prehensive self assessment was stressed by many delegates on three different topics, viz. Re-
The MBA Degree program scheme impressed many dele- as this sector robbed the ex- source Mobilization, Voluntary
has been made an integral gates especially as it had not led chequer of revenues and con- Compliance and Shariah Taxa-
part of the officer’s training to any fall in tax revenues as tributed significantly to a tion. In his concluding remarks,
and the rationale is to equip many had initially feared. A need deterioration of the tax base. In the ATAIC Chairperson,
the officers with high level pro-
fessional skills, conceptual
clarity and practical profi-
ciency- necessary qualities in
today’s demanding work envi-
ronment. This speaks vol-
umes 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, Nathi-
agalli and Abbottabad. Hope-
fully, the trip was both useful
and enjoyable. DOT adminis-
tration and the Gazette team
are thankful to you for your
keen interest and valuable
suggestions.
Chief Editor

2
December Issue.qxp 12/30/2006 11:54 AM Page 4

DotGazette

Mr. M. Abdullah Yusuf stressed

the need for member countries
to equip themselves with the lat-
est in modern science and tech-
nology, especially in the field of
Information Technology which
was crucial to enhancing the
ability of Tax Administration to
properly appraise data and auto-
mate processes central to tax
collection, audit and detection of
tax evasion.
The delegates greatly appreci-
ated the excellent conference
arrangements made and the
deep personal interest taken by
Mr. M. Abdullah Yusuf, Secre-
tary General (Revenue Divi-
sion)/Chairman, CBR, Mr.
Salman Nabi, Member (Direct
Taxes), CBR, and other CBR of-
ficers and also the warm hospi-
tality extended to them.
The 4th Technical Conference
of ATAIC will be held in Kuwait
in 2007.

3
December Issue.qxp 12/30/2006
DotGazette
ONCAMPUS
Chairman CBR
VISITS DOT
M
r. M. Abdullah
Yousaf, Chairman
CBR, visited DOT
on Saturday, 18th
November, 2006, to meet the pro-
bationers 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
4
11:54 AM Page 5
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.
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 chair-
man immediately after his ar-
rival. 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 ongo-
ing 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 re-
sponded to various queries
made by the probationers
about their future career in
the department.
December Issue.qxp 12/30/2006 11:54 AM Page 6

DotGazette
RESEARCHARTICLE established industry abroad. A
greater chunk of the already
scarce foreign exchange would

The Design of Tax Incentives thus be appropriated for im-

porting such capital goods.
The only redeeming
it is increasingly becoming evident that non tax benefits might feature of a policy of designing
general investment incentives
weigh significantly in the calculations of the foreign investor and in would be the stimulus it gives
his scale of parameters having a bearing on feasibility these could to foreign investment and to
domestic industry producing
have primacy over the advantages conferred by tax benefits. capital goods. However in the
majority of cases these benefits

D
esigning tax in-
centives is not
easy. As a stimu-
lus measure an
incentive pro-
vided through deliberate inter-
ference with statutory taxation
measures is expected to en-
hance profit ability sufficiently
to increase competitiveness.
On the negative side is the rev-
enue that the exchequer loses
as long as the incentive re-
mains in force.
Tax incentives have been
considered important in the
context of promotion of indus-
trialization. The geographical
dispersal of industry is another
important criteria kept in mind
while designing these incen-
tives. The lack of adequate link-
ages hinders the smooth flow
of factors involved in produc-
tion across the economic ex-
panse. 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 eventu-
ally such a (shortsighted) ap-
proach could interfere with and
even prevent the achievement
of the more fundamental objec-
tives of public policy.
Investment Incentives
The rationale for the deliber-
ate encouragement of specific
industries is that these could
lead the way in the industrial-
ization effort by giving a cue to
other related and complemen-
tary activity through the exter-
nalities - 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 com-
ponent of the plan.
While increased availability
of capital would certainly go a
long way towards increasing
the output of the specific indus-
try 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 cap-
ital for labor over the full spec-
trum of the entire industry.
Considering that third world
countries are plagued with se-
vere problems related to labor
redundancy due to over popu-
lation, such a development
amounts to a distortion in fac-
tor utilization and bodes ill for
the future economic format
that would take shape as a re-
sult of such incentives meas-
ures.
It would be recog-
nized however that the real
reason for such selective sub-
sidization of investment is ob-
viously not merely to increase
the capital stock of an industry
targeted to benefit from the in-
centive 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 se-
lected industry than it will not
have the effect of increasing
capital formation without dis-
torting relative factor prices.
The measure then will have
the effect of creating a bias for
adoption of techniques of pro-
duction that result necessarily
in capital intensity (more capi-
tal per unit of output).
General investment
incentives have the serious de-
fect of under pricing capital in
general. Considering the fact
that developing countries are
capital deficient the under pric-
ing of capital would intensify
demands for capital goods.
Most of these would be ma-
chinery and allied items and
the great majority of these
would originate from already
are not likely to outweigh the
disadvantages as it is increas-
ingly 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 indus-
try producing capital goods
since this is already an area
that is sought to be developed
it would not be realistic to ex-
pect that in the formative
phases of economic develop-
ment it would be sufficiently
developed to be able to make a
significant contribution thru
production of adequate quanti-
ties of capital goods.
Among the many
enigmatic problems that plan-
ners in third world countries
face is that of opening up back-
ward 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 lev-
els from their existing de-
pressed state to levels that are
socially acceptable and to in-
crease aggregate industrial
output.
As should be evident
from the statement made
above the problems posed by
regional disparities in levels of

5
December Issue.qxp 12/30/2006
DotGazette
economic development have
multiple dimensions. Because
of resource constraints the
government is unable to unilat-
erally make investment in all
the various undeveloped re-
gions 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 re-
gions in a country are tradi-
tionally 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 deficien-
cies 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 under-
development breed on them-
selves and exacerbate and
accentuate the original situa-
tion. As a direct sequel, while
the rich in the country keep on
getting richer the poor not only
remain poor put slide down-
wards on the poverty scale.
Given the above scenario the
reluctance of private enter-
prise to move into so forbidding
a situation is quite understand-
able especially as improve-
ment of the condition of a
people is hardly the principal
motivating factor in the calcu-
lations 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
6
11:54 AM Page 7
daunting challenge that the
backward region presents.
However, if costs are lowered
sufficiently, then it follows logi-
cally 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 dramat-
ically.
Insofar as the tax burden
constitutes a cost factor it im-
pacts 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. (pref-
erential taxation.)).
Most fiscal authorities today
do not favor tax exemption as a
means of attracting private en-
terprise to the less developed
regions. It is increasingly being
felt that most of these incen-
tives are in the long run coun-
terproductive.
One of the reasons that such
incentives are viewed with dis-
favor is that these have been
seen over time to lead to a sub-
stitution of capital for labor.
Considering that most third
world countries are labor abun-
dant 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 produc-
tivity and lead to deficiencies in
output. Given the need to in-
crease 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 de-
velopment policy. After all, in-
dustrialization means putting
machines to work for man so in
that context substituting capi-
tal for labor is inevitable. How-
ever the continuing use of
more and more capital per unit
of output perpetuates capital
intensity in industry and this
trend once established is diffi-
cult to reverse. The dangers in-
herent in such a situation
include exacerbation of exist-
ing labor redundancy problems
faced by the developing coun-
try. 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 effi-
ciency of a development pro-
gram. After all it must be
known what the execution of a
development plan entails. Inso-
far as tax exemptions repre-
sent revenue deliberately
foregone, to that extent it rep-
resents the cost of bringing de-
velopment to the less
developed region. However the
fact that a specific industry has
come to the target region fre-
quently clouds the cost in-
volved. Again - and this is
important - it may not be at all
clear that it was the tax incen-
tive that was actually instru-
mental in brining the industry
to the backward region. In fact
the available evidence sug-
gests strongly that the exemp-
tions actually constitute wind-
fall gains to industries that
would have located in the re-
gion in any event.
One of the problems with tax
incentives is that once enacted
they tend to become institu-
tionalized. Over time the bene-
ficiaries get conditioned to the
incentive and find it increas-
ingly 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 inef-
fective.
Tax incentives manage to es-
cape public scrutiny largely be-
cause they are not treated as
items of public expenditure
when infact they are really on
all fours with the public expen-
ditures in that they consume
potential public funds.
It is increasingly being felt
that explicit subsidies achieve
more in terms of desired objec-
tives (viz increased output, em-
ployment and domestic value
added in exports) without cre-
ating undesirable distortions in
resource allocation. Also the
cost of the incentive is much
more evident when adminis-
tered through a subsidy. Thus
the well-worn paths taken by
tax incentives - accelerated de-
preciation, 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
December Issue.qxp 12/30/2006 11:55 AM Page 8

DotGazette

7
December Issue.qxp 1/15/2007 2:57 PM Page 1

DOTGazette
IN THIS ISSUE

Passing Out of Dot Timeline Direct Taxation of In-

33rd STP 2006 come in Pakistan, 1947
pg.1 pg. 3 -2006 - an overview
pg. 7

Passing Out of the Officers of 33rd STP

T
he Passing Out Ceremony
of officers of the 33rd Spe- being provided to them, including
cialized Training Program the MBA in Tax Administration at
was held at DOT (DT) IBA, Karachi . "Education should
HQ's, Lahore, on the 28th of be a welcome opportunity when-
Dec 2006.Mr Muhammad Abdul- ever it comes," he said.
lah Yusuf, Secretary General, Addressing the officer's, Mr
Revenue Division and Chairman Muhammad Talha, Member
CBR, was the chief guest. Mr (HRM),CBR, expressed the hope
Muhammad Talha, Member that the new skills that they will
(HRM), CBR, Mr Salman Nabi,
Member.( Direct Taxes), CBR, Mr
Haji Ahmad, RCIT, (Eastern Re-
gion), Mr Umar Farooq, DG, LTU,
Lahore, DOT Faculty Members
and guests from the private sec-
tor, including bankers, lawyers
and doctors also graced the occa-
sion.
The officer's of the 33rd STP went
through an eight month long

PATRON
M. Muneer Qureshi
(Director General)
training program that started on
STAFF ADVISOR the 26th of April, 2006 and con-
Dr. Hamid Ateeq cluded on the 27th of Dec. The
(Additional Director) specialized training at DOT
in accountancy, law, office proce-
EDITOR-IN-CHIEF
dure, computer skills including bationary officer's pre-service acquire in accountancy, audit,
Munir Ahmed Ch. TMS comprised the second phase training regimen and is designed management and business stud-
EDITORS (ENGLISH) of the IBA MBA program [ the 1st to instill specialized skills in the ies at the IBA Karachi will enable
Sobia Saleem & phase being the CTP at the Civil officer's that will have a direct them to not only discharge their
Services Academy, Walton, La- bearing on the work that they will duties efficiently but will give new
Humaira Daud
hore] and the officers will now join be eventually doing in the deptt. meaning to the reform effort cur-
EDITORS (URDU) IBA Karachi for the final phase Speaking to the officer's on the oc- rently underway in CBR and it's
Arsam Aftab & after which the successful partic- casion, Mr M Abdullah Yusuf, con- field formations.
Misbah Nawaz ipants will be awarded an MBA gratulated them on their Mr Salman Nabi, Member, Direct
Degree in Tax Administration. successful completion of the STP Taxes, CBR, said that DOT had
DESIGN & LAYOUT
The specially tailored MBA in Tax and advised them to have a posi- evolved into an important training
Azhar Jehangir & Administration is now an integral tive outlook and make full use of institution and the good work
Zafar Iqbal part of the Income Tax Group pro- the unique training opportunities >>>>
1
December Issue.qxp 1/15/2007 2:57 PM Page 2
December Issue.qxp 1/15/2007 2:57 PM
DOTGazette
EDITORIAL
T
he month of December,
2006 was very hectic at
DOT. This month the pro-
bationers of 33rd STP of In-
come Tax Group completed
their training.
Final passing out examina-
tion 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 Decem-
ber 28, 2006. Secretary General,
Chairman, CBR, Mr. Muham-
mad 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 com-
mendable role in the training.
It speaks volumes of their ef-
forts that they made the proba-
tioners, with diverse
educational background, pass
through this ordeal success-
fully. The whole batch was feel-
ing gratified and elated on the
successful completion of their
STP.
For this we owe special grat-
itude to the D.G. who took per-
sonal interest in the training,
especially the presentations on
national and international is-
sues, role play sessions and
case studies, through which he
confronted the officers with pol-
icy issues and practical prob-
lems.
DOT faculty deserves more
gratitude than these words can
contain. We hope we will con-
tinue to benefit from their guid-
ance through the thick and thin
of our future careers.
2
Page 3
DOT Report Card - 2006
Three STP batches complete their training in one calen-
dar 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 Man-
agement hosted by HRM Wing at Bhurban, in Dec 06.
DOT facilitates holding of Audit Working Sessions by Audit
Wing of CBR -- Dec 06
enue forecasting had already The Chairman CBR distributed
done here had already borne fruit been held at DOT in 2005 and an- certificates to the successful pro-
as was evident from the fact that other conference of ATAIC Train- bationers and awards to position
there had been a 20% increase in ing Institute Heads was being holders. Memento's were pre-
Return filers which, in his opinion, planned for March 2007. sented by DOT to the Chairman
was largely relatable to the in- Earlier, the PMC, Mr Kashif CBR,
creased efficiency of departmen- Aslam thanked the DG(DOT) and Member CBR (HRM), and Mem-
tal officer's in discharging their Faculty for providing excellent fa- ber CBR (Direct Taxes).
duties in the field. cilities and cooperation to the pro- The ceremony was followed by a
Mr M Munir Qureshi, DG(DOT), bationers during the training bonfire, dinner and a musical pro-
made a presentation explaining program. gram.
the important events in the DOT
calendar in 2006. He said that A W A R D S H O L D E R
three STP batches [the 32nd, 31st
and 33rd STP respectively] had
completed their training in one
calendar year which was un-
precedented.
The DG pointed out that besides
their regular training program
the probationers made presenta-
tions on a wide variety of subjects
and engaged in 'role play' sessions
that helped build up their confi-
dence and improve their problem Munir Ahmed Ch. (Best Probationer) Azhar Jehangir (2nd Best Probationer)
solving capabilities. Eminent
speakers from the private sector
also addressed them on signifi-
cant issues.
The DG(DOT) said that given the
excellent DOT training facilities
and physical infrastructure every
effort should be made to trans-
form DOT into a regional training
hub with an International outlook.
He pointed out that an ATAIC in-
ternational conference on rev- Ms. Attiya Rehman (Best Female Probationer) Capt. Arsam Aftab (Best Conduct)
December Issue.qxp 1/15/2007 2:58 PM Page 4

DotGazette
DOT TIMELINE 2006
JANUARY FEBRUARY
Inaugoration of Badminton Court. 32nd STP- Final Passing Out Ceremony.

MARCH APRIL
Training in the Tax Management DOT hosts an All Pakistan Mushaira
System (TMS) Launched.

3
December Issue.qxp 1/15/2007 2:58 PM Page 5

DotGazette
DOT TIMELINE 2006
MAY JUNE
DOT hosts Integrated Training 31st STP Probationers country
Strategy Workshop. study tour

JULY AUGUST
31st STP DOT gazette launched.
Final Passing Out Ceremony

4
December Issue.qxp 1/15/2007 2:58 PM Page 6

DotGazette
DOT TIMELINE 2006
SEPTEMBER OCTOBER
33rd STP Probationers make Field Visits Mr Ishrat Hussain, Chairman NCGR & Former
Governor, State Bank of Pakistan, Visits DOT.

NOVEMBER
*DOT participates in the 3rd Technical ATAIC
Conference *33rd STP Country Study Tour *Chairman
CBR inaugurates new DOT Conference Room.
DECEMBER
*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.

5
December Issue.qxp 1/15/2007 2:58 PM
DotGazette
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 manu-
facturing 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
P
akistan's tax to GDP
ratio in 2005-06 is less
than 10 and it has
hardly 1.7 million tax-
payers on the tax rolls.
Given a population of 165 mil-
lion this translates into a very
narrow base indeed
[ 1.03% ]. On the Gini scale,
Pakistan ranks at 41 and that
indicates fairly pronounced in-
equality in the distribution of
income. Almost sixty years of
progressive tax rates appear to
have had little or no effect in re-
ducing inequalities in the distri-
bution 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, tax-
able capacity is limited and the
existing taxpayers get
squeezed ever more as the
need for additional revenues in-
creases. Between sectors,
there is a significant lack of eq-
uity. Both manufacturing and
agriculture contribute roughly
20% to GDP. However Manufac-
turing contributes approxi-
mately 65% of the income tax
paid to the federal exchequer
6
Page 7
while agriculture contributes
just over 1%. Similarly, whole-
sale and retail trade contribute
about 17% to GDP and only
2.8% % as income tax. Again,
Transport, Storage and Com-
munication contribute 14% to
GDP and just 4.5% as Income
Tax.
The lack of equity between
sectors is a major flaw in Pak-
istan's tax structure. It pro-
vides the 'raison detre' for
evasion of tax by those deriving
income from sectors other than
agriculture. They see no differ-
ence in income earned by them
from manufacturing and that
earned by those engaged in
agriculture. It is difficult to
comprehend why a feudal earn-
ing 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 constitu-
tional insofar as agriculture
being a 'provincial' subject, in-
come therefrom too must, it is
argued, fall within the purview
of the respective provincial gov-
ernment- where it arises. Well,
if the income derived from agri-
culture can't be taxed by the
federal government, what pre-
vents the provincial govern-
ment from doing so? After all
provincial governments do levy
taxes- so why not a tax on in-
come 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 'dif-
ficult' sector of the economy
subject to the vagaries of the
weather and supposedly rid-
dled with multiple problems.
Imposing a tax on income from
agriculture would statedly re-
sult in an insufferable burden
for the average farmer and
would ruin him .Especially in
Punjab, the average landhold-
ing is cited as not supportive of
an income tax and any such
taxation would render the culti-
vation of the land on commer-
cial lines as uneconomical.
Historically, when tax has
been levied on income, the gen-
eral principle has been that 'all'
income, regardless of source, is
subject to taxation. In post
Meiji Japan, agricultural in-
come came to be taxed steeply
and, paradoxically, the yield
from land increased as land
hitherto neglected and consid-
ered to be 'marginal' was
brought into use through inten-
sive 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 stu-
dents in engineering and the
sciences were sent abroad to
learn first hand - and then re-
turn to Japan to put their newly
acquired knowledge and expe-
rience to use in the mother-
land.
With steep taxation on agri-
culture coupled with the 'sur-
plus' generated from more
intensive and efficient cultiva-
tion of land providing the
wherewithal for investment in
plant and machinery, the
Japanese economy developed
rapidly and the systematic 'cap-
ital deepening & widening'
changed the complexion of the
economy from that of mainly
agricultural in the mid 19th
century to that of an industrial-
ized 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 (un-
founded) fears still persist and
keep the wholly unwarranted
December Issue.qxp 1/15/2007
exemption for agricultural in-
come firmly on the statute. One
can only hope that better sense
will prevail - and soon.
While Meiji Japan was a sov-
ereign state, India in the mid
19th century was a British
colony- and remained a British
colony till the mid 20th cen-
tury.Resultantly, the govern-
ments of the day in the two
countries had different percep-
tions about economic develop-
ment. 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 manufactur-
ing 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 exemp-
tion from levy of any Income
Tax on the income derived from
sale of agricultural produce?
While agriculture received
'preferential' treatment with re-
gard to taxation of agricultural
income, manufacturing was ac-
tively 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
2:58 PM Page 8
high infact as to be seen to be
almost confiscatory. Needless
to say this was not conducive to
making investment in manufac-
turing. Fiscal policy thus had a
good deal to do with India's rel-
atively poor industrial infra
structure- especially in the
areas that came to constitute
the new State of Pakistan and it
is now being speculated -in-
cluding informed opinion in ac-
ademia- that this state of affairs
was not 'accidental' but deliber-
ate and was deliberately con-
trived to ensure a steady supply
of 'primary' goods and raw ma-
terials - cotton for one- from
India to the textile mills of Man-
chester and Birmingham in
Britain and also a ready mar-
ket, in India, for the finished
products of British Industry.
It is indeed ironic that in the
post war period when many
former 'colonies' became inde-
pendant much so called 'in-
formed' opinion in the west-
including many academic's
with impeccable credentials
such as the Swedish re-
searcher Gunnar Myrdal, of
'Asian Drama' fame, continued
to advise developing third
world countries that their sal-
vation lay in a high enough tax
rate structure that would 'en-
sure' that much needed tax rev-
enue was put in the State
coffers. The great fear was that
DotGazette
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 sec-
tor, one each for Banking Com-
panies, Public Limited and
Private Limited Companies
with the highest tax rate re-
served for Banking Companies
and the lowest for Public Lim-
ited Companies. Private Lim-
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 per-
ceived as having become cum-
bersome 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 in-
come 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 re-
stored in the new tax statute,
the income tax Ordinance of
1979 and the 'status quo' main-
tained. 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 dra-
matic change in the tax statute
was seen as making it possible
to bring about a significant es-
calation in income tax rev-
enues. 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 intro-
duced 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 ac-
tivities such as those related to
imports, exports, execution of
contracts etc, income where-
from was subject to normal law
assessment were seen as hav-
ing 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 is-
suance of this refund would
make a dent in collection and
lead to all sorts of complica-
tions including proper verifica-
7
December Issue.qxp 1/15/2007 2:58 PM
DotGazette
tion of the payments claimed to
have been made and the seri-
ous 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 dis-
charge of income tax liability.
This did away with the need to
pass any formal order of as-
sessment 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 taxa-
tion targets 'receipts' not 'in-
come.' There is no objective
method to convert receipts into
income 'at a glance' as it were.
It imposes inequitable tax bur-
dens. 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 in-
herent unfairness -especially
when it is not possible to fully
adjust the deducted tax . It also
creates a financial burden not
easily understood and appreci-
ated because there is no obvi-
ous nexus with income. Tax
deduction in advance of the ac-
tual earning of income is the
opposite of 'tax deferral' and en-
tails a cost that the payer may
find to be completely unwar-
ranted.
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
1
Page 9
away with the system might
lead to a serious fall in rev-
enues.
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 suspicion-
that the loss is mostly artifi-
cially contrived and not gen-
uine. The improvisation made
here to offset the loss to the ex-
chequer that such declarations
entailed was to levy a tax on the
turnover declared by corporate
entities. This 'turnover tax'
brought in much needed rev-
enue but led to an outcry that
such tax of turnover was not 'in-
come taxation' and was there-
fore not legal under income tax
law. The statutory provision
was strongly contested by the
affected taxpayers and equally
strongly defended by the in-
come 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 intellec-
tual underpinning for this radi-
cal 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 li-
abilities with their profits and
become pessimistic and as a
result do not promote eco-
nomic growth and develop-
ment. A large number of people
refrain from productive eco-
nomic activities thus causing a
decline in the accrued tax rev-
enue to the state."
This was precisely the argu-
ment 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 ex-
plain the proposition and the
'Laffer Curve' soon became
well known and came to be re-
ferred to frequently, in acade-
mia as well in government
circles as policy makers in de-
veloping, so called 'third world
countries', grappled with the
seemingly intractable problem
of effective resource mobiliza-
tion. 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 in-
crease tax revenue. Tax rate in-
crease beyond that point will
decrease revenue. At the ex-
treme 100% tax rate, tax collec-
tion will be zero. The curve
further clarifies that for any
given level of tax revenue col-
lected, given the size of the tax
base, there are two rates of tax
capable of achieving the collec-
tion- 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 re-
sorted 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 rev-
enues 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
December Issue.qxp 1/15/2007
through the income tax ordi-
nance 2001, there was no fall in
tax revenue. Again this appears
to be in keeping with the argu-
ment made by Laffer - and six
centuries earlier, by Ibn e Khal-
dun.
While the tax statute was re-
designed there was also a re-
design of the administrative
arrangements made to mobi-
lize revenue. The entire tax hi-
erarchy was re-modeled on
functional lines and primary
authority to levy tax and collect
revenue was now invested in
the person of the Commis-
sioner of Income Tax in sharp
contradistinction to the previ-
ous arrangements when the In-
come Tax Officer occupied
pivotal position. Needless to
say the Commissioner would
delegate authority down the
line and would not be doing
everything himself but never-
theless a sea change has taken
place in the conceptual frame-
work laid out by government
for the assessment and collec-
tion of income tax and this
change is expected to go a long
way in building up taxpayer
confidence and improvement in
compliance levels. Concomi-
tantly, the compensation pack-
age for selected tax personnel
in all categories - officer's as
well as support staff- has been
significantly augmented. Ulti-
mately, 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 sched-
ule to the Income Tax Ord '79
have been another reason for
the low tax yield. Over the
2:58 PM Page 10
years this fiscal concession in
the guise of a five year 'tax hol-
iday' normally extended to a
second five year term, was
seen an important incentive
measure for 'new industry' es-
pecially in the far flung regions
of the country with deficient
infra structure. While the blan-
ket exemption from levy of in-
come tax may certainly have
'facilitated' investment in new
industrial projects, it is highly
questionable whether the in-
come tax exemption 'per se'
was actually instrumental in
the investment decision. In-
formed opinion today appears
not to hold such exemption to
be the key factor in an invest-
ment decision and 'non tax' fac-
tors are now considered to
have been much more impor-
tant. However an important 'ex-
emption lobby' was certainly
created that ensured it's reten-
tion 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 re-
duced - but not eliminated.
However CBR is now commit-
ted to a policy of not encourag-
ing 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 al-
lowance is retained in the new
tax statute and has played a
key role in reducing tax liability
- and also tax yield.
Tax concessions, once ac-
corded, tend to become an al-
most permanent feature.
These do erode the tax yield
and have no clear and direct
causal relationship with an in-
DotGazette
vestment decision. That being
so dependence on such conces-
sions ought to be avoided in the
future.
While all these changes are
no doubt hugely significant in
the context of revenue mobi-
lization, the seemingly un-hin-
dered growth of the 'informal
sector' poses a grave challenge
to tax administration in Pak-
istan. 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' compo-
nent of Rs 2.15 billion in 1973
and Rs 180 bill in 2006. As a per-
centage 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 enlarge-
ment of the tax base, under-
mines the 'rule of law,' acts as a
brake on the growth of the for-
mal sector, corrupts national
income data, confounds eco-
nomic planners, and burdens
tax administration to the detri-
ment of revenue. To be sure,
the 'informal sector' is not ' all
bad.' It does provide employ-
ment and income -albeit,
mostly subsistence level in-
come - and consequentially
also some dignity- to a large
segment of the national labor
force and that is of course
much better than unemploy-
ment and all it's attendant ills.
Nevertheless, the fact that this
sector is largely undocu-
mented, pays no tax and con-
tributes 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 ac-
counts now entails significant
penalty and can lead to prose-
cution and incarceration in a
penitentiary - something that
was absent in the old tax law-.
However it appears that tech-
nology will have to be brought
into play in a big way if it's con-
tinued growth is to be arrested
and put into reverse. The tax
reform initiatives involving
computerization of tax proce-
dures, 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 mean-
ingfully 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 be-
come possible to enlarge the
tax base significantly and aug-
ment revenues meaningfully.
The 'spin off' from advanced
technology brought into play
will enable departmental offi-
cer's to not only arrest and re-
verse the growth of the
'informal sector' but very im-
portantly, will also provide the
wherewithal for dealing effec-
tively with the chronic under-
statement 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. Effec-
tive 'electronic surveillance'
holds the key to 'tax compli-
ance' and the sooner the de-
partment makes headway in
this crucial area the better it
will be for revenue mobiliza-
tion. If there is a magic wand
that tax administration can put
into play to boost revenues,
this is it.
1
December Issue.qxp 1/15/2007 2:58 PM Page 11

September, 2006,

DotGazette

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 His most important philo- and on the use of intuition as Ibn Khaldun does occasion-

I
philosophy of history is a
landmark of social
thought. Many historians -
Greek, Roman, Muslim
and other - had written valu-
able 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 philoso-
phers of history of all time.
sophical work is the Muqad-
dima, the introduction to a
much longer history of the
Arabs and Berbers. In this
work, Ibn Khaldun clearly de-
fines a science of culture and
expounds on the nature of
human society and on political
and social cycles. Different so-
cial groups, nomads, towns-
people 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 al-
Ghazali rather than Ibn Rushd
as a surer guide to the truth.
The work on which Ibn Khal-
dun's reputation chiefly rests
is and learning its grammar,
opposed to logic in solving dif-
ficult 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 profun-
dity and the originality that
marks him off so sharply from
his Muslim predecessors and
successors.
The overwhelming impres-
sion given by Ibn Khaldun's
writings is that society is an or-
ganism that obeys its own
inner laws
Ibn Khaldun sees the histor-
ical process as one of constant
cyclical change, due mainly to
the interaction of two groups,
nomads and townspeople
ally 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 im-
pressed by the development of
Europe, whose merchants and
ships thronged the seaports of
North Africa and whose sol-
diers served as mercenaries in
the Muslim armies. He sug-
gests that a general change in
conditions can produce an en-
tirely new social and political
scene, rather as if a new world
had been created.

1
December Issue.qxp 1/15/2007 2:58 PM Page 12

September, 2006,
DotGazette

1
Feb Issue.qxp 2/6/2007 11:11 AM
IN THIS ISSUE
Interview:
Yassie Hodges
pg.1
INTERVIEW
Yassie Hodges, CBR CONSULTANT
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 approx-
imately 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 be-
came resident lead instructor in
training,training auditors that
were coming into the service.
I initially worked as Chief of
Audit and later became the Di-
rector of Compliance responsible
for collection, compliance,
criminal investigation and
research.
Approx two years
ago I left
1
Page 1
DOTGazette
Integrated
Audit Training
pg. 6
govt and started working with a same type of work.
private consulting firm. So I was selected here to actu-
Part of my work with the con- ally take a look at the full audit
sulting firm had to do with help- program in Pakistan- not just
ing tax administrators in make recommendations but
developing countries deal with rather reach an agreement with
problems such as those obtaining the CBR and implement a full
in Pakistan. fledged audit program and then
I spent time in the Philippines follow up and monitor the pro-
specifically focusing in on their gram to see whether the changes
audit program envisaged are actually being
looking at properly implemented.
audit tech- DG(DOT): You have been in
niques. Pakistan for some time now
Before I and have had an opportunity to
came here I get to know CBR personnel at
was actually in all levels. What is your opinion
Kenya doing of their overall competence and
very much skill ?
t h e YASSIE HODGES: Generally I
must admit that I am very im-
pressed 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 how-
ever 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
Kenwood Green
re-inaugurated
pg. 8
PATRON
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
also by the fact that the organiza-
tion 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 ap-
plies 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 offi-
cers 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
>>>>
Feb Issue.qxp 2/6/2007 11:11 AM Page 2

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

T
he eye catching wood structure known as "Ken-
wood Green" is a DOT landmark and was built
in 1998-99 entirely through funding contributed
by Mr Khalid Hameed, then DOT instructor in Book-
keeping & Accountancy. Not only did he provide the
funding for the project, he also supervised the erec-
tion of the structure right from the cuttting and shap-
ing 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 atten-
tion drawn to the disappearance of the plaque by Mr
Khalid Hameed who by then had left his teaching as-
signment at DOT. This 'wrong' has now been ad-
dressed 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 un-
veiled by him in the presence of DOT faculty and se-
lected guests including Mr Haji Ahmad, RCIT,
Eastern Region, Mr A.A. Zuberi, former Director,
DOT / Member ITAT, Mr Mohsin Akhtar, former Di-
rector General, DOT / Member, ITAT, Mr Nazir
Chaudhry, Accountant Member, ITAT, Lahore Bench,
Mr Saadat Saeed, former Director

8
Feb Issue.qxp 2/6/2007 11:11 AM
DOTGazette
EDITORIAL
T
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 demand-
ing as the previous we
parted ways with.
In December we bid
farewell to. the probation-
ary officers of the 33rd STP
who left for Karachi to pur-
sue their MBA (Taxation)
from IBA, Karachi. Since
May 2004 till December
2006 The DOT administra-
tion was over stretched in
organizing back to back
five training programs of
Income Tax Officers (ITO)
and Assistant Commission-
ers . Come January 2007 .,
and the Directorate is again
geared up to shift its ener-
gies and resources to the
Capacity Building Pro-
grams of Officers and Offi-
cials 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 stu-
dents but also the DOT
landscape with a legendary
Kenwood Green , the Direc-
tor 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.
2
Page 3
the program than if they had
they had some practical experi-
ence that they could relate to in
the classroom.
DG(DOT): So the MBA pro-
gram 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 pro-
gram where you bring in new In-
come 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 prac-
tical 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 pro-
gram 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 ar-
rival?'
YASSIE HODGES: I think it's
very, very do-able -if you can stay
focused.
Sometimes one of the prob-
lems 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 some-
thing you will have to look at very
closely.
Once the path is laid out then
you should be able to put all avail-
able resources behind it so that
you are able to fulfill the commit-
ments 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 job-
I don't want anyone to think that
this is going to be an easy job be-
cause 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 knowledge-
able people see the present tax
system as inherently complex
and a strain on tax administra-
tion and see a system based on
a standard 'flat tax' to be more
easily manageable and more ef-
fective 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 sys-
tem 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 sys-
tem you look at, everyone is say-
ing the same thing whether or
not an actual effort has in fact
been made to simplify the sys-
tem.
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 fa-
miliar 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 skep-
tics in the Pakistan Tax Admin-
istration who are still
uncomfortable with the Univer-
sal Self Assessment Scheme
and see it as too far reaching
and fear that given the weak-
nesses in tax administration,
Feb Issue.qxp 2/6/2007 11:11 AM
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 effec-
tive 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 re-
sponded positively and frankly I
don'nt see any reversal of the
same.
DG(DOT): Based on your ex-
perience so far, what new train-
ing 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 talk-
ing a lot about the many prob-
lems in the organization.
I would like to see people act a
little differently- using skills to di-
agnose 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 them-
selves and too little on ways and
means for their resolution, it re-
ally starts getting everyone down.
People lose their self esteem and
morale. Any time you are in an
Page 4
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 dra-
matic 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 requi-
site problem solving skills are in-
stilled 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 work-
force. This ofcourse is easier
said than done. How do you
think we should go about it?
Through lectures? Workshops
? model in the ATAIC group.
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 cer-
tain types of people who they may
perceive to be inferior to them in
(official) status.
DotGazette
We need to change this nega-
tive 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 inter-
act better with taxpayers.
They will also take more inter-
est 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 person-
nel.
We may usefully refer to
Malaysia in this context.
Malaysia is often cited as a role
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 on-
the -job training where they actu-
ally 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 as-
sess 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 per-
sonnel than when you induct
'generalists' and put them in a
class room setting for a pro-
tracted length of time.
DG(DOT): Strong Executive
support is essential to the suc-
cess of any program of tax re-
form. You have worked in the
CBR for some time now and
have met the senior officer's, in-
cluding 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 for-
ward. 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 re-
form process.
DG(DOT): But the Chairman
did not start his career in gov-
ernment as a taxman. Infact
initially he worked in the pri-
vate sector as a professional ac-
counts man - he is a Chartered
3
Feb Issue.qxp 2/6/2007 11:11 AM Page 5

DotGazette
Accountant. Is that a problem?
YASSIE HODGES: I think
that's a plus point.
Any Organization can do with
fresh outside perspective to bet-
ter understand problems con-
fronting 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 any-
thing be done in a hurry to en-
large the tax base?
YASSIE HODGES: In a hurry?
I don't know.
Is it possible to expand the tax
base within a 'reasonable' time-
frame? 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 mil-
lion tax returns………I just
could'nt even imagine that espe-
cially when you consider that a
large number of filers are
salaried and wage employees.
What about all those busi-
nesses that are not filing Re-
turns?
I think that if we, selectively yet
systematically, focus in on a par-
ticular 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 effec-
tively from the provincial govern-
ments.
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-fil-
ers than any other method. Once
we have achieved success with
this relatively small group, we
can then replicate the methodol-
ogy on a larger group until we
have covered most of the 'poten-
tial' taxpayer population.
These are the type of things
that I think are very, very do-
able.
DG(DOT): Finally, technol-
ogy has been cited as a 'force
multiplier' to dramatically en-
hance the effectiveness of tax
personnel . What specific rec-
ommendations 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 re-
sources and deploy technology
effectively.
You already have underway
the Integrated Data Manage-
ment system and Data
Warehouseing.
In order to efficiently digitize
and put to use the mass of avail-
able 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 rele-
vant information.
Technology is able not only to
facilitate Tax Deptt personnel but
also taxpayers. Electronic filing
of Returns and data input and ac-
cess across telephone lines are
realistic possibilities using appro-
priate technology.
The imaginative use of technol-
ogy creates a 'win-win' situation
for everyone.
However whenever technology
is put to use in this manner to
store, retrieve and collate sensi-
tive data, it is essential that ro-
bust control and data encryption
systems be devised simultane-
ously to ensure that the new sys-
tems are not misused in any
manner by 'unauthorized' per-
sons.
Video of the Interview can be
seen at www.dgtrdt.gov.pk

RESEARCH
Tax Incidence Sources of Tax Revenue for various country groups, 2001
Taxes on in- Social Security Property Sub-total: Taxes on Other Total
come profit contribution and Tax taxes on in- goods Taxes

V
ery few reli-
and capital taxes on payroll come and and serv-
able studies of
gains Property Tax property ices
tax incidence
in developing coun- Percent of GDP
tries. Broad indica- OECDa 12.4 9.7 2.4 24.5 7.7 0.3 32.5
tion of mildly LACb 4.7 3.8 0.3 8.8 8.8 3.4 21.1
progressive impact. Othersc 6.5 0.8 0.2 7.5 8.3 3.4 19.2
"Chile case shows Percent of total tax revenues
that this is not due to OECDa 38.2 29.8 29.8 75.3 23.8 0.9 100
direct taxation; with LACb 22.1 18.1 18.1 41.5 42.1 16.2 100
VAT strongly regres- Othersc 33.9 4.2 4.2 39.1 43.2 17.8 100
sive. a. Excludes Mexico
"World Bank study b. LAC include Argentina, Brazil, Chile, Guetamala, Ecuador, Mexico, Paraguay, Peru, Uruguay and
(Ferranti et al, 2004) Venezuela
stresses importance c. Others include India, Indonesia, Malaysia, Russia, Singapore, Thailand and Ukraine
of topic but comes up Sources: Artana, Lopez Murphy and Navajas, 2003
with no new evi- OBCD Revenue Statistics 2001: IMF Government Finance Statistics and IMF country reports to complete
dence. on subnational government

4
Feb Issue.qxp 2/6/2007 11:11 AM Page 6

DotGazette
Country Decade Before Tax A f t e r-Ta x Difference Before and After-Tax Income distribution for Chile (1996)
Gini Coeff Gini Coeff Decile Income Income Change in Progressivity (tax as %
Brazil 1970s 56.2 55.3 -0.9 share pre- share total of income
China 1970s 27.3 31.7 4.5 tax after_tax share Income VAT Other Tax
1980s 31.7 33.3 1.6 - tax taxes System
1990s 36.2 43.0 6.8 1 1.45 1.4 0.05 0 11 3.42 14.4
Czech Republic 1990s 28.3 22.1 -6.1 2 2.74 2.63 -0.11 0 11.8 4.2 16
Ecuador 1990s 51.5 43.0 8.5 3 3.77 3.61 -0.16 0 11.4 4.33 15.8
Hungary 1980s 26.9 22.4 -4.5 4 4.73 4.59 -0.14 0 10.9 4.25 15.2
1990s 28.1 26.3 -1.9 5 5.57 5.47 -0.1 0.01 10.7 4021 15
India 1970s 40.5 30.9 -9.6 6 6.76 6.64 -0.12 0.04 10.2 4.07 14.3
Indonesia 1970s 42.7 36.6 -6.1 7 8.22 8.2 -0.02 0.11 9.7 4 13.8
Mauritius 1980s 45.7 39.6 -6.1 8 10.6 10.61 -0.01 0.23 9 3.85 13.1
Mexico 1970s 52.5 51.0 -1.5 9 15.42 15.75 -0.33 0.62 8 3.54 12.2
1980s 50.6 55.0 4.4 10 40.75 41.09 -0.34 2.54 6.3 2.96 11.8
Nigeria 1980s 35.7 37.0 1.4 GINI 0.4883 0.4961
Pakistan 1970s 33.5 31.2 -2.3 RATIO 13.41 14.12
1980s 33.4 32.0 -1.4
Peru 1980s 49.3 42.8 -6.6
Singapore 1970s 38.7 34.0 -4.7
1980s 41.3 35.5 -5.9
1990s 37.8 37.9 0
Taiwan 1970s 29.3 28.9 -0.3
Source: Chu, et al. (2000)

Incidence of tax and spend
Now widely argued that
a single rate of tax on in-
come/consumption combined
with equal per capita income
would be strongly redistribu-
tive (IABD, 1998)
But this would only work
if large cash transfers to the
poor were involved (not a fea-
ture of EMs) as in UK; and
above all depends on strong
assumptions about distribu-
tive effect of public goods.
The imputation of the
benefits of public goods by in-
come class is difficult, and
can only be done rigorously
for health and education (a
third or so of public expendi-
ture).
Evidence on direct tax and
growth
Macroeconomic instabil-
ity, debt overhang, social con-
flict much more an enemy of
private investment that tax
(Serven and Solimano)
Empirical literature for
OECD countries indicates lit-
tle or no effect of direct tax
rates on growth.
Strong intuition in en-
dogenous growth theory that
human capital is not a credit
collateral, so inequality hurts
growth (Aghion and Howitt,
1998)
Growth and direct taxation
Our preliminary esti-
mates for OECD countries
indicate a marginal positive
relationship; and direction of
causality remains to be es-
tablished.
Our estimates for
Latin America indicate a
barely significant
(Rsq=1.7%) negative rela-
tionship. 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 re-
duce growth by 0.4% - surely
an acceptable price for the
welfare gain?
Arguments against direct
taxation
Disincentives to saving
and entrepreneurial or pro-
fessional effort; corporation
tax passed on to consumers.
Difficulty and cost of
collection, particularly in
open economics (asset mobil-
ity) with large unregulated
sectors (informal firms) and
no cadasters etc.
What matters is net in-
cidence, 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 ambigu-
ous (Ricardian Equivalence)
and effort disincentives exag-
gerated: inequality may
lower growth.
Collection problem one
of political pressure rather
than administrative incapac-
ity.
Direct taxation (pro-
gressive) 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, cor-
ruption etc. Wealthy avoid
paying tax 'legally'.
Tax evasion justified in
elite discourse by corruption
and waste in the public sec-
tor.
Underlying lack of a
sound social contract: not
only between state and soci-
ety, but between the wealthy
and society.

5
Feb Issue.qxp 2/6/2007 11:11 AM Page 7

DotGazette

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 Professional’s Academy of
Commerce, a leading private

Integrated Audit Training sector institution manned by

Chartered Accountants that
was carefully chosen through a
competetive, fully transparent
The first such training program was launched at DOT's main campus at Lahore selection process. The actual in-
by CBR Audit Wing on 15th Jan 2007. This was a twelve day session and in a sig- struction in the class was less
through the traditional 'lecture'
nificant move, personnel from both the direct and indirect tax jurisdictions par- and more through an interac-
tive highly participative process,
ticipated to make this a truly 'Integrated Training" program. that included 'hands on' com-
puter work.

A
udit is a core component
of the of the Tax Reform
measures currently un-
derway in CBR. are Without ef-
fective audit the Universal Self
Assessment Scheme - an inte-
gral part of the Income Tax Ord
2001- cannot realistically be ex-
pected to yield the results ex-
pected 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 Re-
turns for Audit. Personnel de-
puted 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-
DOT participated fully in the
preparatory phase of the pro-
gram 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 train-
ing sessions. The training pro-
gram ended on 27 - 01 - 2007.

6
Feb Issue.qxp 2/6/2007 11:11 AM
Capacity Building & Staff Training
Programme durring Janurary 2007
In this context the Directorate regularly organizes Capacity Building Programs for of-
ficers 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
C
BR is presently un-
dergoing massive re-
forms whereby
functional as well as in-
frastructural reforms are un-
derway. In this scenario there
is an increased emphasis on
Page 8
DotGazette
pacity Building Programs for
officers and Refresher
Courses for officials of the In-
come Tax Group. In the month
of January 2007, two Re-
fresher Course were organ-
ized for officials such as
UDC's and LDC's. The dura-
tion 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 atten-
dance ensure the level seri-
ousness attached to these
trainings. Each batch com-
prised of not less than 22 par-
the need to develop workforce
capabilities at all levels by
equipping them with appropri-
ate knowledge, skills and abil-
ities .
In this context the Direc-
torate regularly organizes Ca-
ticipants
The Directorate also held
one Capacity Building Pro-
grams for officers of grade17-
18 and one for officers of grade
19 in the month of January .
The focus of these Programs
was sensitization of partici-
pants to major economic is-
sues facing the country in
addition to issues related to
Income tax. Lectures on top-
ics such as WTO and Its impli-
cations for Pakistan, Water
issue and its Economic Reper-
cussions etc. were arranged
from subject specialists. Multi
dimensional training tech-
niques were utilized to elicit
maximum response from par-
ticipants. To highlight the im-
portance of Freedom
Movement and the role of Jin-
nah , the movie "Jinnah" was
shown to the participants and
their views requested in writ-
ing.
7

IN THIS ISSUE
The Taxation of
agricultural in-
come in Pakistan
pg. 2
PREPARATION
Preparation for ATAIC conference
of Heads of Training of Institutes
T
he ATAIC( The Associ-
ation of tax Authorities
of Islamic Countries)
was established in year
2003 at Kula Lumpur. The mis-
sion of the Association is to fa-
cilitate the improvement of tax
administration and promote
Sharia Taxation with particu-
lar 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
1
Malaysia Kula Lumpur. There-
after 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 Ad-
ministration in the Islamic
World. Member countries in-
clude, Bangladesh, Brunei,
Darussalam, Comoros, Egypt,
Guyana, Indonesia, Iran, Iraq,
Jordon, Kuwait, Lebanon,
DOTGazette
A trip down
memory lane
pg.4
Malaysia, Morocco, Pakistan,
Qatar, Senegal, Sierra Leone,
Sudan, Tajikistan and Yemen.
In order to explore opportu-
nities 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. Abdul-
lah Yusuf, is currently the
Chairperson of ATAIC, the Di-
rectorate of Training & Re-
search [DOT] has the honour
of hosting this International
Inauguration of
Gymnasium/Sports
Room pg. 8
PATRON
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
Conference at its Lahore Cam-
pus.
In addition to member coun-
tries, delegates from USA,
Turkey and IBFD [The Nether-
lands] are also participating as
observers. In order to make
the upcoming Conference a
success, the entire staff and
faculty of DOT is actively en-
gaged in organizing this event.
General repairs in the Interna-
tional 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 syn-
ergize to make this event a
success.
 DOTGazette
EDITORIAL The Taxation of agricultural income in Pakistan
T
he March issue of the
DOT Gazette coincides Income from agriculture is exempt from levy of income tax in Pakistan because the law govern-
with the welcoming ing the taxation of income declares such income to be outside the ambit of taxability. The contin-
gentle winds of spring beck-
oning us all in action.. In
uation of this exemption for agriculturists not only deprives the federal exchequer of significant
DOT itself, hectic prepara- potential revenue but also sabotages attempts to inculcate the ideal of voluntary compliance
tions for the upcoming which is central to the functional efficiency of any system of taxation.
ATAIC Conference sched-

uled from 12-14th March are
underway.
These preparations how-
ever, have not gotten in the
way of all important in serv-
ice capacity Building Pro-
grams 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 Febru-
ary. Credit goes to the effi-
cient organizational skills of
the DOT administration for
successfully managing all
these activities, albeit, some-
times simultaneously.
Another achievement for
DOT is the upcoming affilia-
tion with IBFD (Interna-
tional Bureau of Fiscal
Documentation) Amster-
dam, Holland. IBFD is a
world renowned institute
known for research and pub-
lications on international as
well as local fiscal laws and
statutes. This affiliation
would make all current pub-
lications 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 men-
tal capabilities, DOT re-
cently upgraded its Gym /
sports facilities through
purchase of necessary exer-
cise equipment.
A
griculturists in Pak-
istan contribute
nothing to the fed-
eral 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 ad-
dress the situation directly and
design a system of income tax-
ation for this sector that will
cater to it's peculiar features
and yet make the necessary
contribution to the federal ex-
chequer.
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 ex-
ploit to release resources to
fund the overall development
effort.
That there exists an actual
'slack' in the agricultural sec-
tor in Pakistan appears to be
borne out by various indices
viz inefficient cropping pat-
tern, under utilization of fertil-
izer, inadequate and / or
improper use of pesticides / in-
secticides, improper use of ir-
rigation facilities and
mis-utilization of private in-
vestible potential in the hands
of the farmers. Because of this
'slack' Pakistan is no where
near the top among other de-
veloping countries with signif-
icant agriculture in terms of
agricultural productivity and
this not because Pakistan's
agricultural land is inferior but
because that land is not prop-
erly cultivated and the agricul-
turists are not much inclined
to make the extra effort to do
so. If tax on agricultural in-
come 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 produc-
tivity 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 his-
tory 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' taxa-
tion 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 pe-
riod less the subsistence re-
quirement for himself and his
dependent family. What re-
mains after meeting the sub-
sistence 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 capac-
ity to meet taxation levies -
notwithstanding the fact that
their subsistence require-
ments would be larger

2
 DotGazette
as their perception of subsis-
tence would be different from
say a small farmer with a lim-
ited landholding. Thus aver-
age per capital income data is
not really very useful in defin-
ing taxable capacity in a
given sector of the economy.
We must know how this in-
come is actually distributed.
Inequalities of distribution
must mean differences in tax-
able capacity.
'Subsistence' has different
implications in the agricul-
tural and other non-farm sec-
tors. 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 sub-
sistence 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 sec-
tors. Thus families in the
rural areas, in general, do not
spend as much on fuel, light-
ing, house rent etc as do their
counterparts in the non-farm
sectors. Infact the differences
are quite significant. Further-
more, other 'necessary' ex-
penditure that
non-agricultural families in
general and urban families in
particular have to bear is that
connected with clothing,
footwear, medicines, educa-
tion and even entertainment.
In all these areas the agricul-
tural family escapes much of
the high expenditure enigma
that the non-agricultural fam-
ily cannot - though of course
in varying degrees. An addi-
3
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 'sub-
sistence' in the agricultural
sector costs a good deal less
than in the non-agricultural
sector. That being so the inci-
dence of indirect taxes- which
generate the bulk of govern-
ment revenues- is necessarily
markedly less on the agricul-
tural sector than elsewhere.
This therefore adds to the ad-
vantage that the agricultural
sector has through the in-
come 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 - espe-
cially those who speak 'for
and on behalf' of the agricul-
turists- 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 in-
direct taxation which every-
one has to bear must have an
exaggerated impact in the
agricultural sector as the ma-
jority of the population re-
sides there. Thus lower
relative subsistence require-
ments in the agricultural sec-
tor 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 an-
other important aspect to be
considered in the context of
the economic argument in
favor of additional taxation of
the agricultural sector. An
analysis of public expendi-
tures on the current and cap-
ital account would reveal that
government expenditures in-
cidence is much greater than
the tax incidence on the agri-
cultural sector. This implies a
net outflow of public funds
both on the current and the
capital account from the non-
agricultural sector to the
agricultural sector. What it
boils down to is the in-
escapable fact that the agri-
cultural 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 justi-
fication for really strong tax-
ation 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 in-
come from these landhold-
ings 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 progres-
sive 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 impedi-
ments to implementation of a
progressive land tax are pro-
nounced, 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 conjunc-
tion with other specific meas-
ures 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 Pun-
jab University, Mr. Ahmad joined the 1973 Batch of Civil Servants, named "The First Commons".
S
tarting from our
March 2007 issue,
DOT Gazette has initi-
ated a new theme
Captioned - "A Trip down the
Memory Lane". Under this
theme, beginning from 1st
Common onwards, each issue
shall include a special write-
up on Income Tax Officers be-
longing to various Common
Training Programs.
The purpose of these write-
ups is to establish a communi-
cation 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 ed-
ucational background of Mas-
ter 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, result-
ing from the then "Civil Ser-
vice Reforms Agenda", where
officers of various cadres /oc-
cupational groups were to be
commonly trained.
Mr. Ahmad vividly remem-
bers 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 Offi-
cer under the ablest guidance
of Mr. Abdul Aziz Khalid, the
then Commissioner of the La-
hore Zone nearly encompass-
ing the entire areas now
styled as Eastern Region, La-
hore. Mr. Abdul Aziz Khalid, is
a note-worthy poet and elo-
quent writer.
Mr. Ahmad quite emotively
memories his early days
super-ordinates, Ch. Salah-ud-
Din, and Mr. Sikandar Hayat
Khan; the former for his dedi-
cation to extensive develop-
ment works he had under-
taken and the later for being a
strict disciplinarian, a re-
searcher, thorough bred tax
professional, prolific writer
and poet.
The traits of being an effi-
cient administrator with a no-
ticeable passion for reforming
the institution and love for lit-
erary activities can be per-
ceived to be a reflection of Mr.
Ahmad's grooming in the ini-
tial years of service while
working with these super- or-
dinates.
Given the administra-
tive milieu of the department
in those old days, the idea of
getting posted in the Compa-
nies Circle very after his pro-
motion to BS-18 and then,
persistently continuing as as-
sessing 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 Fel-
lowship" at the prestigious
Kennedy School of Govern-
ment (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 confer-
ment 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 (Di-
rect Taxes).
Besides his dedication and
commitment to the official
business, he has been suc-
cessful in not letting his pas-
sion for Sports and Arts
diminish in any way. No won-
der, he is also the Senior Vice
President of Pakistan Gym-
nastic Federation, President
of the Punjab Gymnastic Asso-
ciation and the Editor in Chief
of the pioneer annual publica-
tion 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, mel-
low, subtle and kind person in-
side 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"
4
 DotGazette
FLASH BACK
The year 1973 will go in his-
tory as Year 1 for the Civil
Service of Pakistan, coming
in place as a result of Admin-
istrative 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 ADMINIS-
TRATIVE TRAINING, LA-
HORE. 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-e-
Azam Library".
The batch comprised of
247 probationers, who joined
the common training pro-
gram on 1st December, 1973.
Unlike the later day develop-
ment, group allocations were
not made prior to joining the
Common Training Program
(CTP). Implicit in any transi-
tion are the experimenta-
tions, and differences of
opinion. It was decided that
final group allocation would
be done on the basis of com-
bined marks obtained in the
initial Competitive Exam
and Final Passing Out Ex-
amination (FPOE).
As a bye product of transi-
tion, most probably the dif-
ference 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 Examina-
tion, setting a tough target
for the Establishment Divi-
sion to go for allocations. The
riddle was however resolved
5
when it was finally agreed be- ferent important positions and London. A frequent visitor
tween Establishment Division across the country. between Pakistan and Great
and FPSE that those proba- Coming back to our parent Britain, he is touching new
tioners who cleared the FPOE service - Income Tax Group, heights of glory in interna-
shall have their first choice of the 1st Commoners are hold- tional exposure.
group allocation and the rest ing important portfolios inside Mr. Zahir Kaleem is a jovial
of the probationers would be / outside CBR and working person lively to talk, who ex-
allocated on the basis of joint continuously to serve the de- celled amongst his batch-
marks of competitive exami- partment and the country to mates to an international
nation and FPOE, irrespective the best of their abilities. position in CATA. He is
of their not getting through Our Income Tax Batch from presently working as Execu-
the exam. Courtesy the transi- 1st Common comprised of 20 tive Director of Common
tion, one of our batch mates bright and committed officers. Wealth Association of Tax Ad-
who was the last to join the Describing persons is gener- ministrators (CATA), a presti-
training program due to ally difficult but once it comes gious slot for a number of
dropouts of few successful to your known ones it turns common wealth countries in
candidates, got allocated to out to be an uphill task. Look- the World.
DMG group as he had cleared ing back through the prism of Mr. Muhammad Khan, hav-
the FPOE. time takes one back to memo- ing command over both
A hind sight interpretation rable moment. Writing about 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 Direc-
tor), 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 friends and batch mates is al- and hailing from Attock, is
Common Training Program ways gratifying: presently posted as CIT (Ap-
has served an important na- Mr. Qadirul Jalil is a good peals) at Islamabad. He is a
tional purpose of inter-provin- friend and batch mate, who friend of friends, who is living
cial harmony and inter-group opted for retirement from his life in his own peculiar way
cohesion. By the grace of God, service on his own initiative. of living.
a sizeable number of 1st com- He is presently running a con- Mr. M. Illyas Sheikh is a
moners are contributing to the sultancy and family sports very lively personality from
welfare of the homeland in dif- business in Lahore, Sialkot Lahore. He is presently posted

as Commissioner (Southern
Region), Karachi. Now settled
in Karachi, he is an active par-
ticipant of social life in the me-
tropolis.
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 negotia-
tion of International Tax
Treaties. With God gifted qual-
ities and religious - cum - mys-
tic 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 vir-
tuous 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 offi-
cer; 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 pe-
riod of transition and reforms
and is managing the affairs ex-
cellently.
Khawaja M. Sadiq Butt, a
representative from the beau-
tiful valley of Kashmir, is a col-
league who was always
smiling and ready to help. He
is now retired from service
and is enjoying a peaceful fam-
ily life.
Mr. Abdul Ali Khan is
presently posted as Chief Co-
ordinator (DPC). Mr. Khan al-
ways 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 intro-
duced 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 safe-
guards the characteristics of a
Pakhtoon.
Mr. Umer Khan M ohmand
was our only batch mate from
DOTGazette
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 Ki-
noos and Punjabi diet before
bidding farewell to the serv-
ice!!
Mr. Inayat Ullah Kashani,
a Baloch to the core, is our
only batch mate from
Baluchistan. He possesses a
witty personality and an intel-
ligent bearing. He has retired
from service and one of his
sons qualified for the Compet-
itive Examination and joined
the DMG Group.
Mr. Abdul Ghani Channa is
presently posted as C.I.T.,
(Southern Region) Karachi,
Channa is a thorough gentle-
man who has to his credit
noteworthy publications in
Sindhi literature.
Mr. Iqbal Muzaffar is an-
other accomplished batch
mate of ours who is presently
posted as D.G. RTO
(Rawalpindi). A witty and af-
fectionate 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 inde-
pendent life. He is presently
running a successful consul-
tancy in Karachi.
Sardar Irshad Shaheen is
presently posted as the Re-
gional Commissioner (AJK)
and in that capacity he is in-
charge of all taxes. A poet and
writer, he used to organize
memorable literary gather-
ings while he remained posted
in places such a Gujranwala,
Fasilabad, Sialkot and Sar-
godha. 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, obvi-
ously leaving a sense of pro-
found grief amongst the
survivors. All of them are so
close to my heart that though
physically apart, their pres-
ence is always felt by my soul .
A brief introduction of those
friends;
Mr. Munir A. Sheikh was a
thorough gentleman and pro-
fessional, who left this world
at the prime of his career, leav-
ing an indelible impression of
his nice, disciplined and sober
personality for his batch-
mates, colleagues and friends.
His last assignment was as
Member ITAT.
Mr. Aftab Ahmad Kohati
was a hardworking and com-
petent 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 re-
signed 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, account-
ing and law. He was always
ready to guide fellow colleagues
in solving problems while under-
training in the academy. His last
posting was as C.I.T. Corporate
Region, Karachi.
6
 DotGazette
TRAINING these training programs were si-
multaneously organized from

Training Activities Undertaken in February

12.02.07-24.02.07. Each group
comprised of more than 20 offi-
cials each. The focus of these
trainings was to explain the new
The purpose of all such trainings and capacity buildings remains to expand the horizon of mid provisions of Income Tax Ordi-
career officers of income tax group through lectures and group tasks. nance 2001 and to upgrade the
computer skills of the officers.
The Directorate also organized two separate capacity building programs/trainings for In- The second session of the In-
come Tax Officers (ITO)/Special officers and Supervisors/Administrative officers. tegrated Training Program com-
menced from 19th February
2007 and as previously officers of
both Income tax and sales tax

T
he DOT Lahore Cam-
pus remained busy in
conducting various Ca-
pacity Building pro-
grams 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 Acad-
emy 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 rele-
vance to incidence of taxes and
measurement of economic
growth. Extended lectures and
group discussions were held on
topics such as " The phenome-
non of Under ground Economy,"
" WTO-Concepts & Implication" ,
"Integrity Management ( Work-
ing of Invigilence Wing
,CBR)"etc. In addition , two lec-
tures were organized on " Sales
tax-Concept & Practice in Pak-
istan" in view of the future
merger of two internal taxes in
RTOs and LTUs. Mr. Akhtar Ali
Naeem (Ex-Collector Customs )
delivered these lectures fol-
lowed by a lively Q&A session. In
all 32 participants in grade 19
from all over Pakistan under-
went this Program. The pur-
pose of all such trainings and ca-
pacity buildings remains to ex-
pand the horizon of mid career
officers of income tax group
through lectures and group
tasks.
The Directorate also organ-
ized two separate capacity build-
ing programs/trainings for
Income Tax Officers (ITO)/Spe-
cial officers and Supervisors/Ad-
ministrative officers. Both of
participated in the twelve days
training program. Largely based
on case study approach, the pur-
pose of this training is to equip
the officers of audit wings of both
services in conducting mean-
ingful audits. The Directorate
remained fully associated in
planning the course design and
in provision of all allied infra-
structural facilities to the partic-
ipants of the course..

7
DOTGazette
Inauguration of Gymnasium/Sports Room
Y
et another achievement
in the month of Febru-
ary for DOT was the in-
auguration of the newly
created Gymnasium /Sports
room .The need for proper
gym facilities complete with
necessary exercise equip-
ment was being felt for the
last few months. All modern
training campuses provide
gym/sports facilities for ensur-
ing mental as well as physical
discipline amongst the
trainees.
Recognizing this need , our
Director General, Mr. M.
Munir Qureshi , took a per-
sonal 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 probation- there shall now be no excuse

ary officers as well as by the
faculty. In future , there are
plans for construction of a sep-
arate Gym complete wi th
sports facilities like Tennis ,
badminton etc. under one
roof. For faculty members
for extended waist lines!!
Also present at the inaugu-
ration were Mr Haji Ahmed
, Regional Commissioner
(Eastern Region ) and Mr.
Noorul Amin Hotiana (Add.
Commissioner (HQ)).

Director & another doctor!! ) Thus equipped , DOT is

surveyed the market and se-
lected the equipment compris-
ing of electronic/ manual tread
mills, Air bikes, Stepper,
Twister etc.
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-

8
pril Issue.qxp 4/9/2007 10:35 AM Page 1

DOTGazette
IN THIS ISSUE

ATAIC International Conference of ATAIC

Heads of Training Institutions, March 12-14, 2007, PICTORIAL
DOT (DT) Lahore, Pakistan. pg.1 pg. 5

PATRON
M. Muneer Qureshi
(Director General)
STAFF ADVISOR
Dr. Hamid Ateeq
(Additional Director)
EDITOR-IN-CHIEF
Amna Faiz BhattY
“....The theme of the conference was ‘Technology as a Force Multi- (Deputy Director)
plier in training and the workplace’....." LAYOUT & DESIGN
Zafar Iqbal
he first Conference of veloped countries where a yield above are commonplace.

T
ATAIC Heads of
Training Institutions
was held at the Direc-
torate General of In-
come Tax (Training and
Research), Lahore from March
12 -14, 2007.
Nine countries represented
by seventeen delegates, includ-
ing 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 train-
ing of direct tax person-
nel 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
Directorate General of
of 20% and above In the ATAIC group the aver-
vis a vis GDP is age "aggregate revenue" [tax
Income Tax Training &
not uncom- and non-tax revenue] for the
Research, Sutluj Block,
mon. And in entire group comes to just Allama Iqbal Town,
the highly de- 419.5 bill dollars US which is Lahore.
veloped Scan- just 12% of the overall GDP Ph: +92-42-7842710
dinavian of 3474 billion dollars. Consid- PABX: +92-42- 7830211
countries tax ering that the aggregate rev- Fax: +92-42- 7842702
to GDP ratios of enue includes both tax and Web: www.dgtrdt.gov.pk
40% and non tax revenue, the yield e-mail: dg@dgtrdt.gov.pk
from taxation is cer-
tainly very much to GDP ratio of just about 10%.
on the lower Needless to say this needs to be
side. Coun- improved drastically. Only three
tries like countries of the ATAIC group,
Pakistan oil rich Kuwait, Qatar and Iran
have a tax are able to generate aggregate
revenues signif-
icantly in ex-
cess of their
aggregate expendi-
tures.
Consistent with the Confer-
ence theme, presentations were
made on a wide range of topics
including Forensic Audit, Com-
puter Forensics, Simulation
ATAIC Chairperson, Mr M Abdullah Yusuf, the driving force methodology, Computerization
behind the March 2007 Conference of ATAIC Training Heads, in the tax department and it's
in whose tenure as Chairman, CBR, CBR has, todate, hosted role in selecting Returns for
three ATAIC Conference (April 2005, on Revenue Forecasting,
audit, data warehousing, multi
pril Issue.qxp 4/9/2007 10:36 AM Page 2

DOTGazette
SYNDICATE BRAINSTORMING DOT WALKABOUT

CLOSING SESSION

POST CONFERENCE
pril Issue.qxp 4/9/2007 10:36 AM
DOTGazette
EDITORIAL
arch 2007 was one hec-
M tic month. It was the
month of the Conference-
The first meeting of ATAIC
Heads of Training Institu-
tions since the inception of
the Association in 2003. Many
months of diligent prepara-
tion 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 Mem-
ber 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 con-
tributed to a pleasant exten-
sion 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 calligra-
phy - by the great Sadequain.
The brand new Conference
Room - the main conference
venue- was another signifi-
cant 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 gener-
ated in these three memo-
rable days at DOT will
Page 3
dimensional training methodol-
ogy etc
The use of modern technology
has revolutionized work place
practices in all areas. Informa-
tion 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.C. Whatever
it's configuration, given appro-
priate software, a networked en-
vironment and suitable
peripherals, this machine has
magnified enormously the
human capability to store, re-
trieve and process vast amounts
of raw data.
In revenue mobilization, the
training of tax personnel in di-
verse disciplines is today heav-
ily dependent on modern
technology. Forensic audit, com-
puter 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, de-
tect tax evasion, bring the con-
cealed / suppressed income to
tax and, in selected cases, suc-
cessfully prosecute tax evaders
in a court of law, leading eventu-
ally to a significant jump in gov-
ernment revenues - revenues
necessary to launch programs
of economic development and
meet other pressing expendi-
tures, including those on De-
fense and Administration.
At the DOT(DT) main cam-
pus at Lahore there has already
been a sea change in the induc-
tion of modern technology to im-
part 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 compo-
nent of the new technology ded-
icated to provide training on the
Tax Management System
(TMS) newly developed by Pak-
istan 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 sce-
narios using dedicated propri-
etory 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 jour-
nals and this promises to lead to
a quantum jump in DOT(DT)
training potential. Incidentally,
IBFD membership does not
come cheap and CBR's willing-
ness to commit significant re-
sources to the much sought
after membership of this presti-
gious institution is symbolic of
it's firm resolve to upgrade the
training and research establish-
ment and bring it up to Interna-
tional standards.
The first Conference of ATAIC
Heads of Taxation Training In-
stitutions was inaugurated on
the 12th March 2007 by Mr
Salman Nabi, Member (Direct
Taxes), CBR and in his inaugu-
ral 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 person-
nel within the ATAIC group. He
pointed out that most ATAIC
recurring fiscal deficits and
there was an urgent need to
augment revenues meaning-
fully which can only happen if
there was a very well trained
workforce of taxation personnel.
Mr Salman Nabi drew atten-
tion to the fact that in an era of
globalization and economic inte-
gration it was imperative that
taxation personnel are familiar
with the latest investigative
techniques and understand the
relatively new science of com-
puter forensics for which a con-
certed 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 fore-
casting was organized using the
micro simulation approach de-
veloped 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 pro-
ceedings delegates from all the
participating countries made
presentations and there was
something of value in each pres-
entation. However the presenta-
tions by the delegates from
Malaysia and Turkey do need
special mention. Malaysia has
made significant progress in de-
veloping 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
pril Issue.qxp 4/9/2007 10:36 AM
has more than four million reg-
istered taxpayers (20% odd).
Likewise, Turkey has much to
offer in computerization gener-
ally and more particularly, data
ware housing and although not
yet an ATAIC Member but be-
cause of it's active participation
as an 'Observer' in all ATAIC
conferences / meetings, is iden-
tified as a Best Practices coun-
try in these areas that ATAIC
members can emulate. The
progress made by Turkey in the
imaginative use of computers
and related Information Tech-
nology is evident from the fact
that 91% of corporate tax tax-
payers 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-chan-
nel. This translates into savings
of some 6000 tons of paper annu-
ally 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) facil-
ities have been used to provide
training to a core group of mas-
ter trainers who are now in a po-
sition to impart training to
members of CBR's field forma-
tions in different parts of the
country. The TMS is unique in
that it has been developed by
CBR / PRAL using in-house ex-
pertise. It is based on the Oracle
Data Base platform and is being
used to input tax data to build a
'taxpayers profile' and to imple-
ment and store statutory orders
of income tax assessment, rec-
tification and issuance of re-
funds.
Mr Muhammad Talha, Mem-
ber (HRM) CBR, [Pakistan]
made a very succinct presenta-
Page 4
/ Capacity Building and ex-
plained how the reform process
has evolved since 2001 with spe-
cial 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-di-
mensional training methodol-
ogy in vogue since 1947 [and
even earlier!], the new holistic,
multi-dimensional training
methodology exploits new ap-
proaches to learning including
dynamic, interactive class par-
ticipation, case study, role play
and simulation. It was explained
that this approach seeks to re-
late 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 econ-
omy' is one such real world sce-
nario in which the new training
methodology has promise. The
UGE is of great significance to
most developing countries in
that this segment robs the ex-
chequer 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
DotGazette
tually begins- gave a very lucid
presentation on the initial train-
ing process and explained how
they too at CSA are using mod-
ern approaches to teaching to
achieve optimal benefit.
At the end of the three days of
intensive deliberations, the del-
egates agreed on nineteen rec-
ommendations and the
following communiqué has been
released by DGDOT(DT) and
sent to all ATAIC Members:
RECOMMENDATIONS OF
THE DELEGATES PARTICI-
PATING IN THE CONFER-
ENCE 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, cor-
rected / amended, where neces-
sary, 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 Author-
ities of Islamic Countries
(ATAIC) will continue to meet at
regular intervals to discuss and
consider issues pertinent to the
training of their taxation person-
nel.
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 ef-
forts 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 com-
prehension of their Taxation
especially those likely to partic-
ipate in International Confer-
ences.
5. When ATAIC Mem-
bers hold Conferences, where
possible, simultaneous transla-
tion facilities
(English to Arabic) will be pro-
vided.
6. There shall be im-
proved sharing of relevant infor-
mation between ATAIC
Members and the World Wide
Web /Internet will be fully and
properly put to use in this con-
text.
7. Relevant statistical in-
formation / data will be organ-
ized and maintained in a
common, mutually acceptable
format, with effective safe-
guards / 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 person-
nel 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 in-
struction, including "informa-
tion technology."
10. Members will also use
dynamic but "appropriate,"
multi-dimensional training
methodologies, including 'simu-
lation modules,' in imparting in-
struction.
11. Members will consult
each other on curricula for dif-
ferent subjects in which instruc-
tion 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.
pril Issue.qxp 4/9/2007 10:37 AM
DOTGazette
information technology, includ-
ing computers and related pe-
ripheral equipment, will be
accelerated in training institu-
tions.
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 partici-
pant) will be "Best practices
Model" in computerization and
data warehousing.
16. Pakistan's experience
with 'Self Assessment' / 'volun-
tary compliance,' 'Withholding
Taxation' and 'Joint Audit Train-
ing' will be referred to by Mem-
bers in designing their training
Page 5
programs.
17. The Pakistan Direct
Taxation Training Institution
(DOT(DT)) will make necessary
arrangements to provide train-
ing in English Language com-
munication 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 Train-
ing Manuals will be digitized
and On-Line access by Mem-
bers 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 Di-
vision and the Chairman CBR-
in person to address the confer-
ence delegates on the final ses-
sion of the conference. Mr
Abdullah Yusuf congratulated
the delegates on a 'job well
done' and exhorted them to
make full use of the latest tech-
nological developments to in-
crease the efficiency and
productivity of the ATAIC taxa-
tion personnel. He said that
while there was no need to try
and "re-invent the wheel," nev-
ertheless, it was necessary that
developing countries be aware
of latest technological develop-
ments and be willing to use
such technologies after impart-
ing 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 mo-
bilization. In this context he re-
ferred especially to 'data
warehousing' and 'information
technology' and advised ATAIC
members to share information
in these areas.
Contributed by
M Muneer
Qureshi
pril Issue.qxp 4/9/2007 10:37 AM Page 6

DotGazette
INAUGURATION CEREMONY
pril Issue.qxp 4/9/2007 10:39 AM Page 7

DOTGazette
CONFERENCE SESSIONS
pril Issue.qxp 4/9/2007 10:39 AM Page 8

DotGazette
CULTURAL EVENTS
ay Issue.qxp 5/8/2007 12:50 PM Page 1

DOTGazette
IN THIS ISSUE

An Interview A trip down AN Awareness

with Observers the memory Workshop
from IBDF lane pg. 7
pg.1 pg. 3

PATRON
M. Muneer Qureshi
(Director General)
STAFF ADVISOR
Dr. Hamid Ateeq
(Additional Director)

I
n the month of March,
2007 DOT paid host to
ATAIC Conference of the
Heads of Training Institu-
tions. Two observers from
IBFD Mr. Aurobindo Pon-
niah (IBFD Head,
Malaysia and Dr. V. Van Kom-
mer (Manager, Government
Consultancy) attended this con-
ference. Mr. M Muneer Quershi
DG DOT interviewed the two
gentlemen on this occasion and
an extract of this interview is re-
produced as under.
Q.1 Kindly dilate upon the
mandate and functions of IBFD
(International Bureau of Fiscal
documentation).
Ans: IBFD is a foundation es-
tablished in 1938 with the view
to maintain fiscal documenta-
tion that could benefit the tax
world at large. We are an inde-
pendent organization based in
Amsterdam, the Netherlands
and run by a board of trustees
comprising of eminent tax per-
sonnel. Over the years our li-
brary 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 acad-
emy in Amsterdam for training
government officials and corpo-
rations. This academy offers in-
house structured courses to
interested governments and
multinationals e.g. IBFD in col-
laboration with the Malaysian
Tax Academy are running
courses on" transfer pricing" for
Right to left: Mr. Aurobindo Ponniah (IBFD Head, Malaysia, Dr. V. Van
Kommer (Manager, Government Consultancy)
the Malaysian Revenue Ser-
vices. Dr. Kommer, (Manager,
Government Consultancy)
added that their services also
included advising various gov-
ernments on policy implemen-
tations.
Q.2 How many countries in the
developing world have benefited
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 re-
mains a barrier for most of
Latin America as our medium of
training is English.
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 Ams-
terdam and have a small sub-of-
fice 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 re-
gion.
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 re-
gion we assign two researchers
with requisite qualifications
such as an MBA or PhD. These
researchers have further con-
tacts amongst local correspon-
dents in a country for supply of
information on tax matters. For
Pakistan our local correspon-
dent for the last many years is
ay Issue.qxp 5/8/2007 12:50 PM
EDITORIAL
T
he warm breeze of a
typical summer, did
nothing to dampen
our enthusiasm for a mo-
mentum driven month of
April following a hectic
March . The resounding
success of the ATAIC (As-
sociation of Tax Authorities
of Islamic Countries) Con-
ference of Heads of Train-
ing 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 let-
ters of appreciation issued
by the Director General's
office to all team members
(may it be officers or offi-
cials) gave a new impetus
to the DOT administration.
Dot has always been a
centre for imparting
training as well as an av-
enue for much needed dis-
course and discussions in
the present phase of re-
form & change . In order to
apprise all stake holders
amongst the field forma-
tions of the reform initia-
tives and the way forward,
a one day "Awareness
Workshop" was organized
in collaboration with the
HRM wing (CBR) in the Di-
rectorate. Officers belong-
ing to both direct as well as
indirect taxes participated
in this workshop. Not for-
getting the all important
task of training, the Direc-
torate also managed to
conduct a Capacity Build-
Page 2
....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 lan-
guage. For example in case of a
tax treaty we request the gov-
ernment for original copy of that
treaty. Any translation or tran-
scription by our correspondents
with any change incorporated is
not acceptable to us.
Q.5 Do you hire correspon-
dents 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 profes-
sionals.
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
DOTGazette
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 train-
ing of officers working in LTUs.
Even in Holland, their LTU re-
mains connected with the IBFD
data base. We can further com-
pare tax systems of various
countries to develop "best prac-
tices model" for improving the
implementation side of a reform
initiative.
Q.7 Can you tell us something
about your educational back-
grounds?
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 of-
fice in Malaysia.
(Dr. V. Van Kommer) I am
also a Law Graduate and joined
the tax service as a Tax Inspec-
tor. Having served in various ca-
pacities, I then joined the
diplomatic corp. I am also an au-
thor of various books on issues
such as Performance Manage-
ment, Effective Tax Administra-
tion 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 com-
mon perception for a research
foundation is that people in-
volved in research generally
have an economics background.
Ans: Yes, it is interesting that in
countries like India, Pakistan,
Indonesia, Malaysia etc. gener-
ally economists handle tax ad-
ministration whereas the trend
is different in countries of Eu-
rope and even in America
Q.9 Do you use video confer-
encing as a tool in you organiza-
tion?
Ans: No. E-learning with all its
potential, has certain limita-
tions. We have started using e-
learning for maintenance
purposes e.g. case studies of
laws. Huge investment is re-
quired for e-learning and gener-
ally 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 accessibil-
ity to experts.
Ans: It is our experience that
face to face interaction in a class
room environment is more re-
warding 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 ex-
perts from IBFD that they
would be willing to lend their ex-
pertise in implementation of the
reform initiative currently
under way in CBR.
Interviewed by:
M. MUNEER
QURESHI
(DG DOT)
ay Issue.qxp 5/8/2007 12:50 PM Page 3
DOTGazette
A trip down the memory lane
C
In course of his career Mr. ontinuing with our
journey into the
Khawar attended various past, we now move
to the 2nd Common
international courses such as Income Tax Batch. The
a course on "Computer DOT gazette feels honored in
having Mr. Khawar Khurshid
Systems Accounting and Butt, Member, ITAT, Lahore
Auditng" held in University of to share the memories of his
common with us.
Glasgow, U.K. in 1984 and Mr. Khawar did LL.B. and
"Advanced Tax Management Masters in Political Science
from the Punjab University,
Course" organized by the Lahore. His display of lead-
ership qualities was appar-
Japanese International ent even during his student
Cooperation Agency (JICA) at life when he was elected
President of Students Union
Tokyo in 1991. of Forman Christian College,
Lahore for the session 1969-
70. He was also an accom-
plished debater of F.C.
College and Punjab Univer-
sity 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" or-
ganized by the Japanese Inter-
national Cooperation Agency
(JICA) at Tokyo in 1991.
During his distinguished ca-
reer, Mr. Khawar served on
various important assign-
ments. His humility and
straight forward approach
makes him a model officer and
a good human being. As re-
marked by one of his junior
colleague "Khawar Sahib be-
lieves in leading not through
criticism or coercion but
through reposing trust in jun-
ior officers especially new en-
trants to the service".
FLASHBACK
The 2nd Common Batch of
Civil Services Academy com-
prised of approximately 245 Of-
ficers. Continuing with the
policy followed in the earlier
batch, the service allocation
was done by the Establish-
ment Division after completion
of the Common Training Pro-
gram at Civil Service Academy
(CSA), Lahore.
Learning from the experi-
ence of 1st Common Batch
where a number of probation-
ers 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 accommoda-
tions were available at three
different locations for the pro-
bationers namely: The Walton
Campus, The International
Hotel (Upper Mall) and The
DMG Campus. Mr. Khawar
Campus was located in a rela-
tively 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 pro-
bationers from Walton Campus
to the Main Campus for weekly
extension lectures etc. An-
other honor for Mr. Khawar
was his selection as PMC
(President Mess Committee)
at the CSA (Watlon Campus).
Mr. Khawar fondly remem-
bers his departmental training
and the teachers who im-
parted training with all due
dedication and devotion. Mr.
Muhammad Afzal affection-
ately known as "Lala Afzal"
was the Director at the Acad-
emy, which was situated at In-
come 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 & Re-
search (DOT) where a pur-
pose-built Campus provides
best possible hostel and trans-
port facilities to the Probation-
ers. The Departmental FPOE
of the Income Tax Officers was
conducted by CBR itself in
those days and the examina-
tion hall was located at Nabha
Road (presently the Audito-
rium).
Moving to the 2nd Common
ay Issue.qxp 5/8/2007 12:50 PM
tioners, it comprised of 19 as-
piring young Tax administra-
tors who by the Grace of Allah
today are holding important
assignments inside and out-
side CBR. The Batch has the
distinction of being a very uni-
fied group which saw the
promulgation and application
of three Income Tax Ordi-
nances starting from Income
Tax Act, 1922 to the new In-
come Tax Ordinance, 2001. A
brief introduction of the Batch
who are now more of a family
than colleagues with associa-
tion 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 Re-
gions at Karachi. He is cur-
rently 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 sta-
tions within Pakistan. He is in-
terested 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 Manage-
ment Course" organized by the
Japanese International Corpo-
ration 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
Page 4
University, Islamabad. A very
humble man , who has inter-
est in Sufism. While under
training at NIPA (National In-
stitute of Public Administra-
tion) in Quetta in the year
1993-94, he took a personal ini-
tiative to visit the backward
and far-flung areas of
Baluchistan. After promotion
to Grade-21 in 2003, he was
posted as RCIT, Central Re-
gion, Multan. He is currently
posted as Coordinator Special
Initiatives in CBR.
4. Mr. Naseer Ahmad
Currently serving as Mem-
ber, 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 re-
flects 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 re-
signed from service in the year
DOTGazette
2003.
6. Mr. Amjad Javed
Hashmi
Mr. Amjad is the most profi-
cient 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 Universi-
ties. He also has to his credit
various law related publica-
tions.
7. Mr. Muhammad Aslam
Mr. Aslam belongs to Mandi
Bahauddin. He has done Mas-
ters in Economics from Punjab
University and has good com-
mand over Income Tax and re-
lated Laws. He is currently
posted as CIT, Appeals, Gu-
jranwala.
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 be-
fore joining the Income Tax
Service. Bold and straightfor-
ward, he is known to be a gen-
tleman 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 dis-
tinguished 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 po-
sition of Additional Secretary
(In charge), Women Develop-
ment Division in the Ministry
of Women Development at Is-
lamabad. He has done "Ad-
ay Issue.qxp 5/8/2007 12:50 PM Page 5

DOTGazette
Mr. Humayun is currently
serving as Regional Director,
NAVTEC (National Vocational
and Technical Education Com-
mission), 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 Univer-
sity. Opting for voluntary re-
tirement in 2001, he is now
permanently settled in USA.
16. Mr. Muhammad
Iftikhar Khan
Hailing from FATA Janni
Khel Wazir Tribe, Mr. Iftikhar
has done MA Economics from
Peshawar University and Mas-
First Row (sitting L to R) Abdul Latif Khan (Secretary Mess Committee II Term), Mohammad Yousaf Alvi, M. Zafar Ali Rizvi (Asstt Di- ters in Strategic Studies from
rector), 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 N.D.U, Islamabad. A good-na-
tured man, he has always dis-
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, played the traditional Pathan
Tariq Jamil Syed Sardar Hussain Shah (Member Mess Committee I Term), Mohammad Sharif, Ghulam Shabbir Khan Baluch, Nazir hospitality. He has mostly
Ahmad, Malik Bashir Ahmad served in NWFP and is cur-
Third Row (sitting L to R) Mohammad Ali, Maqbool Ahmad, Sarfraz Khan Habibi, Abdul Rauf Chaudhry (Member Mess Committee rently posted as CIT, Appeals,
I Term), Qaiser Ali Shah (Member Mess Committee I Term), Mohammad Wasim, Mohammad Ayub Khan Tarin (Member Mess Committee Peshawar.
II Term), Shahid Najm, Masud Muzaffar, Mohammad Saleem 17. Mr. Muhammad
Fourth Row (Standing L to R) Mohammad Ihtesham Khan, Tariq Shafiq Khan (Perfect), Saif Alf, M. Akram Shaheedi, Mohammad Ishaque Memon
Ashraf Khan, Nazir Hussain, Iftikhar Hussain Tariq
Belonging to Deeplo
vanced Tax Management Mr. Liaquat has done M.A. sionally sound officer. She (Tharparkar), he is a graduate
Course" under the auspices of Economics from Punjab Uni- was the first amongst 2nd from Sindh University. Before
Japanese International Corpo- versity, Lahore and Masters in Common, to be promoted to joining the Income Tax Group,
ration Agency (JICA). He has Strategic Studies from Na- Grade-21 (in the year 2000). he served in Habib Bank Lim-
also attended courses at Royal tional Defence University Is- She is presently posted as DG, ited for two years. He is cur-
Institute of Public Administra- lamabad. A very well read and RTO, Peshawar, on deputation rently posted as
tion, UK and Management intellectual person, he has also from Ministry of Law & Jus- Commissioner, Zone-A,
Course at Harvard, USA. served as Member Directing tice. Karachi.
10. Mr. Masood Ali Staff in NIPA, Peshawar. He is 13. Mr. Bilal Khan 18. Mr. Arjundas Oad
Jamshed currently serving as Member, Mr. Bilal has done Masters (Deceased)
Mr. Masood has done ITAT, Peshawar. in Economics from Peshawar Mr. Arjundas hailed from
M.Com. from Hailey College, 12. Mrs. Abdia Ali University and Masters in Sindh (Rural). He met with a
Punjab University. Has great Mrs. Abida is the only lady Strategic Studies from Na- fatal road accident way back
command over accountancy officer in 2nd Common Batch. tional Defense University Is- in 1978. A jovial person who
and Income Tax Law. He has She holds an M.Sc. in Home lamabad. He is currently died very young which put an
a jovial personality and com- Economics and has done Mas- serving as Member National end to an otherwise bright and
mands respect amongst batch- ters in Strategic Studies from Tariff Commission, Islamabad. promising young officer.
mates and juniors alike. He National Defense University He attended "Common Wealth Physically a strong man, he
has never believed in compro- Islamabad. A very soft spoken Advanced Management was accompanied by his fam-
mising his principles even in and gentle person, she has Course for In-service Tax Offi- ily when the accident hap-
ay Issue.qxp 5/8/2007 12:50 PM
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.1 What impressions are you
carrying back viz-a-viz- our
training academy?
Ans: I was pleasantly sur-
prised, you have the best at the
DOT Academy. Your computer
labs are very impressive and up-
to-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 to-
gether, but I must admit that be-
cause of the language barrier,
we sometimes had problems.
We need to overcome this bar-
Page 6
concerned, we must come up
with concrete suggestions for
the future and have regular fol-
low-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 ap-
ples with apples. The Malaysian
Tax Academy handles a number
of cross disciplines. We have
hostel accommodation compris-
ing 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 con-
cerned we are more or less at
par, however, your Auditorium
DotGazette
Q.5 What are your sugges-
tions to make training more ef-
fective?
Ans: I think as far as training
is concerned, there is a large
gap between the levels of train-
ing needed for different coun-
tries, e.g. as revealed during
country presentations by par-
ticipants of this Conference,
some countries lack even the
basic level of training,
whereas, countries such as
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 fur-
ther cooperation between Pak-
istan and Malaysia in the field
of tax administration?
Ans: I think we need to sit
and requirements of our coun-
tries 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 in-
corporated in a training con-
ference but a purely Technical
Training Conference should be
kept separate. In future, we
need to confine ourselves to a
"Conference on Training Is-
sues of Heads of Training Insti-
tutions" 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)
ay Issue.qxp 5/8/2007 12:50 PM Page 7

DOTGazette
ANAWARENESS WORKSHOP

Mr. Muhammad Talha,

T
he success of any re- with a road map of future, a ber (Audit) spoke on the occa-
form initiative is de- one day "Awareness work- sion. In his opening speech,
Member (HRM), Mr. pendent upon its shop" was held in DOT, La- Mr. Muhammad Talha ex-
skillful execution and hore in collaboration with plained in depth the HRM ini-
Ather Maqsood Ahmed, involvement of a motivated HRM (Wing) CBR. tiatives and the progress on
Member (FR&S) and Mr. workforce. In order to keep all Mr. Muhammad Talha, Mem- projects such as restructuring
field officers of CBR well in- ber (HRM), Mr. Ather Maq- of offices, the legal framework
Abdur Razzaq, Member formed of the progress so far sood Ahmed, Member (FR&S) of reforms, the procedure of
of reform initiatives along and Mr. Abdur Razzaq, Mem- job placement through IJP
(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.
ay Issue.qxp 5/8/2007 12:50 PM
DOTGazette
(Internal Job Posting) and the
renewed focus on training and
development in liaison with
institutions such as LUMS,
IBA etc. He informed the au-
dience of the pace of reforms
resulting in setting up of re-
gional offices where place-
ment of officers was being
done in a transparent manner
by advertising the jobs on in-
ternet. He explained in depth
that the focus was on develop-
ing a professional work force
whereby the new entrants to
service went through a one
year MBA Taxation program
from IBA, Karachi. For mid
career officers , training mod-
ules in liasion with LUMS and
IBA, Karachi were being final-
ized.
Mr. Ather Maqsood Ahmed,
Member (FR&S) dilated upon
the Tax policy and Adminis-
trative reform initiatives and
the outcome so far. He high-
lighted 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-
Page 8
tackle macro economic and
fiscal imbalances, a three
pronged strategy comprising
of resource mobilization, ex-
penditure management and
debt deduction and exit strat-
egy were envisaged. He ex-
plained that as a result of this
strategy, tax rates had been
lowered to reduce tax evasion,
"tax on production and invest-
ment" had been replaced by
"tax on consumption and in-
come" and there was a grad-
ual reduction of corporate tax
rates to make investment in-
ternationally competitive. As
scheme under the Income Tax
Ordinance, 2001. He informed
the audience that the audit wing
in collaboration with a profes-
sionally qualified academy and
DOT, Lahore had so far trained
128 Audit Officers/Officials be-
longing to both Income Tax and
Sales Tax to conduct meaning-
ful audits by applying modern
investigative techniques.
These presentations were fol-
lowed by a detailed Q & A ses-
sion where the participants
raised important queries re-
lated to the future of audit and
job placements through IJP.
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 fi-
nancial year 2005-06 as com-
pared to financial year
2004-05.
Mr. Abdur Razzaq, Member
(Audit) highlighted the per-
formance of the Audit Wing and
the initiatives undertaken to de-
 w w w. d g t r d t . g o v. p k
By:
M Muneer
Qureshi
DG (DOT)(DT)
T
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, generat-
ing 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.
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.
11th Issue
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
June, 2007
INSIDE THIS ISSUE
Tax Base Broadening
By: M. Muneer Qureshi
Page - 1
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 prefer-
ence 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
A
s the financial year 2007
draws to an end , it is
time to see in retrospect
and ponder on the past perfor-
mance 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 (12-
14th 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 infrastruc-
ture & 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 institu-
tion.
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.
Pakistan Tax Conundrum
Econ Sector
Agriculture
Mining & Quarrying
Manufacturing
Construction
Electr & Gas Distrib
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 substan-
tial 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 waste-
land (banjar) for all they care- it
is not too difficult to hoodwink
the federal tax authorities on
the bonafides of the invest-
ments 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
11th Issue
agricultural business contrived
artificially through the creation
of "ghost" liabilities, has
provided legal cover to substan-
tial 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
Share in GDP
20.2
1.9
17.1
2.2
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 agricul-
turist. Again, since bank
accounts are as a rule not
According to researchers and Government
statistics, in Pakistan 40% of the richest
landowners own 70% the arable land.
June, 2007
reported to the tax authorities -
only those accounts are
reported that "suit" the
taxpayer, the cash flow of funds
constitute an added impedi-
ment in this context as these
cannot be monitored.
Thus if incomes generated
through agriculture were made
taxable, the "facilities" pres-
ently available through the
"devices" mentioned above, for
securing huge unwarranted tax
benefits, would be effectively
Share in Taxes
1.2
4
62.2
2.9
5.3
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
>>>
 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 -
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 agricul-
ture (land revenue and irriga-
tion charges) increased by 78%,
while value added in agricul-
ture, 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 consump-
tion 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 accentuat-
ing differences in income
distribution in the agrarian
11th Issue
sector. Progressive rates of tax evasion on their part.
income tax, if applied to the In a historical context too, in
income of this rural elite, could, the case of post Meiji era Japan
over time, alleviate this malady, in the 1880's when the drive to
the persistence of which can modernize the country was
only bode ill for the social launched aggressively, taxation
stability of agraria and for the of agricultural income was the
politico economic well being of principal source of revenue to
1980 1987 2006
7.0 6.1 5.7
45.4 49.8 55.0
19.1 16.1 14.0
31.7 35.7 45.0
40.8 42.2 45.0
48.1 45.3 50.0
8.5 7.8 6.0
6.8 7.8 8.5
the country in general. fund the industrialization drive.
However one looks at it, Paradoxically, the taxation of
there appears to be little agricultural income in Japan
justification for a blanket did not 'ruin' Japanese agricul-
exemption for agricultural ture as many had predicted.
income. There is no denying Rather, once the agriculturist
that the small farmer with a realized that agricultural
limited landholding may not be income would 'have' to suffer
able to bear the burden of tax, the agriculturist made
additional taxation. concerted efforts to increase
However bar ring such agricultural productivity by
exceptions, levy of an income
tax would appear to be fully
justified - and even necessary if Distribution of Family Income - Gini Index
the negative perception in the
other sectors of the economy of Namibia 70.7 China
such blanket exemption from S. Africa 59.3 Iran
levy of income tax for the Brazil 59.7 Singapore
agriculture sector is to be
Mexico 54.6 Turkey
corrected. It is now acknowl-
edged that one of the important Argentina 52.2 Pakistan
reasons for tax evasion in Thailand 51.1 Russia
Pakistan in the other sectors of Malaysia 49.2 Japan
the economy is this 'unjust Philippines 46.6 U.K.
preference' for agricultural United States 45.0 S. Korea
income which provides a
justification for tax payers
enjoying non agricultural
income to justify and rationalize
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 consequen-
tially, 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 improve-
ment in agricultural productiv-
ity 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, agricul-
ture 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
44 Australia 35.2
43 Egypt 34.4
42.5 Indonesia 34.3
42 India 32.6
41 Spain 32.5
40 European Union 32
37.9 Bangladesh 31.8
36.8 Finland 26.9
35.8 Norway 25.8
Sweden 25
Denmark 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 conniv-
ance 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 con-
sumption.
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 agricul-
tural 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
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 income-
will 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
Under Ground Economy in Pakistan - vital statistics
Year UGE-Size
1973 Bill Rs. 15
1978 41.832
1983 104.759
1988 192.752
1993 470.124
1998 1449.891
1999 1146.839
2000 1094.052
2001 1298.233
2002 1388.064
2006 1500
Source:
M. Ali Kemal, Underground Economy & Tax evasion in Pakistan - A Critical Evaluation.
11th Issue
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 re-
introducing Wealth Taxation
and also by direct state inter-
vention to help and facilitate the
disadvantaged and underprivi-
leged members of society
through better education
facilities and healthcare and
easier access to institutional
credit so that they are able to
UGE- Tax Evasion
Bill Rs. 2.15
4.644
13.361
26.672
62.913
193.397
152.499
141.077
169.025
176.472
180
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 reduc-
tion 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.
UGE- % of GDP
20 %
23.51
28.75
28.54
35.27
54.52
39.03
34.76
38.00
37.25
35.00 %
 w w w. d g t r d t . g o v. p k
An Interview With
(Tax Administration Advisor) U.S. Department of The Treasury
M
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 repro-
duced 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
11th Issue June, 2007
the details of the conference. I then e-
mailed 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 demon-
strate 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 confer-
ence 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
the agenda for more extensive
trainings for the future.
Q: How would you propose
that technological gap
between the member coun-
tries 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
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 advance-
ment 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
advancement, it seems like an
attainable goal for them.
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
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 techno-
logical assistance not only
utilizes the technology, but can
also tailor it according to its
needs.
Q: Being an ex-IRS function-
ary, 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
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.
Q: Does the U.S Department
of Treasury has some priority
list in terms of assisting
certain countries /govern-
ments in their reform initia-
tives? 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 e.g as regards “audit training “ and the gies, course design etc. so to deliver
their way up to becoming supervisors. countries can take back those experiences training properly. One of the recommenda-
to best fit their own needs for training tions that we have come up for training
Q: Where would you place DOT as according to their local environment. institutions such as DOT is that, they
compared to other developing countries should have a mix of faculty on rotational
in the field of training? Q: What measures should be taken to basis in DOT, which comes from the field so
Ans: DOT because of its facilities, is an ideal enhance the efficiency of training that they bring technical expertise with
center for regional training. I think that for institutions of the developing countries? them, but you should also have a perma-
country specific trainings you have to go Ans: As my expertise is in the designing of nent faculty here whose expertise is in the
into local laws and legislation and then training material, one of the things that the training design and not necessarily in tax
train the people for a particular job. The countries need to develop to handle administration. As a result the professional
regional training centre can play an technical training delivery system, is to training experts can then work with the
important role where experts from train a team of people who are in turn rotational faculty members to develop
different countries can share experiences trained to handle infrastructural technolo- 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

I
t has always been the
philosophy at DOT to
develop workforce capabili-
ties at all levels by equipping
them with appropriate knowl-
edge, 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 num-
bers of trainings offered to
grade 16 officers is due to
preference given in specialized
pay positions to a more profes-
sional 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:

2005-06 2005-06 2006-07 VARIATION

Full Year 9 Months 9 Months (+) OR (-) IN
s.
Name of Course 01.07.05-30.06.06 01.07.05-31.03.06 01.07.06-31.03.07 % AGE
No
No. of No. of No. of No. of No. of No. of No. of No. of
Courses Trainees Courses Trainees Courses Trainees Courses Trainees
1 2 3 4 5 6 7 8 9 10
01 Capacity Building Training (BS-19) 11 157 8 135 8 133 0.0 (-) 1.5
02 Capacity Building Training (BS-17/18) 26 370 21 317 20 259 (-) 5.0 (-) 22.4
03 Capacity Building Training (BS-16) 14 191 12 170 9 121 (-) 33.3 (-) 40.5
04 Specialized Training Program (32 Batch) 2 55 2 55 (-) 100.0 (-) 100.0
05 Specialized Training Program (31 Batch) 1 40
06 Specialized Training Program (33 Batch) 1 38 1 36 (-) 100.0 100.0
07 Appeal Management Processing System 3 45
08 Training Course on Expenditure / Audit 3 38 1 13 (-) 100.0 (-) 100.0
09 Workshop on Withholding Taxes 2 177 2 177 (-) 100.0 (-) 100.0
10 Refresher Course for Tax Bar Members 2 40 1 24 (-) 100.0 (-) 100.0
11 Orientation Course on TMS 2 97 5 75 100.0 100.0
12 Training Course in Acctts. Matters & I.T. 3 60 3 60 6 112 50.0 46.4
13 Specialized Training Program for ITOs 1 59 1 59 0 0 (-) 100.0 (-) 100.0
14 Foundation Course for Sgs / Stenos 13 196 7 102 15 191 53.3 46.6
15 Special Training Program for Sup. / Supdt. 1 14 1 14 (-) 100.0 (-) 100.0
16 Foundation Course for Inspectors 10 155 7 106 10 132 30.0 19.7
17 Foundation Course for UDCs 7 99 5 69 29 458 82.8 84.9
18 Financial Mgt. & Expend. Training 9 144 100.0 100.0
19 Special Course on Audit & Accounting 3 128 100.0 100.0
20 Withholding Tax Management System 1 12 100.0 100.0
21 3 days ATAIC Conf. of Heads of Training Institutions 1 40 100.0 100.0
22 Foundation Course for Naib Qasids 5 56 100.0 100.0
23 Seminar on Perf. Evaluation of NPOs 3 300 100.0 100.0
24 Seminar by Members 1 250 100.0 100.0
TOTAL 102 1831 71 1301 126 2447 (+) 43.7 (+) 46.8

By:
M. Munir Qureshi
DG (DOT)(DT)
T
he 21st century burea-
ucrat is increasingly
being visualized as a
sophisticated, highly moti-
vated, 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 o-
grammed 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 impor-
tance. This transformation, if
indeed possible, would be
nothing short of a sea change.
In any work environment
the buzzword today is 'produc-
tivity.' 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
1
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 perform-
ers, 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 produc-
tivity of its' workforce or
maybe even a diminution of it's
existing productivity and
regression back to an earlier
stage of even lower productiv-
ity. 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 procrus-
tean 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 inde-
pendent, 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 adminis-
tration 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
13th Issue August, 2007
INSIDE THIS ISSUE
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 optimis-
tic 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 inde-
pendence. 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
DITORIAL
T
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 success-
fully 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 24-
26th July at the Directorate.
The event was organized by the
Audit Wing , CBR with an aim
to develop a unified Audit
Program applicable through-
out 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
2 2
continued from page-1
under World Bank special-
ist, Shahid Hussain, identified
critical areas in tax administra-
tion 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, proce-
dural 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 abun-
dantly 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
13th Issue
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 reaction-
ary 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
August, 2007
undeniable fact that the
available deficient compensa-
tion 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 compensa-
tion for those officers and
support staff who are able to
meet specific performance and
integrity criteria has removed
much misgiving in departmen-
tal personnel and has created an
environment in which Tax
Reform measures are much
more readily acceptable.
Tax personnel now under-
stand 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
CCentral Board of Revenue is
going through fast paced
reforms aimed at moderniza-
tion 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
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 under-
declaration of income and
instilling confidence in tax
personnel in their ability to
detect and bring to tax unre-
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-
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 simulta-
neously led to an increased
awareness in taxpayers of the
much improved capability of
2
13th Issue
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 presenta-
tions, work on spread sheets,
manage their E-mail accounts
and perform other related
operations. The course outline
for this training is designed
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
August, 2007
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 com-
menced 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
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 profes-
sional 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
S
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
View from Sky Bridge of Twin Towers (Kualalumpur)
different countries. IBFD has
grown from a tax documenta-
tion 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.
IBFD operates on a not-for-
profit basis and is completely
independent. IBFD organiza-
tion is divided into IBFD
2
13th Issue
Products and Services, which
covers all publishing, educa-
tional, research and consul-
tancy activities, and IBFD
Foundation which executes
several Academic Activities.
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.
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
T
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
2
13th Issue
[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
August, 2007
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

T
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 IBA Karachi. These Capacity sessions. The first three days of and quality service. He
job training of middle and Buildings Programs will be trainings are devoted to hands impressed upon the officers to
senior level managers through organized at our Directorate on computer training skills and benefit from the opportunity
standardized training which will be providing the the next three days focus on provided for development of
programs, HRM Wing, Central necessary infrastructural, communication skills in official their skills and capabilities in
Board of Revenue signed an instructional and material settings. form of these capacity buildings
agreement with IBA, Karachi support. Our Directorate has programs. Only officers
for developing Capacity This unified and structured committed to provide all the possessing the relevant skills
Building Modules for its officers training module is meant for logistics and infrastructural and knowledge would secure a
from Grade-17 to 19. officers of both Income Tax and support for this initiative. DOT future based upon quality
As a result, the HRM Wing, Customs & Excise Groups. faculty is actively involved in service, tax-payer facilitation
CBR has arranged a 6 days Training in subjects such as imparting this training as well and use of computer technology
training module for officers c o m p u t e r t e c h n o l o g y, as in preparation of training in an automated office setting.
from grade 17-19 in communication skills, manuals designed for this Mr. M. Muneer Qureshi,
collaboration with Centre for presentation Skills etc. is given module. Director General DOT in his
Executive Excellence (CEE), through interactive training The inaugural ceremony of speech welcomed the initiative
these IBA related trainings was taken by the HRM Wing for
held on 2nd July 2007 in DOT providing the officers of both
Auditorium. Mr. Muhammad Income Tax as well as Customs
Talha, Member HRM was the & Excise Group an opportunity
Chief Guest at this occasion. to benefit from specially
In his inaugural address he designed training programs
highlighted the importance of from a reputed and world
on job trainings and courses for renowned institution such as
enhancing the professional IBA, Karachi.
skills of officers of Central In the first batch of this IBA
Board of Revenue. In line with related Capacity Building
reforms underway at CBR it Program 45 Grade-19 officers
was necessary to develop the belonging to both Income Tax
needed human resource and Customs and Excise Group
potential to achieve the goals of completed their training on 7th
automation, professionalism July 2007.

2
w w w. d g t r d t . g o v. p k 13th Issue August, 2007

1st batch of IBA related Capacity Building Program

2nd batch of IBA related Capacity Building Program

3rd batch of IBA related Capacity Building Program

2
 w w w. d g t r d t . g o v. p k
T
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.
Tax Group were present at the 12. Falik Shair
He outlined the period of occasion. The batch comprises 13. Ayesha Ranjha
training being spread over more of 26 officers from the 34th CTP. 14. Qadir Nawaz
than seven months. It was Merit wise list of officers is as 15. Muhammad Shakil Anwar
expected of the officers in course under: 16. Agha Nabeel Akhtar
of this period to develop the 17. Adeel Mahmood Shah
necessary skills required for job 1. Ghulam Hussain 18. Bilal Ahmed
performance. He highlighted 2. Naheed Ahmad 19. Mukhtiar Ahmad Shar
the importance of observance of 3. Rukhsana Arif 20. Huma Sarwar
officer like behavior and service 4. Usman Ahmed Khan 21. Javaid Ahmed Kumbhar
discipline in course of period of 5. Ch. Khurram Aziz 22. Irfanullah
training at the Directorate 6. Usman Ijaz Bajwa 23. Riaz Khan
General. 7. Syed Arsalan Qudus 24. Sultan Muhammad Nawaz
. Bukhari . Nasir
In his concluding remarks, 8. Muhammad Umer Yunus 25. Bahader Sher Afridi
he wished the young officers of 9. Saher Aftab Butt 26. Muhammad Qasswar .
34th STP a successful and long 10. Amanullah . Hussain
career in service. 11. Rais Humayun Abdul
. Hayee
Senior officers of the Income
2
 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

T
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

1
w w w. d g t r d t . g o v. p k 14th Issue September 2007

DITORIAL
w w w. d g t r d t . g o v. p k 14th Issue September 2007

is one year old!

w w w. d g t r d t . g o v. p k 14th Issue September 2007

at
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 14th Issue September 2007

continued from previous page

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

1
 w w w. d g t r d t . g o v. p k 15th Issue October 2007

DITORIAL

continued on page 3

1
 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

1
 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
DOT (DT)
Sutluj Block
Residences Allama Iqbal Town,
Lahore

1
 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)

1 5
 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
l More jobs for software houses
l Better control and management of
business by traders
l Shorter audit periods by tax
department
l Less paper work by traders
l More revenue
continued on next page

1 6
 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 October 2007

Imam Bukhari (194 265 A.H.)

360 degree view of maqam of Imam Bokhari

8

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 restruc-
turing 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
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
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
1
16th Issue
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 inter-
face, 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 redoubt-
able FBR Chairman Abdullah
Yousaf_ could muster to get
TARP going.
The reasons for such
seemingly unjustified resis-
tance 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
November, 2007
INSIDE THIS ISSUE
Change Management
Page 1
Relational Database Model
Page 2
Database
Table
Column Column
Table 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
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 examina-
tion 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 “Man-
agement /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 com-
menced 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 dimen-
sion tables. Each table repre-
sents 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 insignifi-
cant.
5. The sequence of rows
is insignificant.
6. Each column must
have a unique name.
A relationship is an associa- on relational tables.
tion between two or more
tables. Relationships are
expressed in the data values of operations are:
the primary and foreign keys. A
primary key is a column or
2
16th Issue November, 2007
columns in a table whose values Intersection;
uniquely identify each row in a Product;
table. Projection;
A foreign key is a column or Selection;
columns whose values are the Join; and
same as the primary key of Division.
another table. You can think of a
foreign key as a copy of primary Normalization is a design
key from another relational technique that is widely used as
table. a guide in designing relational
Keys are fundamental to the database. Normalization is
concept of relational databases essentially a two step process
because they enable tables in which puts data into tabular
the database to be related with form by removing repeating
each other. Navigation around a groups and then removes
relational data base depends on duplicated data from the
the ability of the primary key to relational tables.
unambiguously identify specific After having a basic
rows of a table. 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.
Database
DATA MANIPULATION
Relational tables are sets.
The rows of the tables can be
considered as elements of the Table Table Table
set. Operations that can be Column Column
performed on sets can be done
Row
The eight relational
Field Field
Union; The Anatomy of a Database
Difference; continued on page 3

continued from page 2
May be installed on a
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uthorization driven user
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Intuitive, yet powerful
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Main features
Relational database
optimized for fast search;
Unlimited data capacity at
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Times series analysis built
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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
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DbVisualiser enables simulta-
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JDBC drivers.
Main features
Browse database struc-
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View detailed characteris-
tics of database objects;
Edit table data graphi-
cally;
Executive arbitrary SQL
and;
Reverse engineer
primary/foreign key
mappings graphically.
Point Base Embedded:
3
16th Issue
This is a full-featured and
zero administration Java
relational database that enables
software vendors to accelerate
development cycles and reduce
time to market.
Main features
Delivers cross-platform
p o r t a b i l i t y, a s m a l l
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the end-user.
Pervasive Postages:
This is a validated and
supported distribution of
Postgre SQL, the world's most
advanced open source data-
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Main features
Often support, updates,
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well as professional
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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.
November, 2007
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 program-
mers that rely on the
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Solid FlowEngine:
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stringent car rier-grade
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Sahar Majid
[Sci-tech World]
 w w w. d g t r d t . g o v. p k
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 comprehensi-
ble manner and also widely
publicized. It is also important
that these benefits be perceived
as significant and directly
relatable to a marked improve-
ment 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 compara-
ble 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 reorganiza-
tion 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-
16th Issue November, 2007
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 collection-
ONLY 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
great majority of this population ing to convince them through
concept of contiguous 'territory.'
have no interaction whatsoever reasoned argument that the
The ACIT (BS 17 18) equivalent
with any officer or official as changes sought to be imple-
to the ITO- may now be assigned
their Returns are accepted 'in mented through reorganization
any case by the Commissioner
toto' the moment they are and restructuring are for the
of Income Tax pertaining to any
submitted. The very act of better for the entire FBR
part of the Region.
submission of the Return too is workforce and also for revenue
And ofcourse universal self
soon to undergo a dramatic collection. They need to be told
assessment now means that
change as evermore Returns of similar changes made in
MOST Returns of Income are
are filed 'electronically.' other jurisdictions worldwide
bound to be accepted 'as filed.'
For the individual ACIT, all that have brought about
Previously, most Returns were
this entails a drastic reduction dramatic improvements in
subjected to Normal Law
in his 'authority.' Actually, 'clout' workforce efficiency. And they
Scrutiny which mean't that
would be a better expression. need to be counseled on the
there was a steady procession of
And this dramatic diminution of dynamics of mindset change
taxpayers to the Income Tax
'clout' has traumatized many an and the connection between
Officers' office.
officer who joins Government such change and positive
This drastic reorganization
Service because of the sense of attitudes that produce results
of the Direct Tax Deptt is
personal importance that such and overcome obstacles.
nothing short of a 'sea change'
Service conveys. FBR personnel also need to
and the net result of this is that
This is where Change be counseled on the efficacy of
the individual officer charged
Management assumes enor- teamwork vis a vis individual
exclusively with assessment of
mous significance. enterprise. Effective Teamwork
income, or collection of tax /
Those individuals of the harnesses focused effort and
issuance of refund or some
FBR workforce who find it releases synergy that magnifies
other specific area of work has
difficult to reconcile with the the effort put in by individual
only nominal interaction with
changed realities of the post team members. However it is
the taxpayer population and the
TARP era, need expert counsel- important to know that an ce of
4

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 assis-
tance 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 concen-
trated their effort in identifying
the obstacles to change sought
to be implemented through the
Tax Administration Reform
program. The teams further
made specific recommenda-
tions 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
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 exemp-
tions 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 regis-
tered a significant surge. Mr
5
16th Issue
Abdullah Yousaf further
emphasized that the imagina-
tive use of ICT in Chile, in
which local software develop-
ers 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 administra-
tion.
Chile's experience in
modernizing it's tax adminis-
tration 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
November, 2007
monitoring of project imple-
mentation was strongly
recommended. It was also
recommended that
Benchmarking be used to judge
and evaluate performance in
different areas.
FBR Member (Administra-
tion), 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
Capacity Building Program on
Management / Leadership Skills
Organized By Centre for Executive Education, IBA, Karachi 22-27th October
T 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.
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 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
6
16th Issue
module of this programme was
conducted by the DOT faculty.
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.
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
November, 2007
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.

A course on Organizational Development and Change Management
Dr. Yasmin Fatima
Deputy Director
A
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 & presenta-
tions. The course was inaugu-
rated 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 &
Opportunities during transfor-
mation 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 presenta-
tions. 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 observa-
tions/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 strate-
gies/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/
7
16th Issue
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 organiza-
tions 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,
November, 2007
followed by certificate distribu-
tion 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 method-
ical, 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 July, 2007 August, 2007 September, 2007 October, 2007 November, 2007 December, 2007
Training Activity
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

Timeline July August, 2007 September, 2007 October, 2007 November, 2007 December, 2007
Subjects 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

Information Processing

Audit - I

Country Study Tour

Final Term Exam

1st. Term Exam

Eid Holidays

Eid Holidays
Sales Tax & Other Acts

Enforcement

Audit - II

TMS

Extension Lectures

Syndicate

DOT(DT)- 34th STP

80 70 70 70 70
70 65 66 66
60 Lecture Hrs. allocated
55 57 59 60
50 Lecture Hrs. completed
till 31-10-2007
Hours

40
41 46
30
33 25 Key:
20 ITFC : Income Tax Foundation Course
AFC : Accountancy Foundation Course
10 20 Aud-I : Audit-I
IP/TMS : Information Processing/TMS
0 ST : Sales Tax & Other Acts
Aud-II : Audit-2
ITFC AFC
Aud-I IP/ ENF : Enforcement
TMS ST Aud-II ENF
SYN : Extension Lectures
Subjects SYN

8

Training Methodologies
at DOT(DT)
M MUNIR QURESHI
DG(DOT)(DT)
L
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
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
1
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”
17th Issue
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
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 December, 2007

DITORIAL

A
continued from page 1

s the Specialized an art and a science that session was also held by DR
training of the 34th needs to be mastered by a great “Role Play” sessions as part Hassan Askari Rizvi,
STP draws towards its deal of effort and a willingness of a training routine help authoritative political
conclusion, it was time for the to change and take on a new participants acquire the sort of commentator and noted
Country study tour arranged in role. skills that are necessary for columnist, who has a number of
the last quarter of the term. The FBR functionaries in the post well received publications to his
tour is meant both for an Such “acting” skills are of reform era. At DOT (DT) such credit as well. The “final” treaty
exposure to the working of the course best imparted in a sessions are now part of the session was held on the 1st of
FBR headquarter and various professional institution training imparted to Nov. 2007 and the “parleys”
FBR units as well as an opportu- dedicated to work in the theatre. probationary officers of the were video recorded. There was
nity for excursion and mental And DOT (DT) has certainly no Income Tax Group. In Oct. 2007 a great deal of posturing- and
stimulation. With these intention of preparing FBR the probationary officers of the some angry gesticulating as
objectives in mind, a 5 days tour personnel for any such 34th STP went through a role well!! -by the participants and it
was organized commencing deployment!! But as has been play exercise in which the all appeared quite “natural” and
from 5th November. After the aptly said, the whole world is a probationers were divided into shows the human capacity for
successful conclusion of this stage and we are all actors four groups of two teams adaptability and resilience.
memorable tour, the probation- playing out our respective roles. representing Pakistan and Both “teams” were able to
ary officers are expected to Given such a context, it is India and they were tasked with negotiate a peace treaty- and
complete the remaining STP imperative that public negotiating a treaty to resolve maintain good humor as well!
with due diligence and serious- functionaries acquire personal outstanding disputes between Hopefully, the “real” players will
ness necessary for the develop- communication skills to help the two countries, including the also be able to do that someday
ment of career officers. them interact effectively with seemingly intractable, in the not too distant future !
The pace of work at the members of the taxpaying Kashmir dispute. Background
Directorate in the meantime public and to enable them to documentation was researched
remained busy. Four successive improve public perception of largely in the DOT (DT) library
IBA related Capacity Building FBR. and the internet and a briefing
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.
Briefing session by DR Hassan Askari Rizvi

1
 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 - India: Treaty Parleys

Group A - Pakistan: Treaty Parleys Group A - Press Conference

1
 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” Group B - Pakistan “Peace Parleys”

Press Conference Group B - “Peace Parleys”

1

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 e-
interactive 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
1 5
17th Issue December, 2007
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 were explained the detailed practiced. The participant's
users at their respective RTOs theme of workflow and feedback showed that they were
and LTUs. practiced the business very comfortable with the new
Twenty two domain officers processes of Declaration, system and after the two days of
from Income Tax Department Refund and Amendment. On the training believed that they had
ranging from BPS-16 to BPS-19, second day, the modules and the capability to transfer the
selected from all over the processes including expertise to the other users
country, attended the program. amendment, record transfer, gained from the programme. All
On the first day of training, the record management, profile the processes were revised by
participants were given a management, performance the participants on the third day.
detailed overview of Mahasil. management, rectification, This training program was a
They reviewed the fundamental Audit, MIS and Help etc were major step towards the
modules of the system and its explained, discussed and implementation of the software
basic working. The participants 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.

Our CST experience
By SaherAftab Butt
34th STP
O
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
ever…Ayesha Ranjha along
with Madam Yasmeen Fatima
were seen riding a water
scooter with great enthusiasm
1 6
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
17th Issue
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
December, 2007
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

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.
17th Issue December, 2007
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. The bus ride from Muree to
Abbotabad included singing by
Next day the group went to
Nathiagali where we toured the the probationers in the most
hideous voices imaginable.
4km walking track of Ayubia
Park. Our lunch was at Greens However, the show was stolen
by Umer Yunus who sang the
Retreat Hotel, a beautiful place
where we thoroughly enjoyed most tragic songs one could
think of.
our meal.
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.

Message by Mr. Mumtaz Ahmad
Member Legal, Federal Board of Revenue
By MumtazAhmad
Member (Legal)
T
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. 3.4.
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 , 4.
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 4.1.
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
4.2.
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
4.3.
organization providing
quality services and
promoting compliance
with tax laws, while
practicing values such
17th Issue
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. 5.
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 6.
government department
will be provided with
greater autonomy in
determining its own
policies and strategies in
relation to salaries , 7.
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 8.
programme has
started through
training, monitoring,
restructuring etc.
refurbishment of
accommodation ,
equipment and
resources to
accommodate the
new processes and
December, 2007
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.

D.O.T (DT)
By:
M. Muneer Qureshi
DG DOT(DT)
T
he Directorate General
of Training & Research
(Direct Taxes) is FBR's
principal training establish-
ment for it's Direct Tax person-
nel. 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
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
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, perma-
nent 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 grade-
21 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
18th issue January, 2008
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 2006-
07 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 infra-
campus.
structure incidental to it's
training activities. Presently it
All classrooms, I.T. labs,
has three, state of the art, I.T
auditorium and Conference
Labs equipped with 90 Hewlett
Room have multimedia
Packard Pentium IV, dual core
projection facility and public
PC machines and TFT display
address system. The Library
in a fully networked environ-
has four, internet ready PC
ment backed by three dedicated
workstations with loaded
servers, two UPS units of 15
proprietary software to access
KVA & 30 KVA capacity and an
Income Tax case law and, since
independent electricity power
2007, also the vast, online data
generation plant of 210 KVA
base of the 'Bureau of Fiscal
capacity. High speed, DSL
Documentation' [IBFD] at
internet connectivity soon to be
Amsterdam, Holland, after DOT
upgraded to Broadband- is
acquired full membership
available for the entire DOT
rights.
continued on page - 2
1

DITORIAL
T
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 develop-
ment 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.
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 profes-
sionals.
DOT Gazette
wishes
all its readers
a very happy
New Year
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 motor-
cars.
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.
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
2
18th issue
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.
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
January, 2008
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 consulta-
tion 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
 18th issue January, 2008

trainees have been success-

ful 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 The Target Population for nevertheless specialized
of their probationary status. Since 2002, a mandatory DOT is some 750-1000 direct tax training for field officers has
Failure to clear the FPSC FPOE capacity building program for officers of the FBR placed in BS been started at DOT. Thus
can lead to a termination of their departmental field officers was 17-20 and some 5000 support specialized training in the
appointment in Government also implemented at DOT. staff personnel who qualify for conduct of Audit including
Service. Initially, the departmental field various kinds of training under Audit conducted jointly by sales
officers underwent two weeks of the tax reform program. tax and income tax group
Another major change has capacity building training at officers- is being conducted at
been the enlargement of the DOT. Subsequently, this was Although the Capacity DOT since 2006.
DOT training mandate to modified so that the skill Building program is now
include the training of FBR development of the capacity designed and implemented by DOT has also become the
support staff especially the building program spread over IBA , Karachi and LUMS, preferred venue for the launch
clerical staff and departmental one week was implemented at Lahore, in it's entirety, for of many important learning
Inspectors. DOT while the concept develop- officers placed in BS 17-19 initiatives by FBR. In this
Over time this has acquired ment segment of the program posted in the Punjab and the context it is important to
ever increasing significance was implemented at IBA, NWFP, IBA uses DOT, Lahore, mention the launch of the
and this is evident from the fact Karachi. Finally, beginning 2006 premises and facilities to impart h u g e l y s i g n i f i c a n t Ta x
that in 2007 some 1500 support the capacity building program training. Management System [TMS] in
staff have received training at for all departmental officers is 2006 at DOT. TMS was the first
DOT,man campus, Lahore and carried out in it's entirety at IBA, Notwithstanding the fact significant I.T. based initiative in
the two sub-offices, especially in Karachi and LUMS, Lahore. that capacity building is no automation on the Direct Taxes
I.T. and communication skills. longer a DOT responsibility, continued on page-4

3

continued on page -
side since the launch of the
Tax reform Program in 2002.
TMS was seen as especially
significant because it repre-
sented 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 automa-
tion. A core group of officers was
trained at DOT to become
master trainers in TMS.On the
express directions of the
Chairman, CBR, STP partici-
pants were also given training in
TMS by DOT technical person-
nel. 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 devel-
oper, 'Mahasil' will nonetheless
provide extremely useful 'hands
on' experience to departmental
direct tax personnel in automa-
tion 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 simula-
tion 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 methodolo-
gies have been put to use at DOT
to impart training. The tradi-
tional 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 e-
learning modules. This new
'multi-dimensional' training
methodology is of considerable
significance in the dynamic
environment in which FBR
4
18th issue
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 establish-
ment for Income Tax Officers
ONLY. As many as 3052 FBR
personnel in all categories [
officers as well as support staff]
January, 2008
received training of some kind
at DOT in 2006-07. This is a 67%
improvement over the immedi-
ately 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 encour-
aging.
Once the required improve-
ments 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

T
he 34th Specialized
Training Program batch
of Income Tax Group
probationary Asstt
Commissioners of Income Tax
completed their training at
DOT(DT) on the 31st of Dec 2007
and for mally ended their
assignment with a passing out
ceremony on the 2nd of January
2008. Mr M Abdullah Yusuf,
Secretary General, Revenue
Division and Chairman of the
Federal Board of Revenue was
the Chief guest and gave away
certificates to the batch of 27
officers that included five lady
officers. The Director General,
DOT(DT), Mr M Muneer
Qureshi addressed the jam
packed auditorium
recapitulating the training
activities carried out over the
preceding one year. He also
explained the development of
training infra structure and
teaching methodologies, over reform initiatives launched by model was not peculiar to b e h i n d u s i n i t i a l l y. T h e
time, at DOT(DT). The FBR, tax administration was no Pakistan but was today the Chairman said that only those
Chairman FBR also spoke on longer a one sided affair but a norm globally. Mr Abdullah countries would be able to move
the occasion. He appreciated partnership in which the tax Yusuf lamented that although for ward that are able to
the DOT invitation extended to paying community was an equal Pakistan had considerable maintain their competitive
the newly elected office bearers partner. He pointed out that it is potential and the workforce was position in a challenging
of the Lahore Chambers of the private sector that should second to none but international environment.
Commerce and industry to take the lead in the development unfortunately we had not been Finally, he congratulated the
attend the passing out of the economy while the public able to get the fundamentals graduating class of Income Tax
ceremony and congratulated sector should create the right and resultantly many Group officers and exhorted
them on their assumption of necessary environment countries that had been able to them to take full advantage of
office. He emphasized that conducive to strong economic do so were now overtaking us on the opportunities for self
under the new dispensation in growth. The Chairman said that the economic development improvement given to them. He
place consequent to various tax this development pattern or front although they had been far also appreciated the
improvements made in DOT
training infra structure but
observed that these were not
enough and more needed to be
done if DOT was to become a
world class institution. The
Chairman then distributed
certificates and prizes to the
34th STP officers.

After the closing address

and vote of thanks, there was a
very well attended dinner /
bonfire for the probationary
officers passing out and the
guests invited to the function.

5
 18th issue January, 2008

Pictorial - 34th STP Pass Out

6
 18th issue January, 2008

Pictorial - 34th STP Pass Out

7
 18th issue January, 2008

MESSAGES FOR THE PROBATIONERS OF THE 34th STP.

Mr Usman Khalid Mirza, Mr Muhammad Talha,
Member (DT), FBR. Member (HRM), FBR.

“…I extend my heartiest I feel great joy in felicitating

congratulations to all of you for you on successful completion of
showing great commitment to a your training at DOT. With this
national cause by preparing passing out ceremony you will be
yourself intellectually as well as moving to the final leg of your
professionally to serve your training at IBA. The excitement
country through this dynamic and enthusiasm with which you
and vibrant organization. I am are bearing today should be kept
sure your perspective is very alive as it will help you steer your
clear and you are thoroughly way through the tough schedules
conversant with your renewed n the weeks and months to come.
role in the era of transformation I advise you to treat this training
and reforms. You have been as a valuable opportunity and
groomed by very able and make the most of it. It is not just
competent faculty in such a an academic pursuit with an end
manner as would enable you to result in the shape of a degree
ensure that the paradigm shift in rather it is a life time learning
Revenue Division is smoothly experience. You will learn not just
handled, thereby yielding the theoretical aspects of
unprecedented results. This transition was inevitable obviously in taxation and management but also learn how to manage your
the back drop of a hackneyed, out dated, rotten and counter- time, how to work under pressure, how to prioritize among
productive department. The founding fathers of the current conflicting and pressing tasks, how to organize your life so as to get
reforms identified several bottlenecks in the previous circle based optimum results with your efforts. These skills will help you
system of the Income Tax Department. through out your life. The IBA experience will give you a favor of
The system of taxation as had evolved in Pakistan prior to the working in the private sector.
introduction of reforms, was marred by adhocism, unwarranted FBR is being run on corporate lines to make it more efficient
legal and administrative swings, wide gap between tax payers and productive. The experience of learning in an environment led
needs and their awareness, rigidity of the administrative by top private sector managers and leaders will be very useful to
framework, adversarial relationship between taxpayers and tax you in business process reengineering and revamping old
collectors, poor pace of organizational business processes and systems at FBR. I wish you the best in future.
system, lopsided management of human resources and paucity of
resources vital to give a boost to productivity. The Think Tanks of the reforms have now laid much emphasis on human resources,
business processes, information management and facilitation rather than coercion and stringency. Tangible steps have now been taken
after prolonged deliberations and consultations amongst all stakeholders. A new relationship with taxpayers has been conceived which is
primarily based on facilitation as its foremost principle. Functional division has now become the core tenet of the process of organizational
restructuring. Professionalism, transparency and integrity are the major slogans of our times and do constitute the major fabric of
reforms.
Promotion of voluntary tax compliance remains the prime focus of the tax administration reforms. You have seen that substantial
investment has been made in infrastructure development, end-to-end automation of business processes, and human resource
development. We have won taxpayer's confidence through Universal Self Assessment Scheme [USAS] in the Income Tax structure, yet the
provision of a transparent and effective deterrence for the tax evaders has a very important role in the new system. Therefore, a fair and
judicious mechanism of audit is in the process of evolution. The future tax system envisages a clear separation between all domestic and
international taxes. Hence there is a dire need to prepare our work force for the formidable challenges linked with the reforms.
Lastly, I would like to register a few words of caution i.e. as you would be taking up your new assignments, never miss sight of the spirit
of reforms as introduced by the architect of change Mr. Abdullah Yusuf, Secretary Revenue Division and Chairman, FBR. He in fact is the
anchorperson who in a very short span of time, endeavored single handedly in changing the besmeared and polluted image of the
organization. My other advice for you would be to spread out your intellectual capacity in the best interests of the organization which would
include interalia the power of analysis, professionalism and best practices. These are crucial times for you when you are entering a new
phase of your carrier. This period is in fact a mix of the old and new system which compels us to carefully and discreetly shun away the
legacies of the old system which would with the passage of time be finally obliterated as the process of reforms continues and reaches its
logical conclusion, most probably by 2009.

8

Asymmetric Initiatives
for Revenue Mobilization
M Muneer Qureshi
DG(DOT)(DT)
R
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 proce-
dures, workforce 'mindset'
problems, a huge, very poorly
understood, informal sector,
inadequate workforce compen-
sation, 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 environ-
ment of developing countries,
apart from the routine initia-
tives like tinkering with tax
rates and exemptions and
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 signifi-
cant 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 estab-
lishment 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 informa-
tion technology is being used
much more systematically than
ever done before as a teaching
aid for both officers as well as
-ICT prowess-
During 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
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 special-
ized 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
21st Issue 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 deficien-
cies in high level training that in
turn are the result of weak-
nesses in training infrastruc-
ture. Take for instance, the art
and science of forensic investi-
gation in cases involving tax
fraud and in the use of comput-
ers 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

T
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 administra-
tion 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.
continued from page 1
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 impor-
tant 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 general-
ists 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 reason-
able 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
50
40
28.75% 28.54%
30
23.51%
20%
20
10
0
1973 1978 1983
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 infrastruc-
ture, 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 all-
including 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
2
21st Issue April, 2008
54.52%
39.03% 37.25%
35.27% 34.76%
38%
35%
1988 1993 1998 1999 2000 2001 2002 2006
(Est.)
Malaysian Tax Academy- all
highly trained ( many of them
abroad) and recruited expressly
as Instructors- at “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 tech-
niques 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 infrastruc-
ture would also be required to
install the specialized labora-
tory facilities. Classrooms,
hostel and mess facilities, gym
and other sports and recre-
ational 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 credibil-
ity.
Monitor Financial Data.
There are more than [80] million
continued on page 3
 21st Issue April, 2008

continued from page 2

bank accounts of individual informal sector whose size has ties. FBR must be empowered Use Technology to monitor
customers in Pakistan and only variously been estimated at “to look at” a great deal more of Turnover.
[2.2 million] taxpayers who file between 35 to 50 percent of GDP the financial data held by the Information and communica-
annual Returns of Income. and even higher by some banking system than is pres- tions technology is the great
While it is not at all axiomatic economists. All this “unre- ently possible. This is not to say “force multiplier” of our times
that anyone who operates a ported and undocumented that such empowerment will and tax people must learn to put
bank account would definitely income” is a veritable treasure automatically lead to investiga- it to use effectively.
be earning taxable income, and trove for the plethora of tions being launched in the case The wholesale and retail sector
one individual may be maintain- commercial banks that dot the of the many millions operating in Pakistan contributes more
ing several bank accounts, it is economic landscape in Pakistan bank accounts who do not file than 17% to GDP and just over
indeed very odd that there are currently. The horde of “black Returns of Income. But over 4% by way of tax revenue to the
so few bank account holders out money” entrepreneurs placed time “intelligent” automated federal exchequer. A major loss
of the total population of [80] in the vast and growing informal systems, may be used to to revenue here emanates from
million who do earn taxable sector do not stash their liquid gradually generate profiles that the systematic underreporting
income in Pakistan. wealth at home as some of us could eventually suggest of turnover. The underreporting
are wont to believe. They do not whether or not taxable income is especially serious in the case
There is practically no system- have to do so. “Laundering of is indicated in an individual of major wholesale and retail
atic monitoring of financial data black money”is a profitable case. A blanket amnesty for past outlets. One way of dealing with
in Pakistan. In the United States enterprise and has many years will decisively remove the the problem that is already in
all financial transactions above “facilitators”, institutional and fear of being saddled with huge use in as many as [18] countries
$ 10,000 are at the present
monitored and time is the
details logged GROWTH OF TAX REVENUES IN PAKISTAN installation of
in a central 900
electronic tax
data base to 847 registers
build up a 800 [ETR] in select
profile and 700 wholesale and
(Rs. in billion)

c o n d u c t 600
retail outlets.
analysis. This device is a
500
Besides, Banks 402 variant of the
are required by 400 o r d i n a r y
law to formally 300 electronic cash
report all 201 register [ECR]
200
suspicious 77.40 99.5 100 with which we
deposits and 100 59.18 are all familiar
1.25 3.45 6.98 9.76 30.70 89.87
72.29
they do send 0 and is already
1947-48

1949-50

1960-61

1965-66

1972-73

1978-79

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

1990-91

1994-95

2001-02

2006-07

p e r i o d i c being used in
reports. In many retail
Pakistan, the outlets. The
State Bank of otherwise. Courtesy a legal tax liability for any tax evasion in ETR has a
Pakistan requires Commercial embargo, details of bank those years while maintaining special, so called, secure, “fiscal
Banks to report similar deposits accounts of even existing deterrence in the future. memory” chip that records all
under a “Know Your Client taxpayers cannot be routinely Presently, the data required to tax relevant transactions and
[KYC]” policy but there has requisitioned by the income tax be appended with the Return of displays tur nover on the
hardly been any significant authorities. And those who do Income in the case of non- machine as each transaction is
reporting to date. not “exist” on the tax rolls, live corporate taxpayers, who form made. The 'fiscal memory' itself
blissfully, secure in the knowl- the great majority of the can only be directly accessed by
Deal decisively with the edge that “out of sight”- of the taxpayer population, is, at best, the tax authorities to download
Informal Sector. FBR- (usually) also means, “out 'minimal' and will thus generate particulars either in real time or,
of mind.” ver y few “leads” for tax periodically, at the end of a given
The informal sector, character- authorities to follow. In the timeframe. The device in
ized by 'unreported,' undocu- An effective way of dealing with Pakistan environment, it is conjunction with suitable
mented or more aptly, improp- the informal sector is to create certainly not advisable to additional, peripheral equip-
erly documented- (business) systems that make some form of demand “copious data” to be ment, authenticates all
transactions, robs the exche- documentation inevitable for as appended with the Return of transactions using a secure
quer of much needed tax many economic transactions as Income. However a meaningful hash algorithm and stamped
revenue that has increased possible. And using technology reporting of data is essential if with this electronic signature,
significantly over time. and the law, the system has then any meaningful analysis is to be copies of the sales invoices
Pakistan has a burgeoning to be policed by the tax authori- conducted. continued on page 6

3

Training cum Workshop on Audit of Direct Taxes
at DOT (DT), 24th March to 26th March, 2008
By:
Dr. Yasmin Fatima
Deputy Director
W
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
Taxes Audit Wing of Audit &
Accounts Department from 24th
to 26th March, 2008.
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-ul-
Haq (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
4
21st Issue
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
April, 2008
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


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 profession-
als 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.
Monitor personal expendi-
ture.
For obvious reasons, Income
Tax Law lays down a great deal
of emphasis on the earning of
income. That is quite under-
standable given the nature of
the enactment. However, it is a
fact that in many cases an
individuals' personal expendi-
ture is not consistent with the
Total Income reported in the
Return but the mismatch
generally escapes the scrutiny
of tax authorities. In a universal
Illumination
Illumination
6
21st Issue
FEDERAL RESOURCES IN PAKISTAN 2007-08.
Bank Borrowing
8%
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.
Given the fact that we are
committed to a fully integrated
DOT (DT)
DOT (DT)
23rd
23rd March,
March, 2008
2008
April, 2008
Privatization Proceeds
5%
Change in Provisional Cash
Balance
3%
Self Financing of PSDP
by Provinces
8%
External Receipts
16%
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 educa-
tional 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 extraor-
dinary 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.

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 disci-
pline 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 partisan-
ship, 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 transforma-
tion 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 neces-
sary since the individual acting
alone could acquire neither the
necessary food nor security.
Only the division of labour, in
and through society, makes this
possible. The state arises
through the need of a restrain-
ing force to curb the natural
aggression of humanity. A state
is inconceivable without a
society, while a society is well-
nigh 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 sociolo-
gist to understand the trend of
events. These laws operate on
masses and cannot be signifi-
cantly influenced by isolated
individuals. [32]
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 pre-
Islamic, and to Berbers,
Turkomen and Kurds. These
laws are explicable sociologi-
cally, 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]
7
21st Issue
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:
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 self-
reliant, 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]
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
April, 2008
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 genera-
tions, 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 flower-
ing 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 civiliza-
tions 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.)

I
bn Khaldun was born in second part is the Universal months. [28] It can be divided including history and historiog-
Tunis on May 27, 1332 A.C.E. History, and the third part is the into six parts as follows: r a p h y. H e r e b u k e s s o m e
(Ramadan 1, 732 A.H.). [2] history of the Maghrib. In this historical claims with a
He received a traditional section, I concentrate on the 1. Human society ethnology calculated logic, and discusses
education that was typical for first part. The second part is and anthropology the sciences of his time. He
one of his family's rank and similar to the standard histories 2. Rural civilizations w r o t e a b o u t a s t r o n o m y,
status. He learned first at the of Muslim historians, and there 3. Forms of government and astrology, and numerology, and
hands of his father, who was a does not seem to be much forms of institutions dealt with chemistry, alchemy,
scholarly person, not involved in divergence. The third part, 4. Society of urban and magic in a scientific way. He
politics like his ancestors. He which is concerned with the civilization freely offered his opinions and
memorized the Qur'an by heart, history of the Maghrib, is 5. Economic facts well documented the “facts” of
learned grammar, jurispru- considered a primary source 6. Science and humanity other points of view. His
dence, hadith, rhetoric, work. [27] Much of the informa- discussion of tribal societies and
philology, and social forces is
p o e t r y. H e t h e m o s t
reached a interesting part
c e r t a i n p r o f i- of his thesis. He
ciency in these illuminated the
subjects and world with deep
r e c e i v e d insight into the
certification in makings and
them. In his workings of
autobiography, kingdoms and
he mentions the civilizations.
names of the
scholars with The follow-
w h o m h e ing quotation
studied. [3] describes his
philosophy of the
Ibn Khaldun historical
continued his process of
studies until the civilizations,
age of nineteen, including, for
when the great example, the
plague swept role of econom-
over the lands ics.
from Samarkand
to Mauritania. It …in the field
was after this of economics,
plague that Ibn Ibn Khaldun
K h a l d u n understands
received his first very clearly the
public assign- supply and
ment, marking the start of his tion in this section is from Ibn This impressive document demand factors which affect
political career, and forever Khaldun's personal travels and is the essence of Ibn Khaldun's price, the interdependence of
changing his life. [4] contacts in the area, and is wisdom and hard ear ned prices and the ripple effects on
replete with first hand accounts. experience. Ibn Khaldun used successive stages of production
HIS MAGNUM OPUS, An additional work that is not his political and first-hand of a fall in prices, and the nature
“AL-MUQADDIMAH.” usually considered a part of this knowledge of the people of and function of money and its
book is an appendix, which is an Maghrib to formulate many of tendency to circulate from
Ibn Khaldun's magnum autobiography of the author. his ideas. This document country to country according to
opus, “al-Muqaddimah” can be The first part, the “Introduc- summarizes Ibn Khaldun's demand and the level of activity.
divided into three parts. The tion,” is popularly known as “al- ideas about every field of [29]
first part is the introduction, the Muqaddimah;” Ibn Khaldun knowledge during his day. He
wrote this in a span of five discusses a variety of topics, continued on page 7

8

TAX ADMINISTRATION-
INTERNATIONAL BEST PRACTICES
M Muneer Qureshi
DG(DOT)(DT)
T
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 compli-
ance [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 adminis-
trations. 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 adminis-
tration because the 'apparent'
better performance is due to an
abnormally depressed compen-
sation package for tax employ-
ees. 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 administra-
tion reflects the quality of it's
workforce, the effectiveness of
fiscal policy and the systems in
place for processing and
1
22nd Issue May, 2008
Tax Administration
International Best Practices.
Page - 1
collating tax related data. The IBFD connection
The simplest way to improve tax Page - 6
administration would be to
adopt [ and in some cases
'adapt'] international best
practices rather than try and
experiment with different policy IBFD
regimens and design every-
thing anew from scratch.
If it is acknowledged that the Inaugural of three week
better performance of tax “Train the Trainer Course”
Page - 8
administration is directly
relatable to a significant degree
to the quality of training with which we can reasonably
imparted and the policies and compare ourselves have
systems in place for the elaborate training facilities and
assessment and collection of tax well structured programs for
then it follows that these areas training their tax personnel.
in Pakistan need to be looked at They have dedicated and well
critically and it needs to be seen equipped campuses and well
how far these arrangements qualified and permanent faculty
stand comparison with the in sufficient numbers in all the
arrangements in place in other different areas that are
countries. germane to the training of a tax
In the case of training arrange- administrator. They also use
ments, we see that the more specialized methods of instruc
successful tax administrations 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 Capacity Building
16 Credit Hours 21 Credit Hours 33 Credit Hours Training
(Annual)
BS-19/18/17
C.S.A., Lahore DOT (DT), Lahore IBA, Karachi
C.T.P S.T.P MBA Final Phase
at DOT (DT)
(10 months) Conducted by IBA
(5 months) (12 months)
2 Cohorts
6 days each
• Foundation Courses 1. Income Tax Foundation 1. Analysis of Financial
(6 weeks)[ English writing Course Statements • PC, Communication, and
skills, Public Speaking, 2. Accountancy Foundation 2. Business Maths. & Stat. Presentation Skills Module.
Research Methodology, IT] Course 3. Audit • Management / Leadership
• 4 Core Subjects: 3. Audit-I 4. Financial Management Skills Module
(28 weeks, 4x7)
1. National Issues of
4. Audit-II
5. Information Processing
5. Business Policy/Stragic
Management
Pakistan & Contemporary
issues of Islam
6. Enforcement
7. Sales Tax Other Acts
6. Business Process Re-
engineering
2. Public Admin. & 7. International Trade
management. 8. Financial Accounting
3. Economics & Public 9. Management Accounting
Finance. 10. IAS Financial Reporting
4. Govt. Functioning in Systems
Pakistan & 11. Business Laws
Office Management. 12. Public Economics
13. HRM

T
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 endur-
ance, 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 achiev-
ing 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 (Profession-
als' Academy of Commerce) at
DOT Campus, Lahore. The
module is based upon discus-
sions, case studies especially
developed for FBR personnel,
industrial visits etc.
22nd Issue May, 2008
continued from page 1
tion like simulation learning to Board Malaysia [IRBM] is high at [111] [ as against [12]
reinforce the classroom carefully planned to inculcate faculty].
teaching. Furthermore, they skills in a phased manner
have also introduced automa- throughout the career path of International best practices
tion in a big way. the individual. would appear to suggest that in
Malaysia is one country that has order to ensure effective
received a lot of attention in A similar situation obtains in training of tax personnel
Pakistan because of the rapid Japan. Extremely well equipped adequate numbers of perma-
strides that it has made in training institutions staffed by nent instructors and a well
economic development well qualified faculty and very structured training program are
generally and in improving tax well structured programs of a necessary requirement in
administration particularly. It study and evaluation to instill order to achieve optimum
set up it's training academy, the basic and advanced level skills in results.
Malaysian Tax Academy (MTA) the workforce is the norm.
in 1995 on a sprawling [15.10 TRAINING METHODOLOGY
hectares] acres campus and In Pakistan we are woefully
today (march 2008) it has a deficient in terms of adequate How we impart training is
permanent faculty [full time permanent teaching faculty at fundamental to it's practical
teaching professionals espe- the training academy for FBR's efficacy in instilling skills in the
cially recruited for the purpose] direct tax personnel, the workforce. The traditional
of [100] in Management Directorate General of Training 'lecture' based training method-
studies, International & and Research, [DOT(DT)] at ology is now being increasingly
Research studies, Taxation Allama Iqbal Town, Lahore. supplemented by other method-
studies, Information Technology DOT(DT) main campus at ologies and one very promising
and e-learning . Besides the Lahore has a faculty of [12] only approach is that of 'simulation'
permanent faculty there are [92] -that includes the Director and in Malaysia we find that the
support personnel [ General and Director; ( [3] simulation method of imparting
Administrative Staff [30] ; permanent faculty; [7] tempo- training has shown it's practical
Logistic, domestic, mainte- rary faculty- regular officers of effectiveness in building and
nance & security [62] ]. The the Income Tax Group and enhancing the skill level of direct
training regimen devised for PRAL temporarily posted at tax personnel.
specialist career professionals DOT(DT)-; [2] visiting faculty Simulation seeks to recreate
inducted into the workforce not from the private sector profes- real life situations in an artificial
as generalists through a general sional institutions). The class room environment.
civil service exam but recruited deployment of support staff at Complex scenarios are dupli-
separately by Internal Revenue DOT(DT) is disproportionately cated using computer program
continued on page 3
FBR induction _ Direct Taxes
Employed through F.P.S.C. in BS -17, Employed through FPSC in BS-16, Promoted in BS-16 from
after passing C.S.S. Exam. as Income Tax Officers Departmental Ranks
for University Graduates for University Graduates as Income Tax Officers
Civil Services
Academy,
Common Training Program
MBA Program for Income Tax Group Officers
Lahore
(10 months)
16 credit hours
Exam.
DOT (DT),
Specialized Training Program
Lahore
(5 months) Specialized Training Program
(5 months)
21 credit hours
F.P.O.E. by F.P.S.C. Exam.
IBA, Karachi
MBA Final phase
(12 months)
33 credit hours
Exam.
Short Term
Programs
DOT (DT)
Training
BS- 20, 19, 18, 17, 16 BS- 20, 19, 18, 17, 16 BS- 20, 19, 18, 17, 16
Short Term Training Short Term Training Short Term Training
Programs Programs Programs
2
 22nd Issue May, 2008

continued from page 2

ming and information technol- learning is also in use in all
ogy and trainees are then placed major tax jurisdictions. Once
Sequence of Training - Malaysian Tax Academy
in this abstracted and simplified the learning module has been
'virtual world' - as opposed to developed only a PC or laptop is
the very complex real world- sufficient to start e-learning and Advance
Advance//
Elementary
Elementary Intermediate
Intermediate Transaction
and asked to make decisions regular 'coaching' and instruc- Specialist
Specialist
Level
Level Level
Level Level
Level
Level
given different variations of the tion and elaborate lab facilities
basic theme in a particular area are not required. It is therefore
1 to 3 years from 3 to 10 years from More than 10 years 5 to 2 years before
in which training is being an economical and effective appointment appointment retirement
imparted. training methodology but is not Induction course Advance Tax Course: Transfer Pricing Psychological counseling
Basic taxation course • Accounting principals Forensic Computer & planning for retirement
At the heart of the simulation a substitute for classroom Basic management and concept Criminal Investigation Employments Dividend Fund
course • Principals & rationale to
methodology is a dedicated instruction through lectures or decision made under
Advance Auditing responsibilities towards
emoployees retirement
Advance Stamp Duty
'simulation centre' where the simulation learning in a lab Malaysian & other
countries law cases Higher Level financial
Nutrition & healthcare
management
information technology environment where such • Income Tax Act 1969 & management skills Financial & investment
Specialize Training Management
essentials are located including methodologies are necessary. It • PLAS Business opportunities &
second career after retirement
the 'data base' on which the is best used to reinforce training • PULADIT
• PULATEM
simulation exercises are to be already given through other • BPO

based as well as the training methodologies.

area where the trainees problems posed by manual does not necessarily lead to a
participate in the simulation I N F O R M A T I O N & systems is the use of business taxpayers audit.
exercise in a 'work group' COMMUNICATIONS process reengineering and 5) The selection of taxpayers
environment. TECHNOLOGY AS 'FORCE information technology to study cases for audit is an art in itself.
In Malaysia the simulation MULTIPLIER' work processes, eliminate The random method of selection
technique is being used to The United States of America as redundant processes, optimize is now thoroughly discredited as
impart instruction in Tax Audit model. the work cycle in processes it is statistically heavily biased
and Bookkeeping. Tax Audit deemed most important and in favor of those cases that are
simulation training is also 1) Manual procedures to collect, useful to achieving the task in most numerous which are
included in the General tax collate and disseminate tax data hand and then put information invariably not the type of cases
Administration Course (GTAC) are inimical to efficiency as they technology to use to speed up that are expected to be most
and the Tax Enforcement are slow, cumbersome and the work cycle and manipulate fruitful in terms of the possibili-
Course both of which include prone to error, besides being vast amounts of data with ties of realization of additional
participants from tax adminis- vulnerable to manipulation with complete accuracy. tax revenue over and above that
trations outside Malaysia. ulterior motive. The risk 3) In the case of I.T. Systems, the declared along with the return
It is proposed that a similar increases directly with the rule of thumb is to adopt a fully of Income filed.
simulation centre be set up at increase in the scale of opera- integrated system that has a 6) The method of choice for case
DOT(DT) main campus at tions undertaken and the proven record of effectiveness. selection for audit is parametric
Lahore. complexity of the task in hand. Attempts at experimentation selection. However the identifi-
Besides simulation learning, e- 2) An effective solution to the and development of a 'new' cation of the parameters is
system from scratch on an ad- problematic and requires great
Organization Chart, N.T.C., Japan hoc basis should be avoided as deal of expertise in economics,
they are usually counter tax law and accounts. Once the
Kasumigaseki Research
Kasumigaseki
office
Research
Department
Department productive and expensive in parameters are identified the
Central
Central Tax Museum
terms of time and financial next task is to develop a
Institute Tax Museum
Institute resources and only delay the mathematical equation in which
Wako Campus
Executive
Executive
Education
Education
introduction of new technology the parameters identified are
Wako Campus Director Department I
Department I and systems. placed and an algorithm is then
Education
Education
Department II
Department II
4) The most advanced I.T. based developed to search the
system in the world in the area taxpayer data base to pick up
Vice Campus office
President
President
Vice
President
President Training Centers in charge of
Campus office
of taxation is in the United cases in conformity with the
Training Centers in charge of
all Primary Courses and the
all Primary Courses and the
Basic Training for Beginners
States. Well over 100 million tax parameters identified. The
Basic Training for Beginners
(3 centers)
(3 centers)
Tokyo, Nagoya, Osaka
returns are processed electron- required number of cases is
ically and data appended then short listed and notified for
Training Centers in charge of
Training Centers in charge of
all Course in the Comprehensive thereon matched with that audit.
12 Regional all Course in the Comprehensive
12 Regional
Training Centers
Training Centers
Training Program (5 centres)
Training Program (5 centres)
Sapporo, Sendal, Kanto Shinetsu
available on a comprehensive 7) The United States employs
Sapporo, Sendal, Kanto Shinetsu
Hiroshima, Kumamoto
Hiroshima, Kumamoto data base. Any mismatch top flight economists, financial
Training Centers in charge of automatically throws up a red experts and mathematicians to
Training Centers in charge of
Courses IV of Comprehensive
Courses IV of Comprehensive
Training Program (4 centers)
flag and is then available for identify parameters and
Training Program (4 centers)
Kanazawa, Takamatsu, Fukuoka
Kanazawa, Takamatsu, Fukuoka
Okinawa
detailed scrutiny and evalua- continued on page 4
Okinawa
tion. However every red flag

3

continued from page 3
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 public-
domain 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.
22nd Issue May, 2008
This was not an 'integrated' all
Pakistan Report even for tax
collection. Sequence of Training at the National Tax College, Japan
10) The Tax Management Those employed through the Principal Those employed through National
System (TMS) developed by Classes III Entrance Examination (Taxation) Tax Expert Service Examination
(High School graduates) (University graduates)
CBR's BPR Team and PRAL in
Training Centers
2006 and it's subsequent alleged Primary Course (1 year)
Regional
improved variant 'Mahasil'
Work experience (1 year)
developed in 2007-08 have been
Basic Training for Beginners
praised as FBR's automation (3 months)
Long -Term Programs
solution in the direct tax area.
However by now the realization Work experience Basic Training
(a minimum of 7 years) (4 months)
appears to have sunk in that
Exam Work experience (2 year)
both TMS and Mahasil are
Central Institute
Advanced Course I (1 year)
partial ad-hoc solutions that are Advanced Course II (7 months)
not part of a fully Integrated
ICT System for the FBR Exam Selection Selection
11) Unlike Pakistan, the Tax International Tax Seminar International Tax Seminar
Research Course
• Basic Course • Advanced Course
Deptt in Turkey has put in place (2 months) (4 months)
(15 months)
a fully integrated system
basically modeled on the U S
Short Term
Programs
& Regional Training Courses
Training
IRS system adapted for it's own Specialized Training Comprehensive Training Courses based on Work
Central Institute
use. The result has been a
quantum jump in efficiency.
Training Courses
Comprehensive
Today 70% of the total Returns
of Income- not merely the Accounting Tax accounting English I, II
corporate Returns- filed in
Turkey are through e-channel
and the tax base has almost [7]
million taxpayers.
huge amount of expenditure by automation there is no reason at
Furthermore, they are fast
completely eliminating paper all why we cannot do so too.
moving towards making a
work entirely in many areas. adopted is assigned a very high
'paper less office' a practical
12) If Turkey can show such level of secrecy [ level 3, U S
reality and are already saving a
impressive results with I.T. and Deptt of Defense ].
4
 22nd Issue May, 2008

PICTORIAL - INAUGURAL OF THREE WEEKS “TRAIN THE TRAINER COURSE”

5
 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 (Mem-
bers 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 organization-
ally 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 corre-
spondents who monitor, report
on and evaluate the latest tax
changes and trends. Research
findings are published in the
IBFD's publications, incorpo-
rated 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 govern-
ments 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

6

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 cross-
border 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-
DOT (DT) at Pakistan Center for Philanthropy Workshop
at Avari, Lahore on 26th Feb. 2008
22nd Issue May, 2008
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 documen-
tation 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,
tions, ministries of Malaysia, at DOT(DT), Lahore, March 14,2007.
finance, tax adminis- Mondriaan 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) Fairwell luncheon for Mr. Haji Ahmad DG, RTO
Lahore on his Retirement on 24th April, 2008
7

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
T
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 misreport-
ing 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 capabili-
ties of Audit Officers to conduct
effective audits, the Audit Wing
led by the visionary Member
Audit Mr. Abdur Razzaq has
decided to organize a standard-
ized 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 con-
ducted 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
8
22nd Issue May, 2008
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 ambi-
tious 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 cere-
mony due to his official commit-
ments. 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 high-
lighted 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 neces-
sary for audit officers to perform
their jobs efficiently.

The
Federal Budget
_ some loud thinking.
“It's clearly a Budget.
It's got a lot of numbers in it.”
M Muneer Qureshi
DG(DOT)(DT)
Y
es, for the average
Pakistani, that is precisely
what the Federal [or for
that matter, any of the provin-
cial] 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 distrac-
tions and many seemingly
intractable problems, his
_ George W Bush.
'apparent' disinterestedness in
the Budget is quite understand-
able. 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 igno-
rance so profound as to render
the budget completely meaning-
less. 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
24th Issue
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 under-
stood 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
July, 2008
The Federal Budget
_ some loud thinking.
Page - 1
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 outstand-
ing 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

From the Editor's Pen
T
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
24th Issue
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 imple-
mentation 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 institu-
tion.
In the year 2006-2007 a total
July, 2008
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 worth-
while 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 auto-
mated office environments at
LTU's and RTO's.

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 govern-
ment's budget that distin-
guished 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 econo-
mists, 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 employ-
ment 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 time-
honored 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 busi-
nesses 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 govern-
ment.
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
24th Issue
the medium of a 'balanced
budget.' The upward phase of
the 'business cycle' brought in
it's wake inflationary pressure
and the governmental prescrip-
tion 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 govern-
ment 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
July, 2008
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 unem-
ployment 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 genera-
tions 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 devel-
oped 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 'unproduc-
tive' areas, like Defense, means
that if the budget deficit caters
to such areas disproportion-
ately it is of no help to the
economy. The ability of govern-
ment 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 mean-
ingful 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 expan-
sion 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 forthcom-
ing 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 we’ll 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
T
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. Shabih-
ul-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 participat-
ing 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 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 non-
resident and foreign controlled
entities. With the introduction of
Income Tax Ordinance, 2001
provisions relating to transfer
pricing, arm's length transac-
tion, thin capitalization and the
concept of permanent establish-
ment (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 work-
shops. 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.

Pakistani delegates with Instructors Mr. Shahid Bashir Addressing the participants
24th Issue July, 2008
24th Issue July, 2008
 24th Issue July, 2008

Profile of an Unusual Taxpayer

A
skeptic once 1970 as a Grade-17 officer In other words, not only
defined a taxpayer with starting salary of After obtaining prema- did he devote the best
as one who works Rs.450, per month. He ture retirement, Mr. years of his life to the
for the government continued to serve the Masud became the chief government without any
without having to appear government for 25 years executive of a private compensation, he has
for the Civil Ser vice and his terminal salary at company (Pakistan Credit paid a substantial amount
Examination. Again, the time of seeking pre- Rating Agency Limited) merely for the privilege of
according to popular mature retirement in 1995 and worked in that capac- carrying the honorific title
perception, public func- was around Rs.15,000, per ity till the end of 2007. of a 'retired government
tionaries lead luxurious month. Assuming that his During this period, the servant'.
lives at the expense of the average monthly emolu- total direct income tax
“poor taxpayers”. It is in ments throughout his paid by him to the govern- Here is a person
this background that Mr. period of service were ment amounts to belonging to our service
Masud's story is unusual around Rs.8,000 (a gener- Rs.14.5m*. This means who should make us all
and interesting. ous assumption), the total that what Mr. Masud proud and should be
emoluments received by received from the govern- considered as role model
M r. J a v e d M a s u d him from government ment in 25 years, he paid for the taxpaying public.
joined the Civil Service during his entire service back almost 6 times as
(Income Tax Group) in do not exceed Rs.2.5 m. much to the government.

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.