FROM FEDERAL TO PROVINCIAL: MEETING THE CHALLENGES OF A NEW INSTITUTION
FROM FEDERAL TO PROVINCIAL: MEETING THE CHALLENGES OF A NEW INSTITUTION
From Federal to Provincial: Meeting the Challenges of a New Institution
Can a semi-autonomous revenue authority improve revenue collection? The proponents of the revenue authority (RA) model say yes. The revenue authority model entails removing revenue collection from the finance ministry into an agency that has a certain degree of financial and functional autonomy. The advocates of this institutional model argue that an autonomous revenue authority would be able to offer better incentives for its employees and have more flexible decision-making procedures and, through that, increase revenue collection.
New research from Ringa Raudla, Mohsin Bashir, and James W. Douglas uses the example of the Punjab Revenue Authority (PRA) in Pakistan to show how meeting the challenges outlined by the institutionalist theory contributed to the successes of the PRA. The PRA was established in 2012 and is an interesting case study among revenue authorities because it has managed to not only increase revenue collection but also minimise corruption. The authors’ paper critically analyses the PRA in Pakistan to assess the extent to which the challenges posited by the various theoretical streams of institutionalism surfaced as real problems that leaders in the Punjab Province had to deal with when establishing the revenue authority.
Prior to the creation of the PRA, the sales tax on services was being collected by the federal government in the name of the provincial government. This was an uncomfortable arrangement as the federal government did not have any incentive to collect taxes that were going to be passed on to the provinces, and the provincial governments were not happy with being dependent upon the federal government. With the advent of the PRA, this issue was resolved, and the provincial government ended up collecting much more sales tax on services than the amount that was being collected for it by the federal government. Another challenge faced by the PRA was the increased administrative burden on the taxpayers. Prior to the PRA’s establishment, the taxpayers were filing tax returns only to the Federal Board of Revenue (FBR), but now they had to file returns to the PRA as well as FBR. While PRA has not been able to provide any relief to the citizens in this matter, they have made attempts to popularise the agency by launching citizen engagement initiatives such as lucky draws that taxpayers can participate in through their service receipts. The dearth of professionally trained tax officers was another roadblock faced by the PRA. This was resolved by borrowing well-reputed employees from the FBR and promising them financial incentives and professional roles with high visibility. Finally, the PRA was created in an environment that was polluted with tax evasion by citizens and corruption by tax officials. PRA has tried to counter corruption by handpicking officials from the FBR who have been known to be honest, and by instituting a strict disciplinary system. To avoid tax evasion, they have instituted systems to reward tax compliance, empowered enforcement officials and have launched taxpayer education campaigns.
The creators of the PRA identified these problems and effectively dealt with them which indicates that institutional theory offers valuable insights that can help guide the design of new institutions by predicting the likely problems that new organisations face. The insights offered by institutionalist research are a particularly useful guide for policymakers charged with developing new institutions or changing existing ones.
Raudla, R., Bashir, M., & Douglas, J.W. (2019). The Punjab Revenue Authority: Meeting the Challenges of a New Institution. Public Administration and Development 39(2). 78-88.
doi: 10.1002/pad.1845
About the Author
Mohsin Bashir is assistant professor at the SDSB, LUMS. He teaching courses in organisational power and politics, public administration, and nonprofit and voluntary organisations. His research interests include leadership and effectiveness of organisational networks, performance management including monitoring and evaluation, public private partnerships, organisational power and politics, and nonprofit leadership and management. His research has been published in Public Administration & Development and Third World Quarterly.