Can the New Intergovernmental Structure Work in Pakistan in the Presence of Governance Challenges? Learning from China

The reform of the tax administration has been recognized as a priority since the early 1980s and the report of the Tax Reforms Commission headed by Qamar-ul Islam, which had called the then Central Board of Revenue a hotbed of corruption and rent seeking. A GST was introduced in 1990 under an IMF-supported program (but brought in through the back door, when the entire sales tax act was replaced as part of the finance bill). It was administered very arbitrarily, with the tax administration treating it like a production excise (Ahmad, 2010b), setting reference prices and continuing to give exemptions and preferences through a system of administrative orders (SROs) that provided ample opportunity for the rent-seeking and corrupt practices to continue. The ability to give preferences and exemptions and reward specific groups, while threatening to punish others without reference to Parliament, provided convenient handles to politicians of successive weak administrations to make friends and influence people