Innovation without credibility

EDITORIAL: The Federal Board of Revenue’s (FBR’s) latest attempt to tighten tax collection through a withholding mechanism on digitally ordered goods is being presented as another step towards modernisation and transparency. On paper, the idea appears sensible enough.

By shifting the responsibility for sales tax deduction to payment intermediaries, courier companies and online marketplaces, the FBR claims it can plug long-standing gaps in the e-commerce sector.

Yet this initiative inevitably revives an older and far more fundamental question: whether any new procedural innovation can succeed when the institution introducing it has steadily lost credibility on its core mandate.

The erosion of credibility has been measurable over time in the FBR’s own numbers. Revenue performance has increasingly been framed in defensive terms, with targets routinely missed and “success” recast as falling short by a narrower margin than the previous year. This quiet recalibration of expectations speaks volumes. An organisation tasked with expanding the tax base and lifting revenues has, instead, normalised underperformance.

Against that backdrop, every new system, manual, or reform announcement struggles to escape the perception that it is designed as much to manage optics as to deliver results.

The e-commerce withholding mechanism fits squarely into this pattern. It is technically elaborate, procedurally detailed and heavy on compliance architecture. IRIS workflows, auto populated statements and digital payment trails all create the impression of administrative sophistication. Yet none of this addresses the FBR’s most persistent weakness: its inability to convert policy design into sustained revenue mobilisation.

Automation cannot compensate for institutional fragility, nor can intermediaries be expected to resolve failures rooted in governance and enforcement.

There is also a familiar asymmetry at play. Each successive reform places greater responsibility on compliant actors operating within the formal economy. Payment firms, courier services and online platforms are asked to absorb new reporting obligations, shoulder compliance risks and act, in effect, as extensions of the tax authority. Meanwhile, vast segments of economic activity remain either lightly taxed or entirely untouched.

The burden deepens where compliance already exists, while the broader tax net remains stubbornly narrow.

This imbalance is not accidental. It reflects a long-standing preference for administrative convenience over structural reform. Expanding the documented economy requires political resolve, consistent enforcement and a willingness to confront entrenched interests. These are precisely the areas where the FBR’s record inspires little confidence. Instead, the institution has developed a habit of announcing technical fixes that sidestep more difficult questions about capacity, integrity, and accountability.

None of this requires explicit allegations to be troubling. Persistent underperformance, uneven enforcement and a revolving door of reform initiatives are themselves sufficient indicators of institutional stress.

When taxpayers encounter complexity without corresponding improvement in outcomes, trust erodes. When rules change frequently, but revenue does not rise meaningfully, scepticism hardens. Over time, credibility becomes the rarest currency of all.

Pakistan’s revenue challenge is neither mysterious nor novel. It stems from a narrow base, weak documentation, political interference and inconsistent application of the law.

No withholding mechanism, however cleverly designed, can substitute for progress on these fronts. Without demonstrable improvement in collection, transparency and fairness, new systems risk being viewed as distractions rather than solutions.

If the FBR wishes to change this perception, it must do more than unveil new manuals and digital processes. It must show, over time, that revenues can grow in a sustained, credible manner, that enforcement is even-handed, and that reform is cumulative rather than cosmetic.

Until then, each new initiative will continue to raise the same uncomfortable question: whether innovation is being pursued for impact, or for appearance.

Copyright Business Recorder, 2026