The Institutional Reforms Body (IRB), led by Dr Ishrat Hussain, has assigned the FBR to utilise automation for integration of data to identify potential taxpayers, while the body is also considering to keep tax machineries within the government’s domain to protect their privileges.
“The Ministry of Law will be consulted to assure the privileges of FBR officials remained intact after granting autonomy such as on the pattern of State Bank of Pakistan,” Dr Ishrat Hussain told The News on Friday. He said the FBR was told to carry out reforms in phases, and some steps of automation and integration of taxes would be done in the coming budget, while the next phase from July-December 2020, would outline to ensure effective implementation.
On the issue of autonomy, the FBR officials had already rejected the proposal and told to retain the current status of tax collection machinery as a federal government department. The FBR officers had proposed that the re-structured tax authority after inclusion of provincial taxes may be appropriately named ‘Pakistan Revenue Board’ instead of Pakistan Revenue Authority.
The cabinet had approved the recommendations of the Institutional Reform Cell of Prime Minister’s Office, presented in its report on “Reorganising the federal government,” hereinafter, referred to as task force report. Though, the cabinet did not approve abolishing the FBR and replacing it with the Pakistan Revenue Authority, the FBR was placed in the list of autonomous bodies in the report. This segment should be removed initially to place the FBR as an executive department.
There is a divergent opinion stated by the World Bank as the World Bank project report “Pakistan raises revenue” also envisages the FBR as a semi-autonomous revenue authority. In this backdrop, the Para-F of the proposed plan of restructuring of FBR as envisaged in the minutes of the meeting held on October 3, 2019, outlined the establishment of the Pakistan Revenue Authority as an autonomous body. After detailed dialogues, the stakeholder input was sought from consultative committees.
Globally, the tax collection mechanism is a state function, which cannot be delegated to an autonomous body hence, the African region has a semi-autonomous structure in place. The FBR must be differentiated from the State Bank of Pakistan, which is a regulatory authority. It should also be distinguished from the SECP and other autonomous institutions as it is primarily due to the fact that the revenue authority applies the quasi-judicial powers under the criminal procedures code and performs the prosecution functions as well, which requires the writ and enforcement of the federal government law.
As the levy and collection of taxes is hardly possible without the authority of the federal government, the reduction of tax administration to a revenue authority, will ultimately lead to diminishing taxpayers’ compliance, increased malpractices and decrease in revenue collection. Therefore, it is strongly recommended that the status of the future tax administration be maintained as an attached department and career progression of the IRS cadre officers should not be compromised by lateral entry of professionals at any stage; however, there is a growing need for sectoral analysis and legal experts in the tax administration.
The chief commissioners at the level of regional tax offices may hire the services of the professionals for assistance in tax assessments as support staff required at unit level.