Finance minister, top tax officers lock horns over FBR’s restructuring

Shamshad Akhtar FBR

ISLAMABAD: The proposed restructuring plan of the Federal Board of Revenue (FBR) has met with strong resistance from the tax officers, who have raised concerns over the inclusion of private members in the FBR oversight boards and the division of powers and functions of the Inland Revenue Service (IRS) and Customs.

Caretaker Finance Minister Dr Shamshad Akhtar, however, dismissed their objections and instructed the FBR chairman to submit a summary to the federal cabinet for the approval of the restructuring plan.

According to sources, the finance minister held a meeting with the FBR top management on Friday and listened to their views on the restructuring plan. The IRS officers opposed the appointment of private members, including tax practitioners and chartered accountants, on the FBR oversight boards, saying that it would create a conflict of interest and undermine the government’s revenue and the FBR’s autonomy.

The sources said that the government might appoint academicians or professionals from top institutions to avoid conflict of interest. The tax officials expressed their doubts about the effectiveness of the private boards of directors at the Pakistan International Airlines (PIA) and the Sui Southern Gas Company Limited (SSGCL) in improving the performance of the two state-owned enterprises.

They said that the tax officers cited examples of how private sector influence had resulted in revenue losses and policy distortions in the past, such as the reduction of sales tax rate on point of sales transactions and the withdrawal of withholding tax on banking transactions.

The Customs officials, on the other hand, told the finance minister that they should retain the powers and functions mentioned in the Customs Act, 1969, and that the proposed division of the FBR into a Federal Board of Customs and a Federal Board of Inland Revenue would create confusion and inefficiency.

The sources said that the tax officers also questioned the rationale and the implementation mechanism of the restructuring plan, which they said lacked clarity and ownership by the relevant ministries.

They said that the FBR already provided its technical input on budget proposals and revenue impact, and that the final approval was given by the federal government, the cabinet, and the parliament.

They wondered how the new oversight boards would help in increasing revenue collection, broadening the tax base, and automation and digitisation, which were already underway.

The finance minister, however, rejected their concerns and said that the restructuring plan was necessary to improve the performance and governance of the FBR.

She said that the plan was aimed at enhancing the tax-to-GDP ratio, ensuring taxpayer facilitation, and promoting the liberalisation of the power sector. She said that the plan would not affect the careers of the young and middle-career officers, and that the caretaker government had the authority to restructure the FBR.

A source who attended the meeting told HUM News English that a senior official from the field formation asked the finance minister whether the transfer and postings of the tax officials would be done by chartered accountants and tax practitioners in the future.

The source said that the chief commissioners of the Inland Revenue Service (IRS) and the chief collectors of Customs also expressed their concerns over the increased resistance from the junior officials working in the field formations.

The source said that the officials of Customs wanted to retain their powers and functions related to anti-smuggling operations, money laundering investigations, sales tax collection on ports, and import and export duties. The finance minister assured the officials that their concerns would be addressed at the implementation stage of the restructuring.

The source said that the finance minister directed the FBR chairman to move the summary to the federal cabinet for the approval of the restructuring plan. The finance minister stressed that the reforms were mandatory and had to be implemented at any cost. He warned that the government would not tolerate any kind of resistance to the reforms.

The source said that the finance minister clarified that the FBR’s oversight boards would only provide policy guidelines and would not have any executive role. He said that the chain of command and the administrative role of the tax officials would remain the same. He also said that the director generals of the IRS and Customs would be appointed by the federal cabinet and not by the private members of the oversight boards.

The source said that the finance minister informed the meeting that the restructuring of the FBR was part of the International Monetary Fund (IMF) programme and that the caretaker government had the mandate to carry out the reforms. He said that the caretaker government wanted to take tough decisions in its tenure as it believed that the next government might delay the decisions due to its political compulsion.

The source said that the field formation officers had complained to the FBR chairman and the IRS member operations that they were not being consulted by the high-ups regarding the restructuring of the FBR.

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