FBR is part of the solution and the problem


WEB DESK: The Chairman of the National Tax Reform Commission (TRC), Masood Naqvi, together with two other members of the Commission, stated during a briefing to the Senate Standing Committee on Finance that “reforms in the tax system are a major issue,” and added more disturbingly that the “situation is dire and the number of filers has declined by 18 percent.”

The Federal Finance Minister, Ishaq Dar, issued a notification dated 25th September 2014 setting up a 20-member TRC to: (i) review and rationalize direct and indirect taxes; (ii) customs tariff rationalisation; (iii) review of autonomy and administrative structure of FBR; (iv) creation of a border force to deal with illegal movement of persons and goods across international borders; and (v) any other related issue.

Members included tax consultants, representatives from the major chambers of commerce and industry, academics, as well as officials from FBR with Chairman FBR to be a member/secretary. The task was to be completed in four months (120 days). By 31st August 2015, the Finance Minister had to issue yet another notification extending the tenure of the TRC for another 90 days with effect from 15th August 2015. The report has inexplicably not been made public and is not on the FBR website in spite of a specific TRC recommendation to make a transparent tax policy and development-oriented tax reform agenda public.

However, Business Recorder exclusively reported a few appropriate recommendations that were in the TRC report: (i) an effective tax policymaking forum should be separate from and run by a board independent from the FBR which should be only a revenue collection and policy implementation body; (ii) establishment of National Tax Agency to achieve the objective of a functional, efficient and integrated tax administration system; (iii) appeal for dispute resolution should be independent of the FBR and placed under Ministry of Law; (iv) a high-level commission be set up to define key performance indicators (KPI) for FBR field officers – the objective to reduce the informal economy and the report further suggested that for the next three years 50 percent of FBR staff assigned to territorial jurisdiction should focus on broadening the tax base with specified KPIs and timeline; and (vi) withdraw exemptions under the second schedule of Income Tax Ordinance which include army officials, federal ministers, judges.

On 15th January 2016, another notification was issued by the Federal Finance Minister to constitute another high-powered committee to be led by Haroon Akhtar Khan, the Prime Minister’s advisor on tax-related matters, Chairman FBR, three members of the TRC including its Chairman, Naqvi and Members IR operations, Customs and IR Policy. The terms of reference of the new committee were two-fold: (i) to supervise implementation of the combined recommendations of the FBR and TRC subject to the approval of the federal government and (ii) constitute sub-committees to supervise the implementation of the recommendations approved by the federal government.

The TRC recommendations have been segregated into three categories viz; those that can be implemented in six months, those that can be implemented in six months to two years and the rest that will need two to five years for implementation.

The assertion by the TRC chairman and member, during the briefing that the pace of implementation of reforms is very slow and that FBR does not want reforms is indeed most revealing and at the same time quite disturbing. What this really means is that FBR is a part of the problem and unfortunately there is no solution possible without FBR being an integral part of it.

It is therefore extremely important that the full report of the TRC be released and made a public document so that an informed debate can take place and implementation of the requisite recommendations ensured. -Business Recorder