Budget proposals: ICAP urges govt to amend FBR law, related rules, regulations

ISLAMABAD: The Institute of Chartered Accountants of Pakistan (ICAP) has approached the government seeking amendments to the Federal Board of Revenue (FBR) Act and related rules/regulations for creating an effective independent and transparent tax administration through Finance Bill 2023.

In this regard, the ICAP has submitted its budget proposals (2023-24) to the Ministry of Finance for the next fiscal year.

“It is therefore necessary that the tax administration should not only be efficient but also be fairly independent – having either detached from, or less control of the government. It is recommended to convert the FBR into an autonomous body on lines similar to the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP),” ICAP added.

Following are the specific proposals in this regard:

(I); The FBR Act and related rules and regulations should be amended appropriately for improving the governance structure and making it highly autonomous, transparent and subject to accountability by independent external auditors and office of the Auditor General of Pakistan.

(ii); The FBR should operate and work with a corporate governance structure with a Board of Directors, vested with powers similar to the Boards of Public listed companies. Fifty percent of the Board members including Chairman FBR may be nominated by the government (Ministries of Finance, Law, and Commerce) and, the remaining fifty percent should be nominated by the established trade and professional bodies like OICCI, PBC and ICAP.

(iii); The FBR should be headed by an experienced qualified professional, who should be assisted by qualified and trained professionals having established knowledge and experience of accounting, taxation, law, IT, economy and business administration. For this purpose, full autonomy be given for remunerating the hired personnel and elevating and incentivizing them based on performance evaluated using a balance score card. (iv); An Internal Audit Department should be set up for conducting effective internal audits of FBR affairs and directly reporting to a Committee of Board members comprising government and non- government members.

The ICAP has further recommended that the amendments in the Constitution provided substantial fiscal and legal autonomy to the provinces for raising finance and enacting new laws. Following enactment and implementation of the service tax laws and labour laws by the provinces, businessmen, who have businesses located in more than one tax jurisdiction, are facing jurisdictional challenges and duplicate taxation leading to tax disputes. This is causing financial and operational hardships as number of challenges overtime has increased substantially.

It is strongly recommended to establish (preferably within FBR) a permanent cell or directorate which should be equally represented by nominees of the federal and provincial tax authorities to provide a common platform to the taxpayers for resolving jurisdictional issues and preventing duplicate taxation.

It is also recommended that one authority be empowered to collect all types of federal and provincial taxes for onward transmission to respective revenue authorities within the country without burdening the business entities and the provincial taxes should be consolidated specially the labour levies, eg, EOBI, SESSI, WPPF and WWF, etc.

Special attention may need to be given to tax implication arising on emerging e-business models and asset free web service providers who act as coordinator between supplier and buyer. Mechanism for sales tax and income tax application for such models should be placed for revenue generation, the ICAP added.

Copyright Business Recorder, 2023