FBR restructuring plan: Major impediment to implementation seems to be bureaucracy itself

ISLAMABAD: The interaction of new Finance Minister with Federal Board of Revenue’s team clearly reflects FM’s commitment of the introduction of reforms in FBR and digitalisation of tax system. Tax experts told Business Recorder that apparently, the major hurdle in implementation of FBR restructuring seems to be tax bureaucracy itself.

When the caretaker Finance Minister initiated reform process, not only the caretaker minister was given tough time during meetings but also the targets of revenue collection in January and February 2024 were missed reflecting differences between the caretaker Finance Minister and the tax machinery, tax experts said.

The stand off was so serious in nature that intervention of Islamabad High Court (IHC) was soughted by Inland Revenue officials by filling petition against the restructuring of FBR. The court suspended the notification for the constitution of a high-powered Implemen-tation and Asset Distribution Committee (I&ADC) for restructuring the Federal Board of Revenue (FBR) and hence reform process was put to halt.

FBR restructuring plan finalised

Tax experts further suggested that the Finance Minister needs to play a balancing role to resolve differences between Inland Revenue Service and Customs group on restructuring.

When contacted on the question of nature of reforms, leading international tax expert Dr Ikramul Haq informed that the customs and Inland Revenue departments will be separated and would be led by Directors General (DG) of relevant cadres. Both the DGs will be fully authorized for institutional, economic and operational matters of their respective department. They will ensure the implementation of internationally adopted measures for digitisation, complaint resolutions and transparency under the restructuring process. This has actually triggered insecurity at the top level.

Dr Ikram said that the approved restructuring involves the cessation of the FBR, leading to the creation of two new organisations and three new boards. Legislative changes, including enactments for Customs and Inland Revenue establishments, and alterations in respective rules and Rules of Business 1973, will be required for the restructuring’s implementation. In the background of the above explained tug of war between Finance ministry and top bureaucrats of FBR the major issue facing ministry of finance is revenue collection.

Official reports revealed that the FBR’s revenue collection fell short by 1.3 percent and 4.5 percent in January and February 2024, respectively. The missing of tax collection target during March 2024 may force the government to introduce a mini-budget which will bring more hardships for public.

However, during recent meetings between the FBR and IMF, FBR team claimed that there would be no mini-budget.

Copyright Business Recorder, 2024