ISLAMABAD: Chairman Federal Board of Revenue (FBR) Rashid Langrial has urged the Establishment Division to bring a compulsory retirement regime for the bad performers across all cadres after the ECC said that increasing salaries across the board for all would not bring improvement and there should be impact assessment linked to increase in revenue with spending on performance bonuses, well-informed sources told Business Recorder.
He floated the proposal at a recent meeting of the ECC wherein he faced strong opposition of his “incentives” for the FBR officers proposed in the shape of a summary already cleared by Prime Minister Shehbaz Sharif.
The Revenue Division/ FBR has informed the ECC that the efficiency and efficacy of tax collection in any country was driven by multiple factors such as the tax culture, level of digitalisation, level of documentation and capacity of tax authorities, etc. Moreover, it was equally important that the performance management and incentives system is designed in a manner that encourages tax collection and to put in their best efforts for fair assessment of tax liability for individuals and businesses.
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On account of perverse incentive to tax excessively, generally the performance incentives regime for tax collectors/ officers was not based upon the tax collections/ targets but on compliance with process of assessment and hence focus on fair assessment is crucial. FBR had annual budget of Rs.45 billion, an organisation with more than 18000 working strength although managerial and technical HR has been around 15% of the total workforce. The tax collection to tax expenditure ratio has been 6.45% whereas in case of India it has been 0.79%. Based upon the overall fiscal pressures, the present government has brought in major changes in top leadership of FBR. Detailed FBR transformation plan was presented to the Prime Minister in a meeting in September, 2024.
In order to improve current tax collections without compromising fairness, a performance management and incentives regime has been designed. The proposed model is based upon two broad parameters vis-à-vis integrity of officers and performance of officers based upon key functions being performed by them. The forced ranking mechanism and any good performance management regime shall create significant differentials between high performing and low performing individuals. Thus, the best performer was likely to get up to four running basic salaries whereas the lowest performer will get zero additional performance incentives. However, the overall implication would be equal to two times the amount of running basic salary of the officers from BS 17 to BS 22.
In order to keep the proposed incentive different from routine emoluments, a preferred way was quarterly disbursement rather than on monthly basis. Additional financial implications for proposed performance management regime, as proposed would be Rs.2.474 billion for last six months of current financial year (January-June 2025), as per 2 additional basic salaries per month for all BS-17 to 22 officers. Similarly, for next financial year overall requirements of funds shall be Rs.5.44 billion (including 10% increase in running basic salaries). Financial implication of delivery unit allowance will be Rs 54 million for current financial year (October-June 2025) and Rs 79.2 million for following year. Moreover, the regime shall be implemented through approval as per Section 4 of FBR Act subject to this performance regime and would not be allowed rewards under existing regime, except in cases of exceptional achievements as per the procedure. FBR Board and council shall accordingly amend its reward rules in pursuance of the approval of this mechanism. At any subsequent stage, if FBR/ government decide to do away with the instant regime, the original reward rules shall be restored.
The Revenue Division/FBR further informed the forum that the implementation of FBR transformation plan shall be carried out in a systematic manner. In this regard, a dedicated Reform Delivery Unit has been setup with 30 officers by re-designating some of existing posts. Hence, it was imperative that the individuals may be motivated by incentivizing them through a special allowance of Rs 200,000 per month per individual. Total annual implication was Rs.79.2 million. However, for 9 months of current year, Rs 54 million shall be required. According to Section 4 (1) (t) of FBR Act-2007, FBR has full powers to approve performance management regime for its employees. However, since the instant performance management regime has been designed in line with the FBR transformation plan as approved by the Prime Minister in a meeting on September 19, 2024 and the same was deliberated through the working groups constituted in this regard, and this entails additional financial implication as well, hence the instant mechanism is being submitted for approval of the ECC.
The Revenue Division/ FBR submitted following proposals for consideration and approval of the ECC: (i) Performance Management regime for FBR Officers; ( ii) the regime may be effective from October 1, 2024, first assessment of performance of officers for the quarter October-December 2024 to be disbursed in January 2025 on quarterly basis; (iii) a special allowance of Rs.200,000 per month for each individual posted at Reform Delivery Unit; (iv) provision of Rs.2.474 billion as technical supplementary grant for performance bonus and provision of Rs.54 million for allowance of Reform Delivery Unit during current financial year 2024-25; and (v) inclusion of Rs.5.,14 billion for performance bonus and of Rs.79.2 million for Reform Delivery unit allowance in the regular current side budget of Revenue Division/ FBR for the next financial year 2025-26.
Copyright Business Recorder, 2024
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