Pakistan Revenue Automation Limited: Restructuring plan approved by ECC

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has approved the restructuring plan of Pakistan Revenue Automation Limited (PRAL) along with requisite amount related to the current fiscal year.

Sources in FBR told Business Recorder that the Revenue Division/FBR briefed the forum that the PRAL (Pakistan Revenue Automation Limited) is a company to support the revenue automation function of the Federal Board of Revenue (FBR).

This was an in-house IT setup for improving citizen interface, digitisation of income tax and sales tax returns and integration of data sets with other entities particularly with provincial revenue authorities.

PRAL’s restructuring plan submitted to ECC

In FBR’s efforts to improve tax-to-GDP ratio, PRAL continues to be on the front line in data collection, compilation and processing. Based upon the overall fiscal pressures, detailed FBR transformation plan was presented to prime minister in a meeting of September 19, 2024.

Despite PRAL’s crucial role as the IT arm of the FBR, it could not keep itself updated with modern day’s requirements and recent technological advancements.

A working group within the FBR’s Taskforce on Digitization for PRAL’s Restructuring was constituted to identify gaps and detail potential improvement areas. Some of the key challenges faced by PRAL include governance, weak talent and capacity, inadequate working model and technology infrastructure.

In order to make PRAL a vibrant organisation that supports FBR in improving tax to GDP ratio in Pakistan, restructuring of PRAL on following lines was proposed:

(i) appointment of an independent and empowered board (already completed) Enhanced software development and maintenance capability with ability to resort to all three modes; in-house development, in-house maintenance only and outsource development to third party;

(ii) upgrading of hardware and data centre and replacement of end-of-life hardware (already being funded through existing development schemes of Revenue Division vis-à-vis PSDP No 981 (Pakistan Raises Revenue project);

(iii) establish analytics hub to conduct and consolidate data-driven insights for informed decision making (despite tons of data available with PRAL, the front end for data analytics is missing at FBR);

(iv) setting up procurement capabilities through dedicated procurement cell to streamline acquisition of technology solutions and other procurements;

(v) implement essential organisation structural reform at PRAL by hiring skilled professionals, establishing performance incentives, creating a task prioritization model, and collaborating with FBR to enhance communication and efficiency; and

(vi) streamline the financial flow and budgeting mechanisms as the current arrangement for funds flow from FBR to PRAL, based upon an SILA and is not efficient.

The Revenue Division/FBR further briefed the forum that there was a need to reflect a separate cost centre for PRAL under Revenue Division.

Regular budgetary grants may be reflected as one-line or ERE (Employee Related Expenditure)/Non-ERE grants. The Board of PRAL shall approve the annual budget based upon the grants/other own source revenues of PRAL.

Once the mechanism is functional, the current year budgetary allocations may also be diverted towards the new mechanism.

As per Regulation 4 of Financial Management and Powers of PAO Regulations, 2021, the Revenue Division secretary shall be the principal accounting officer for PRAL.

The total financial implication of restructuring of PRAL for the current year was Rs3.7 billion, whereas, recurring cost shall be Rs4.5 billion for 2025-26 onwards. Currently, PRAL was being provided Rs1.00 billion annually, hence, net additional funds requirement from next financial year onwards shall be Rs3.5 billion.

The Revenue Division sought Rs3.7 billion as technical supplementary grant (TSG) for current financial year 2024-25 and Rs4.5 billion for the next financial year 2025-26 for restructured PRAL.

During the ensuing discussion, it was informed that the PRAL Board had been reconstituted for bringing improvement in operations as well as revenue collection. It was further explained that the performance of the entity would be assessed annually against Key Performance Indicators (KPIs) based on quantitative outcomes.

The forum was also apprised that there were undue delays by the FBR in processing refund claims, and that the FBR was levying advance income tax based on the assessment of previous year. It was also explained that Review Committee of the Finance Division would scrutinise demand for each expenditure prior to release of funds.

The forum opined that impact assessment of the initiative taken so far would be done at the closure of the current fiscal year before releasing funds for next fiscal year.

After a detailed discussion, the ECC approved the Revenue Division’s approval and directed that the approval was given to the amount related to the current fiscal year and that the chairman/CEO PRAL Board shall apprise the committee about the progress in the follow-up meeting in the first quarter of the next fiscal year.

Copyright Business Recorder, 2024