The Tax Reform Commission (TRC) has recommended the Federal Board of Revenue (FBR) to amend the 'Federal Board Revenue Act 2007' in budget 2015-16 to allow employment of high caliber professional at market-based salaries. It proposed that as a short term measure the FBR should induct professionals on contract basis in MP grades.
According to the recommendations of the TRC received by the FBR for 2015-16, to respond to challenges being faced by the FBR, the said Act 2007 needs suitable amendments to allow employment of high caliber professional at market-based salaries to augment and strength the management at Headquarters and strengthen its enforcement and compliance at field formation. As tax administration has to deal with state of the art aggressive tax planning schemes involving cross border financial transactions, tax audit solely comprise internally promoted auditors, who could encounter difficulties while detecting and analysing these schemes effectively. Therefore, FBR can also alternatively think of induction of mid-career professionals and tax consultant with experience in law and accounting directly in higher grades. This measure would be an effective countermeasure and would also attend to the needs and of large taxpayer unit with large size clients, TRC said.
In short to medium term the curriculum of training directorate need to be augmented and made more rigorous. The period of specialised training should be extended to at-least three years to cater the modern external economic challenges. Moreover, a minimum of six months practical training should be mandatory before formal posting to make the officer well-versed with all practical aspects, it said.
It recommended that all best performer in training and high achiever should be allowed to choose the audit wing and registration wing in the order of priority. All the staff in the wing be allowed initially to get double salary provided they maintain a certain level of performance criteria. Double compensation should also be offered to outstanding performers in operation, service and support wings. The training needs to be a continuous part of professional staff at FBR. The Directorate should offer executive training programs for all levels of staff at the FBR. These executive courses should be mandatory and performance at these courses should be linked with future promotions till grade 20. Moreover the high performers may be allowed to stay in Audit and Registration wings.
In the longer run we need to work on the idea of creating a specialised tax services cadre totally separate and independent from other civil services of Pakistan with its own rules and regulations. This would also require a complete revamp of Directorate of training to convert it into a Centre of Excellence. The GOP may carry out an independent study for the purpose.
FBR needs to differentiate between high performers and others. Good performers should be fast-tracked in promotions and rewards, TRC recommended. TRC said that the FBR performs the functions of (i) formulation and administration of fiscal policies, (ii) levy and collection of federal taxes, and (iii) quasi-judicial function of hearing of appeals. A number of measures are contemplated by the Ministry of Finance to expand revenue base and also improve the collection efficiency. Some experts think that an autonomous FBR under possibly a Parliamentary Committee would be more efficient.
On the other hand, the functions of the FBR relating to revenue collection and of the Finance Ministry relating to budgeting and revenue appropriation are the functions of the Federal Government. Formulation of fiscal policies needs to be handled by the economists and the planners, principally in Planning Commission of Pakistan. The collection of Federal Taxes and custom duties should however be the sole responsibility of the FBR. However, Federal Board of Revenue Act 2007 encompassed under section 6 the concept of Cabinet Committee for Federal Revenue. Role of the Committee has been defined as a supervisory body which shall approve guidelines with regard to the policy, planning, reforms, budget and any such other matter referred to it by the Board.
However, the role of Cabinet Committee is not effective and operating in the manner as it should be. Tax Policy Board is recommended as an independent Board under the auspices of the Ministry of Finance headed by the Finance Minister with the prime objective to debate and formulate national tax policy in consultation with the stakeholders on continuing basis, it said.
The Board may comprise of the eminent economists and other stakeholders like FPCCI, Tax Bar Associations, trade bodies, ICAP and other professional bodies. There has to be a link between the Tax Policy Board and the Federal Board of Revenue. Accordingly, Chairman FBR can be a member of both the bodies to ensure interconnectivity and ownership of the policy decision. Whatever input/suggestions are received from various stakeholders should be adequately discussed and preferably a reply for each of the major recommendation not forming part of budget shall be shared with the stakeholder sending it, TRC recommendations added.
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