Ministry yet to set up tax policy unit

Ministry of Finance is yet to set up a tax policy unit (TPU) and notify its members to implement the signature tax reforms of the incumbent government envisaging separation of tax policy and administration. Sources said that given the shortfall in revenue collection there is a need to swiftly move forward on the envisaged tax reforms to ensure that the revenue collection target projected for the current fiscal year is achieved and thereby fiscal deficit is contained to a reasonable level. However, sources attributed the delay to legal issues involved in implementation of the decision seeking separation of tax policy and administration.
Prime Minister Imran Khan had nominated six new members of TPU including Adviser for Commerce, Industries & Textile Industries Abdul Razak Dawood, information technology professional Syed Javed, NADRA Chairman Usman Yousaf Mobin, former FBR chairman Abdullah Yousaf, economist Dr Ijaz Nabi and former FBR chairman Salman Siddique.
The federal cabinet has approved to separate tax policy from revenue administration and constituted a committee to work out legal and technical modalities to this effect.
The government has decided to formulate Tax Policy Board (TPB) as per the longstanding demand of the business community. Sources said that the Tax Policy Unit (TPU) is expected to be established at the FBR.
The cabinet also set up an implementation committee to work out the modalities, role and responsibilities of the Finance Division and Revenue Division for seamless transition and activities. The committee will comprise the finance minister as chairman, minister of state for revenue, cabinet secretary, finance secretary and FBR chairman as members. The committee can also co-opt any other member.
The purpose of separating tax policy from tax administration is to improve governance and tax laws in Pakistan, according to the FBR's summary. The combination of the tax policy and revenue administration has an inherent problem of using the policy as a tool to maximize revenues at the expense of investment and economic growth.
The tax policy unit will be responsible for revenue forecasting, tax expenditure analysis, distributional analysis, economic impact analysis, cost-benefit analysis and tax indicator analysis, sources added.