A study of the Federal Board of Revenue (FBR) has strongly recommended that the core functions of audit and enforcement must be 'de-concentrated' at the Tax Facilitation Centers (TFC) or local level for smooth functioning of the newly setup Inland Revenue Service and document businesses like hotels/restaurants and departmental stores at tourist resorts such as Murree & Nathiagali.
The FBR on Thursday issued a report on "Revisiting the Present Setup of Tax Facilitation Centers and Measures to Strengthen by Devolving Core Tax Functions". According to the recommendations, to make the new setup, Inland Revenue Service (IRS), successful and derive requisite benefits of the proposed RGST, the core functions of audit and enforcement must be de-concentrated at the TFC or local level. In addition to the strengthening of TFCs the focus of study is to strength the career progression of FBR officers. A viable option in this regard would be to follow the resurrected pattern of District Management Group, whereby they have created grade 20/19 seats at the district level.
Moreover, a large number of officers have proposed change in the name of Tax Facilitation Centers to District Tax Office or Local Tax Office. At district level, the tax office should be headed by a district tax officer of grade 20/19 depending on the volume of taxpayers. The District Head (Commissioner/Additional Commissioner) must be empowered with all the core functions as in the case of old Circle System. The core functions of audit, enforcement, monitoring etc may be then de-concentrated below to the level of grade 18/17 or 16 as per the availability.
The report said that main priority of FBR is to broaden the tax base so as to achieve the desired tax to GDP ratio. As a result of recent reforms, the power of the tax offices at lower tiers has been divested and concentrated at the Regional Tax Offices (RTOs) level, this divesture of power has made the tax officers at lower tiers (now renamed as Tax Facilitation Centers) almost redundant and dysfunctional. As a result, the work force in these TFCs in grossly under-utilised and the contribution of these officers to achieve revenue has reached the bare minimum level.
To arrive at a better conclusion, there is a need for decentralisation, delegation and devolution of various functions and powers to the lower tiers of tax administration. The report pointed out that major issues and problems are being faced by the tax officers /officials and taxpayers compelling for an immediate change in the existing structure of tax facilitation centers at the lowest level of tax administration.
Firstly, the officers and staff of the TFCs are under-utilised due to transfer of core functions to the RTOs. Secondly, the deterrence of tax authorities has reached to its bare minimum level. Thirdly, improper enforcement and recovery due to lack of powers and distance from the regional office. Fourthly, there is absence or poor audits because of lack of knowhow about the prevailing business.
Fourthly, there is a divesture of expenditure and transfer of funds to the regional offices, leading to poor office conditions and lack of any facilities. Fifthly, even field vehicles meant for the TFCs have been taken over by the RTOs, so means of official transport available to conduct any extensive field surveys in far flung areas of their jurisdiction has been restricted, thus no effective broadening of tax base.
The basic spirit of tax facilitation and education has been comprised because of lack of able and efficient officers at these centers. The office procedures have become more cumbersome and lengthy for the taxpayers regarding submitting of documents, issuance of refunds and obtaining of basic information about tax matters.
Highlighting the advantages of devolving functions to the TFCs, the report further said that the effective audit because of proximity and knowhow of the business so as to create deterrence. The effective monitoring and recovery of taxes by regular visits, checks will help in broadening the tax-base through extensive surveys.
The field offices have proposed about 30 additional branches of TFCs on the basis of effective performance of tax functions, existence of potential taxpayers so as to broaden the tax base, distance from the RTO, district/Tehsil HQ basis, existence of corporate taxpayers and nab the springing and typical businesses in tourist resort involving hotels/ restaurants in Murree & Nathiagali, FBR report added.