ISLAMABAD: After a marathon meeting with the Federal Board of Revenue (FBR) officials at the FBR House on Friday, Caretaker Finance Minister Dr Shamshad Akhtar conveyed to the board’s officers at the helm that the government has finally decided to put its foot down apropos restructuring in the tax collection body and taking away tax policy from the FBR.

Though questions persist as regards the mandate of the caretaker setup to institute reforms, the issue of broadening the tax base and other reforms has been increasingly nagging successive governments for the last few years. Dr Akhtar conveyed to the top management of the FBR that the restructuring of the FBR is “fait accompli” and any resistance against tax reforms “would be bulldozed”.

Sources told Business Recorder that a day-long tense meeting was held between the caretaker finance minister and senior FBR management at the FBR Headquarters.

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The Chief Commissioners (Inland Revenue) and Chief Collectors of Customs joined the meeting through online means during the last hours. The meeting started at around 11 am Friday and continued all day till evening. The environment of the meeting mostly remained tense on the issue of conflict of interest and the appointment of members from the private sector on the FBR’s Oversight Boards for Inland Revenue and Customs.

For the first time, the tax machinery and the caretaker finance minister came face to face and openly discussed all concerns of the senior tax officials at the FBR Headquarters.

According to the sources, the caretaker finance minister has directed the FBR chairman to move the summary to the federal cabinet for the restructuring of the FBR under the guidance of the Ministry of Finance.

Major resistance of tax officials was related to the appointment of private members including tax practitioners and chartered accounts on the FBR Oversight Boards, which is a conflict of interest.

The caretaker finance minister reportedly conveyed to the FBR top officials that the reforms in the FBR are “fait accompli” which has to be implemented at any cost. The government would not tolerate any kind of resistance to the tax reforms which have to be implemented at any cost.

The FBR’s Oversight Boards would only give policy guidelines and Oversight Boards would not have any executive role and the chain of command of the FBR would not be distributed. The administrative role of the tax officials would remain the same and any resistance would not be tolerated, sources quoted the caretaker finance minister as saying during the meeting.

However, the caretaker finance minister did not guarantee that the conflict of interest would not persist after the new government came into power. There is no guarantee that tax practitioners and chartered accountants will not become members of the Oversight Board in the future. “We cannot give guarantees about the new government”, sources quoted the caretaker finance minister as informing the FBR’s top management.

During the meeting, Chief Commissioners (Inland Revenue) and Chief Collectors of Customs repeatedly raised their concern over the presence of private members on the Oversight Boards, which would be a total conflict of interest. The government can appoint academicians/professionals from top institutions to avoid conflict of interest.

The tax officials raised questions about whether the private boards in PIA and Sui Southern Gas Company Limited (SSGCL) have improved the performance of these key organisations. How the private members would improve the performance of the FBR due to conflict of interest. The private members would watch the vested interest of the taxpayers and not the government revenue and the FBR.

Senior tax officials also quoted examples of conflict of interest that the sales tax rate on point of sales (POS) transactions was reduced to 10 per cent on the recommendation of a leading textile owner, which resulted in refunds to the tune of billions. At the request of the banking sector, the rates of withholding tax on banking transactions were withdrawn in the past after approval from a private-sector finance minister. The measure caused Rs45 billion revenue loss and hampered documentation drive of the FBR.

Top tax authorities also informed that presently, the FBR only gives its technical input on budget proposals and revenue impact, but the federal government, cabinet, and parliament approve the Finance Bill.

Heads of the field formations questioned how the new Oversight Boards would help in increasing revenue collection, broadening the tax base, and automation and digitization which is already underway.

During the meeting, sources said that a senior official from the field formation asked the caretaker finance minister whether the transfer and postings of the tax officials would be done by chartered accountants and tax practitioners in the future.

Top FBR officials also resisted that the private members should not be appointed to the Oversight Boards to avoid conflict of interest.

The Chief Commissioners (Inland Revenue) and Chief Collectors of Customs also talked about the increased resistance from junior and young tax officials working in the field formations.

The caretaker finance minister assured that the concerns of the tax machinery on restructuring would be addressed at the implementation stage of the reforms.

The caretaker government has the mandate to carry out reforms and restructuring in the tax machinery and bilateral and international agreements/conventions and multilateral contracts with the foreign tax jurisdictions. The tax reforms are also part of the IMF programme, sources quoted the caretaker finance minister conveying to the participants of the meeting.

The director generals of the Inland Revenue and Customs would be appointed by the federal cabinet and not the private members of the Oversight Boards, sources referred to the caretaker finance minister clarifying on queries of the top tax officials.

Sources said that the Customs side has requested the caretaker finance minister to retain powers as well as functions mentioned in the Customs Act, 1969. The officials of Customs want it to continue to do anti-smuggling operations with other law enforcement agencies.

In addition, powers pertaining to investigating money laundering cases should also be retained with Customs Intelligence.

Furthermore, the collection of sales tax on ports and other duties on import and export should also rest with Customs.

Recently, a delegation of Customs officers also met the caretaker finance minister on proposed restructuring and reportedly the minister assured that the government will not take powers from Customs.

Sources said that officers of Customs are also divided over the inclusion of private sector members in the oversight board.

Copyright Business Recorder, 2024