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Government gearing up to approve sweeping reforms in FBR


News Analysis |

The Pakistan Tehrek-e-Insaf government is in advance stages of introducing a radical reform plan for the Federal Board of Revenue (FBR), in order to increase, and sustain the revenue collection. PTI government under the supervision of the Mr. Asad Umar is gearing up to promote equity and transparency in the tax collection mechanism.

The summary of the reform package is moved to the newly installed cabinet – which is expected to review it in its third session today. Finance Minister Umar has been aware of the progress of the previous government in this regard and is willing to ensure that those recommendations coupled with his reform package reach the implementation stage, unlike the previous regime.

Tax collection remains a huge issue for a country, where less than 0.61% of the population filed tax returns in 2017. In Pakistan. Tax revenue is hovering around the 10% mark. PM Khan is committed to enhance tax base and improve governance.

The speculations are rife in the media that secretary revenue division in the FBR is bypassed in this regard—who normally signs these type of summaries before being sent to the cabinet for approval. Mr Khan’s government is facing a daunting task to do something about the chronic issues in tax bureaucracy – which has not been achieved, thus far in Pakistan’s history.  Tax collection in Pakistan is extremely rigid and time-consuming process.

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PTI’s self-proclaimed Finance Wizard Asad Umar is more likely to reform FBR in line with the PTI’s much-publicized and criticized 100-day agenda. The government is looking to transform FBR into an autonomous body, as envisioned by PM Khan in his maiden speech—where, he promised the nation to introduce radical reforms in the institution.

In its 100-day agenda, the newly elected government had made it clear that it aims to improve the FBR by appointing a bold, capable and dynamic FBR chairman, reminiscing the impact of IGP KP Nasir Durrani in KP. It wants to shun regressive indirect taxation, which has been the backbone of PML-N economic policy with an equitable tax policy.

Finance Minister Umar has been aware of the progress of the previous government in this regard and is willing to ensure that those recommendations coupled with his reform package reach the implementation stage, unlike the previous regime.

The government is looking to launch FBR reform and share a business-friendly and equitable tax policy within 100 days to revive the economy and reduce debt dependence. The overhauling of the FBR has been one of the most realistic, yet, the most demanding target for the incumbent government.  The cabinet is expected to make important decisions today including structural changes in the taxation authority.

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There are expectations that government intends to separate revenue collection administration from tax policy formulation, taking away the policy formation powers of the FBR. Moreover, FBR may only be restricted to a tax administration and tax collection entity. Independent estimates indicate that the FBR collects 82% of its total revenue in indirect taxes, and only 18% indirect taxes.

Tax collection remains a huge issue for a country, where less than 0.61% of the population filed tax returns in 2017. In Pakistan. Tax revenue is hovering around the 10% mark. PM Khan is committed to enhance tax base and improve governance. But, for this to happen, new monitoring tools, and systems will be required. It would be a difficult task, and a major test of resolve for the PTI government, to bring any drastic changes in the FBR.