Govt finalizes FBR restructuring plan ahead of IMF board meeting

ISLAMABAD: The caretaker government has finalized the restructuring plan for the Federal Board of Revenue (FBR), a week before the scheduled International Monetary Fund (IMF) board meeting on January 11, 2024.

According to sources, the Apex Committee of the Special Investment Facilitation Council (SIFC) has reportedly granted approval for the FBR’s reform and restructuring plan.

The IMF has been urging Pakistan to implement reforms in the FBR, and its technical team engaged in negotiations with tax officials last month.

Sources said that the Revenue Division will submit a summary in the upcoming federal cabinet meeting for approval of the FBR’s restructuring plan. This submission will follow the receipt of minutes from the last SIFC committee meeting.

The summary aims to ensure the implementation of an action plan for restructuring Pakistan’s tax administration and strengthening the internal governance of the FBR.

Sources also said that the SIFC has endorsed the establishment of a special Customs Board to oversee the operations of Pakistan Customs under the ongoing reform plan. Customs will be separated from the revenue collection mechanism to better track smuggling and other illicit activities, while revenue collection remains within the FBR’s purview.

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A separate Inland Revenue Board may be established under the supervision of the Revenue Division. As part of the tax reform program, five federal secretaries, including Finance, Industries and Production, National Food Security, Commerce, and Interior, will serve as ex-officio members of the Customs Board.

The restructuring measures in the FBR aim to eliminate apparent conflicts of interest in tax collection and enhance the performance of the tax machinery.

The FBR is also moving towards adopting innovative digital technologies to expand the tax base and minimize the tax policy and compliance gap.

Sources indicate that senior officials from the FBR have held numerous meetings with the SIFC on the reform agenda, subsequently gaining approval on Thursday.

The government has reportedly decided to create a new position of “Member Appraisement” in the Customs Department to segregate appraisement from operations and enforcement. Another proposal is to separate the tax policy function from the FBR, as per the sources.