Fbr restructuring by tauqeer ahmed
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The document discusses the restructuring of Pakistan's Federal Board of Revenue (FBR) and its effects on tax collection. It notes that FBR underwent major reforms between 2001-2005 with assistance from the IMF and World Bank, including restructuring FBR along functional lines, automating processes, and improving human resources. While some intermediate goals were achieved, the overall tax-to-GDP ratio target was not met and dropped to its lowest level in over 20 years by 2011. The reforms faced challenges including slow integration, underutilized IT systems, and an ineffective audit function. Further reforms are recommended such as granting FBR full autonomy and expanding the tax base.
Fbr restructuring by tauqeer ahmed
- 1. “Tax Collection- Has The Restructuring in FBR Being Effective” By Tauqeer Ahmed IRS 1
- 2. Introduction Statement of The Problem Research Methodology FBR Structure Functions Need of Reforms Reform Process-structural and Legal Reforms Effects of Reforms Conclusion Recommendations 2
- 3. Tax is to a country as is blood to the body Revenue provides sustainable funding essential for long term planning. Tax revenue reduces aid dependency Dependence on citizens’ tax revenues for social and public services strengthen the accountability of governments Current dependency on non-tax sources of funding – has put our country on the back track 3
- 4. Narrow Tax base has been the hall mark of our performance in the past Most of the common measures is tax to GDP ratio 4
- 5. What is the effect of restructuring of the FBR on tax collection? What may be the course of action of the FBR to improve its core activities? 5
- 6. Primary Data ◦ Survey Reports ◦ Interviews Secondary Data ◦ FBR ◦ Research Papers ◦ World Bank Report on Reforms Data Analysis 6
- 7. FBR collects nearly 90% of tax revenue in the country FBR Taxes ◦ Inland Revenue Direct Taxes Income Tax Withholding Taxes Indirect Taxes Sales Tax Federal Excise Duty ◦ Customs Duty 7www.fbr.gov.pk
- 8. Formulation and administration of taxation policy Levy and collection of federal taxes Quasi-judicial function of hearing of appeals Enter into double-taxation treaties with other countries Liaison with all Ministries as well as Chambers of Trade and Industry Prepare reports on FBR activities. 8FBR Year Book 2010-11
- 10. Officers: (BS 17-22) 1,538 Mid-level Officials: (BS 11-16) 7,761 Junior level staff: (BS 1-10) 14,996 Total: 24,295 10FBR Year Book 2011-12
- 11. Low Tax to GDP ratio Poor Management Information System Trust Deficit between the taxpayer and the taxman Narrow tax base in Pakistan Need of Taxpayer Facilitation Model Combating Corruption Reforms to enhance the professional capability of the workforce 11
- 12. Task force under the chairmanship of Syed Shahid Hussain was appointed in 2001 IMF also submitted its report in August 2001 Afterwards the Government started negotiating with the World Bank/IMF and FBR developed Strategy Document in November, 2001 with the help of M/S Max Stamp Well. The Tax Administration Reforms Program was formally Launched in 2005 12
- 13. S. No Description of TARP Heads Total Budget (Rs. Million) GOP Component (Rs. Million) Share (%) World Bank/ DFID Component (Rs. Million) Share (%) 1 Technical Assistance 938.9 112.7 4.9 826.3 11.5 2 Customized Software 3,177.6 381.3 16.5 2,796.3 38.9 3 Hardware and Allied Equipment 2,059.2 411.8 17.8 1,647.3 22.9 4 Infrastructure Development 1,406.0 351.5 15.2 1,054.5 14.7 5 Automobiles 175.5 35.1 1.5 140.4 2.0 6 Training 585.2 - 585.2 8.1 7 Program Management 178.9 35.8 1.6 143.1 2.0 8 Sub-Total 8,521.2 1,328.2 57.6 7,193.0 100.0 9 Cost Escalation 979.4 979.4 42.4 0 0.0 10 Total 9,500.6 2,307.58 100.0 7,193.0 100.0 Source TP&R wing FBR
- 14. To be a modern progressive, effective, autonomous and credible organization for optimizing revenue by providing quality service and promoting compliance with the tax laws 14www.fbr.gov.pk
- 15. Pursuing twin track reforms of tax policy and tax administration to meet medium –term revenue targets To boost the tax to GDP ratio by around 3.5% in five years time Make the tax base as broader as possible Keep tax rates as low as possible; and Make compliance cost simple and non compliance expansive. 15
- 16. Improve compliance with the tax laws Develop a customer centered focus Foster organizational renewal and an efficient, ethical and adaptive organization Increase productivity and cost effectiveness Maintain community confidence Steps to improve Voluntary Compliance Ensure revenue is available to fund government programs 16
- 17. Ensure people receive payments they are entitled to i.e. Refunds The Pakistan Revenue Automation Limited( PRAL) to play a key role in automation of the whole system from filing of the returns to the selection of the cases through computer ballot. 17World Bank Reprt 2013
- 18. Restructuring of FBR along functional lines and integration of income, sales and excise taxes Reengineering and automating business processes and work flows Establishing database for reporting and audit purposes Improving services for taxpayers Strengthening the human resource base 18World Bank Report 2013
- 19. Recruitment and maintenance of quality professionals Comprehensive audit selection plans were given by the professionals appointed from the private sector Reconstituting FBR on functional as against cylindrical basis Merging Inland Revenues- Income Tax, Sales Tax and Federal Excise 19world bank reprot 2013
- 20. Assigning functions/responsibilities to specialized divisions Trade/industry specialization in tax audit with support systems Providing pre-audit anonymity of tax auditors Establishing LTUs and RTOs Capacity Building- all levels Reducing taxpayer/tax collector interface 20
- 21. Creation of Inland Revenue Service( IRS) Replacing the Income Tax Ordinance 1979 with ITO 2001 Selective audit based on risk management analysis A well skilled professional workforce Electronic Filing of Tax Returns and statements 21
- 22. 13 Model Customs Collectorates 18 Regional Tax Offices (RTOs) 6 Large Taxpayers units (LTUs) 76 Taxpayer Facilitation Centers (TFCs) 22FBR Year Book 2011-12
- 23. Effects of Reforms Tax Mix – Historical data Customs Duty 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%49-50 54-55 59-60 64-65 69-70 74-75 79-80 84-85 89-90 94-95 99-00 04-05 09-10 Current %ageShareinRevenue Financial Year Inland Revenues 23FBR Revenue Budget wing
- 24. Effects of Reforms Tax Mix – Historical data Income Tax Sales Tax Federal Excise Duty Customs Duty 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 49-50 54-55 59-60 64-65 69-70 74-75 79-80 84-85 89-90 94-95 99-00 04-05 09-10 Current %ageShareinRevenue Financial Year 24FBR Revenue Budget Wing
- 25. Effects of Reforms Income Tax- Collection Mix Out of Demand (Current & Arrear) Voluntary Payments (With Return + Advance Tax) Withholding Taxes 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13P %ageshareofIncomeTaxCollection Financial Year 25FBR Revenue Budget wing
- 26. The underlining development objective in terms of FBR tax to GDP ratio was not achieved Despite progress in key intermediate outputs and substantial investments in IT, physical and human infrastructure at FBR. Notwithstanding moderate gains during 2004/2005 to 2008/2009, FBR tax to GDP collection has dropped substantially to reach 8.6 percent of GDP by the end of FY 2011, the lowest level in more than two decades 26The world Bank Report 2012
- 27. Slow integration of FBR organization along functional lines Underutilization of IT related systems due to poor integration of the new systems Continued weakness of the audit function Replacement of time tested law did not pay IT system existed with manual legacy Professionals from private sector were not effective Change in mind set still a far cry 27world bank report 2013
- 28. 28FBR Year Book 2012-13
- 29. Tax-GDP Ratio - 2012 0 5 10 15 20 25 30 35 TaxasapercentageofGDP 29www.google.com
- 30. 30 18% 51% 20% 2% 9% Declining real incomes Corruption in tax administration Lack of trust regarding tax utiliation Cumbersome tax filing Others Why we do not pay taxes SDPI
- 31. 31 3% 30% 27% 37% Registration will curtail growth Afraid of Intrusion Compliance is costly Lack understanding on tax matters Why we do not register with FBR SDPI
- 32. Full autonomy to FBR Gradual reduction in reliance on withholding taxes Amendment in law to do away with USAS Broaden the tax base Further simplification of electronic tax filing Effective taxpayers audit plans Enhancement of professional capabilities- use of IT skills Strong enforcement mechanism of tax laws vis-à-vis audit, recovery, integration of laws 32
- 33. 33