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Functions of FBR:

In the existing setup, the Chairman, FBR, being the executive head of the Board
as well as Secretary of the Revenue Division has the responsibility for
(i) Formulation and administration of fiscal policies,
(ii) Levy and collection of federal taxes and
(iii) Quasi-judicial function of hearing of appeals.
His responsibilities also involve interaction with the offices of the President, the
Prime Minister, all economic Ministries as well as trade and industry.

The Directorate General of Transit Trade shall be responsible for


enforcement of all transit trade agreements, laws and procedures through the
respective Regional Directorates and the concerned Collectorates. It shall also
supervise the functioning of these regional Directorates, furnish policy input to
the Board on matters relating to transit trade and maintain liaison with all
stakeholders.

Tax Administration/Reforms in Pakistan:


Pakistan continues to face deep fiscal crisis which cannot be resolved
easily. Taxes are insufficient to meet Pakistan's debt servicing and defense
needs. The tax-to-GDP ratio does not enable Pakistan to counter inflation or
improve governance, deliver quality public services or improve human resource
to reach a take-off stage for economic development. To address these issues,
GoP initiated a Tax Administration Reforms Program (TARP) in FBR in the year
2005 to achieve objectives to include overall increase in the revenue collection
for achieving fiscal targets; increase in tax to GDP ratio through broadening of
the tax base; strengthening audit and enforcement procedures through
professional capacity building of FBR officials; ensuring more equitable &
transparent application of tax laws through provision of high quality tax services.
By completing TARP in 2011 FBR has substantially achieved the desired
objectives despite various obstacles in the existing operational environment. The
successful completion of TARP rests upon Government's firm resolve to reform
FBR's Tax Administration
In June, 2000 when GoP appointed a Task Force on Reforming the Tax
Administration. This Task Force presented its report in May, 2001 which was
shared with stakeholders to include trade bodies, accounting institutes, tax bar
associations and donor agencies for framing an implementation strategy in the
light of viable recommendations from the concerned stakeholders.
Subsequently, on the request from the GoP for input on FBR's reform effort, an
IMF Mission visited Pakistan in August, 2001 which carried out in-depth
discussions with various stakeholders including Ministry of Finance,
Establishment Division, Federal Public Service Commission and trade bodies.
The Mission presented its draft report in August, 2001 which was condensed with
other similar studies to extend recommendations for a tax system having simpler
laws and efficient procedures for promoting self-assessment, reducing physical
controls and creating reliance on audit & risk assessment.
Consequent to these reports and discussions with various opinion makers FBR
prepared a tax reform strategy, which was approved by GoP in November, 2001.
The reform strategy had three main planks (a) policy reforms, (b) administrative
reforms and (c) organizational reforms. Policy reforms included simple laws,
universal self-assessment, elimination of exemptions, less dependence on
withholding taxes, effective dispute resolution mechanism. Administrative reforms
aimed at (I) transforming income tax organization on functional lines (ii) re-
engineering of manual processes of all taxes with the aim to reduce face to face
contact between taxpayers and tax collectors, increasing effectiveness of FBR
and improve skills and integrity of the workforce and facilitation of taxpayers.
Organizational reforms also included re-organization of FBR on functional lines,
reduction in number of tiers and reduction in workforce.
With a view to supplement the level of skills in FBR for meeting the above said
objectives, the Government in March-April, 2002 appointed professional
Members from private sector for (i) Human Resource Management (HRM), (ii)
Information Management System (IMS), (iii) Audit, (iv) Facilitation and Taxpayers
Education (FATE) and (v) Fiscal Research & Statistics (FR&S). FBR prepared
new recruitment policy (with greater emphasis on skills that match FBR needs),
incentive & merit based remuneration, promotion mechanism and extensive
training.
In 2002, FBR received a Project Preparation Facility (PPF) of US $ 2.9 million
from World Bank which was used for hiring of international consultants, namely
M/s Maxwell Stamp PLC, UK, and establishing Large Taxpayer Unit & Model
Sales Tax House at Karachi and a Medium Taxpayer Unit at Lahore. M/s.
Maxwell Stamp prepared a Comprehensive Medium and Long term Tax Reform
Strategy including an implementation time-table defining the precise reform steps
and their time frame.
To bridge the financial gap between the PPF and the funding for main phase of
Tax Administration Reform an amount of US $ 6 million was also allocated out of
World Bank funded "Public Sector Capacity Building Project" which was later
utilized for completion of Pilot Projects i.e. Large Taxpayers Unit at Lahore, 5-
Medium Taxpayers Units at Karachi, Peshawar, Rawalpindi, Quetta and
Faisalabad and a Dispute Resolution Complex (DRC) & Model Customs
Collectorate at Karachi, capacity-building & training of FBR's employees,
Taxpayers Education Programs, introduction of Universal Self Assessment
Scheme (USAS) and holding of Change Management Workshops. Part of this
funding was also utilized for appointment of M/s. NESPak Pakistan as
Consultants for preparation of design layouts, procurement support and
supervision of works at sites for LTU Lahore, 5 MTUs at Karachi, Quetta,
Peshawar, Rawalpindi & Faisalabad, DRC and Care Pilot Project Karachi.
To achieve Reforms objectives, FBR established Large Taxpayer units (LTUs)
and Regional Tax Offices (RTOs) to test the re-organized structure of income tax
& Sales Tax and various Taxpayers Education and Facilitation Centres to
improve voluntary compliance. Customs processes were also re-engineered by
initiating Customs Administration Reform (CARE) which aimed at minimizing the
clearance time of goods and reducing the cost of doing business. Re-engineered
business processes were automated for e-filing of Income Tax returns and
Goods Declarations, followed by establishment of an FBR website for information
dissemination and a helpline for taxpayers.
Executive Committee of the National Economic Council (ECNEC) in its meeting
held on 25.02.2005 approved the main phase of TARP with a capital cost of Rs.
9,501 million. Completion period of this main phase of TARP was five years
starting from 01.01.2005. During the World Bank Mid-Term Review Mission in
August-September 2007, the Bank reviewed the implementation progress of this
project in detail and on the basis of slow utilization of funds mainly due to
problems in development of Information Technology Systems during first two and
half years, recommended restructuring of TARP budget for remaining life of the
project on the basis of anticipated expenditures. Accordingly, a detailed exercise
was undertaken on the basis of which a revised PC-I with reduced capital cost of
Rs. 6,473 millions was prepared and submitted to the competent forum i.e.
CDWP/ECNEC. Revised PC-I was approved by the CDWP on 30.04.2009 and
ECNEC on 20.08.2009.
TARP has so far gained Stakeholders respect through improved performance
and creating business friendly environment. Imbuing professionalism, integrity &
responsiveness, and introduction of transparent ssimplified procedures have
reduced the cost of doing business. Moving towards optimum use of automation
and IT, professional training and better working conditions have further infused
confidence among tax collectors who intend to strive hard for increased
taxpayers facilitation in the areas of Income Tax and Customs.
TARP has been closed by 31.12.2011 at a cost of Rs. 5,528 million against
revised project cost of Rs. 6,472.817 million. All the physical progress has been
achieved. i.e. (a) establishment of 57 RTOs, MCCs, TFCs & Transit
accommodations, (b) four soft wares i.e., Integrated Tax Management System
(ITMS), Human resource Information System (HRIS), SAP Materials
Management (MM) & Financial (FI) Modules, & Data Warehouse software have
been completed and are functional (c) 11,445 machinery & equipment as per PC-
I target were procured and distributed. Tax revenue of Rs. 1,558 billion has been
collected during 2010-11 against PC-I set target of Rs. 1,350 billion. TARP PMU,
during this process, through professional training and hands-on exposure, has
gained sufficient professional capability to utilize the same for achieving any
future project development objectives in terms of project planning, procurement
of works, Goods and services and subsequent monitoring & evaluation.
FBR has successfully achieved the objectives of reforms. The last five years
revenue collection Flow Chart reflects the greater revenue collection as follows;