KARACHI: Tax authorities have observed that the Pakistan Tax Administration Reform Programme (TARP) has failed to produce desired results due to weak supervision of the World Bank.
“World Bank’s supervision was strong at the beginning of the project but overtime became weaker,” the Pakistani authorities noted in the project completion report on TARP released by the World Bank.
The World Bank supported a Tax Administration Reform Programme (TARP) on request of the Pakistan government in 2004, which concluded December 2011.
“Feedback and requests for clearances took longer, leading to many procurement delays,” the report said.
The authorities said 58 percent of expenditure occurred after restructuring; moreover, during the first five-and-a-half year of the project, total expenditure was Rs2.1 billion ($30.8 million), while after restructuring (18 months) it was Rs3.4 billion ($41.6m).
The authorities, however, rated the World Bank’s performance as highly satisfactory.
On the other hand, the World Bank, rated the borrower as unsatisfactory.
“The quality at entry was affected by major shortcomings, such as insufficient identification of critical risk factors and mitigation measures, inadequate technical support on key reform areas, and misclassification of environmental category,” the World Bank said.
The government of Pakistan, however, responded that overall rating of implementation performance on Tax Administration Reform Programme was downgraded to moderately unsatisfactory on account of non-implementation of 15 of the 22 priority measures agreed in April 2011.
In the report, the World Bank has criticised the government of Pakistan for inconsistence commitment to tax administration reform agenda, which affected project’s implementation.
“During the initial years of TARP, the government took several steps to show its strong commitment to the project, including: establishment of LTUs/MTUs; confirming the chairman FBR for three years and renewing the terms of the members responsible for functional areas; granting FBR greater autonomy under the oversight of the Cabinet Committee on Finance and Revenue (CCFR); and preparation of a rationalisation plan for FBR staff,” the World Bank said.
In line with the government’s commitment to the reform agenda, the FBR Act 2007 was enacted.
The Pakistan government also provided relatively adequate counterpart funds until the restructuring, the World Bank added.
“However, the government’s commitment to major tax policy reforms wavered over time, especially during the boom years (2005-2008) when higher economic growth generated modest revenue gains, despite limited results on its tax administration reform programme,” it said.
“The security of tenure of key and senior FBR officials of at least three years was a desirable requirement to move the reform agenda forward. Yet, during the nearly seven years of project life, four chairmen were appointed, with some of them coming from outside the income tax and customs services which did not go down well with some of FBR’s staff,” it added.