ISLAMABAD: The Organization for Economic Co-operation and Development (OECD) will support Pakistan on transparency and automatic exchange of information and conducting criminal investigations under its initiative known as Tax Inspectors Without Borders (TIWB).
In a detailed report prepared by the Platform for Collaboration on Tax (PCT), including the International Monetary Fund (IMF), the United Nations (UN), OECD, and World Bank Group (WBG) continued their support to countries through the release of joint knowledge products, technical assistance concerning tax-related responses to the crisis and workshops on critical issues.
The OECD’s initiative Tax Inspectors Without Borders (TIWB) provides hands on support to developing countries for helping in the cases of conducting effective audits for tax purposes.
In the case of Pakistan, the UK’s HMRC signed a confidentiality agreement and they helped Pakistan to conduct an effective audit. Overall, with the help of OECD and other development partners, different countries assessed over $3 billion through tax audits and recovered $1.5 billion. Under the TIWB initiative, Pakistan has again requested to OECD for helping its criminal investigators for conducting an effective investigation where tax matters were involved.
In a case study on Pakistan, the PCT report stated that the Government of Pakistan continued developing a Medium-Term Revenue Strategy (MTRS) with close support from the WB and other development partners working in the Domestic Revenue Mobilization (DRM) improvement.
Recently, the MTRS has benefited from a multi-donor engagement to carry out the Tax Administration Diagnostic Toolkit (TADAT) to assess the tax administration performance and practices. TADAT will provide an evidence-based assessment about the main gaps against good practices and set out a baseline for further reforms. Based on the latter, development partners will define the framework for further assistance with the leadership at the Federal Board of Revenue (FBR). This will allow better coordination and focus on key areas where the development partners working in this space have a relative comparative advantage. In this context, the WB will continue to assist the FBR to consolidate the MTRS providing technical advice in the tax policy and tax administration, including customs fields.
The PCT Partners coordinate with each other and with other development partners during the design phase of projects. The Partners seek each other’s input on interventions to benefit from the expertise and reinforce synergies by keeping each other apprised of upcoming activities. Through frequent check-ins, the Partners ensure a clear division of labor and conduct their work without close coordination on day-to-day activities.
The IMF and WBG have high levels of information exchange with each other in Pakistan, led by country teams, and supported by Pakistan’s Tax Administration. The WBG sought the IMF’s input on technical design and structure of their major reform program. The IMF has regular email exchanges and meetings with the WBG to discuss aspects of both teams’ reform agendas. The OECD has held meetings with the WBG team, both in Pakistan and at the headquarters, to understand each organization’s value-add, as well as to inform sequencing of activities.
The OECD specializes in international tax. Its activities include an induction program that provided Pakistan with guidance to implement the minimum standards and set up the normative and institutions to fight against BEPS, a capacity-building program of the Global Forum on Transparency and Exchange of Information for Tax Purposes, which was designed in close collaboration with the United Kingdom (UK), to support Pakistan on transparency and exchange of information, and a tax audit and tax crimes investigation support program with the UNDP on its TWIB program.
The Asian Development Bank (ADB) is leading a Tax Administration Diagnostic Assessment (TADAT), with the participation of the IMF, the WBG, and the Foreign and Commonwealth & Development Office (FCDO), UK. In the area of tax administration, the IMF team focuses on compliance risk management while the WBG team focuses on improving the outcomes from tax audits.
The WBG sought the support of the ADB on defining the scope of the Automated Entry-Exit System (AEES) activities because of the notable modernization interventions that the ADB was already undertaking at land-border posts. In the tax policy area, providers of capacity development support have worked in related but different areas. On some emerging issues, such as the establishment of a tax policy unit, further coordination is needed to ensure the Partners’ advice is aligned.
Steps to Improve Future Collaboration: The PCT Partners’ teams in Pakistan all expressed their support for further collaboration in the future. The OECD supports the coordination with other organizations in sequencing reforms to maximize effectiveness but also suggests simplifying administrative procedures to facilitate the co-funding of activities.