PBC backs caretaker govt’s plan to restructure FBR

KARACHI: The Pakistan Business Council (PBC), a leading corporate lobby group, urged the next government on Wednesday to implement the tax reforms approved by the caretaker administration, saying they would boost revenue and accountability.

The interim cabinet on Tuesday endorsed a plan to restructure and digitise the Federal Board of Revenue (FBR), following the recommendations of a committee led by the finance minister Shamshad Akhtar.

The plan envisages creating a Federal Tax Policy Board in the Revenue Division, which will be in charge of setting tax policy, revenue targets and stakeholder coordination.

The board will be headed by the finance minister and include representatives from various ministries and independent experts.

The Federal Board of Revenue will be split into two separate departments: Customs and Inland Revenue, each headed by a director general with full administrative, financial and operational powers. Both departments will also have their own oversight boards, comprising federal secretaries and experts, under the chairmanship of the finance minister.

The PBC, which represents some of the largest companies in Pakistan, welcomed the reforms in a post on social media platform X, saying they were essential to improve the country's low tax-to-GDP ratio and broaden the tax base.

"The good work done by the caretaker government and SIFC on charting restructuring of the FBR must be implemented effectively by the incoming government," PBC said.

"No party has denied the need to enhance the tax to GDP ratio or to equitably broaden the tax base and create long term growth oriented policies."

The PBC said the focus will be sharpened (and tax revenues improve) by the split of FBR into customs and IRS.

"Accountability will also improve through oversight boards composed of a cross section of ministries and independent experts."

The council said fiscal policy must not be made by those who collect or otherwise control the tax collectors.

"Ideally, the Fiscal Policy Board, also composed of a cross section of ministries and independent experts, should report to the PM or the Ministry of Planning."

The tax reforms are expected to be implemented by the next government, which will be formed after the general elections scheduled for Feb. 8.

Pakistan has one of the lowest tax-to-GDP ratios in the world, at around 10 percent, with the

FBR contributing only 8.5 percent in 2022-23, the caretaker

finance minister Akhtar previously said.

The country's tax potential was around 22 percet of GDP, but the number of taxpayers was barely 2.3 million, with only 0.8 percent of industrial and commercial electricity users filing corporate taxes and only 13 percent of the 1.4 million taxpayers registered for the goods and services tax (GST).