How FBR failed to achieve end-to-end digitisation

ISLAMABAD: The Federal Board of Revenue (FBR) has so far failed to undertake eight crucial steps for end-to-end digitalisation leading to revenue generation despite the establishment of Pakistan Revenue Authority Limited (PRAL), a subsidiary of the tax machinery, during the last two decades.

The government has recently hired international consultant Mckinsey for end-to-end digitisation but there is a background to this story that why FBR so far remained unable to do it.

The eight required steps for placement of end-to-end digitisation start from collecting the data would remain useless without cleansing the data to make it accurate. Then the stage of analytics of data is missing by and large due to which the FBR has remained to make any apparent difference. In later stages, there is a requirement for data storage, utilisation of accurate information, effective enforcement measures with the help of a dedicated workforce, then the identification of major revenue potential sectors and individuals, and finally the revenues are tapped into the national kitty. Now it will be a challenge for the FBR to convert the database into taxability by aligning laws, procedures, and enforcement for maximising revenues. Without proper spadework, the dream of increasing revenues will remain a reverie or daydreaming.

In the last two decades, only the tenure of former chairman Tariq Bajwa could be termed a milestone for achieving success to some extent in introducing different IT-based solutions but finally, the objective for bringing transformation for generating revenues through end-to-end digitisation remained a far cry.

Now at the moment, there is a complete disconnect between FBR and PRAL because PRAL has become a dysfunctional entity in the wake of its inability to reconstitute its Board in the aftermath of the State- Owned Enterprises (SOEs) Act.

Secondly, the acting charge has been given to those who did not have any expertise in IT-related affairs. In the FBR, those are looking after IT issues who do not know the basics of Information Technology.

Meanwhile, Federal Minister for Finance and Revenue Muhammad Aurangzeb visited the FBR Headquarters on Friday and held a meeting with the Chairman of FBR and Members of the Board to review revenue collection performance of FBR. Attorney General Mansoor Usman Awan was also present on the occasion.

During the meeting, Chairman FBR gave a detailed briefing to the minister about the revenue collection efforts of FBR for the current financial year 2023-24. The chairman also briefed about measures being taken for digitalization of FBR to further improve its performance.

The finance minister emphasised on devising strategies to enhance tax-to-GDP ratio and broaden the tax base to maximise revenue collection. The minister called for making all-out efforts to achieve the ongoing year’s revenue collection target.

Various other issues including pending legal cases also came under discussion during the meeting. It was decided to devise a holistic strategy to actively pursue all the pending legal cases for early recovery of stuck-up revenues. There are Rs2.7 trillion stuck up at different forums but there is a need to ascertain how much taxes are recoverable.

Earlier, the ADB mission visited FBR on Thursday and met FBR leadership who have been assisting in the implementation of the Domestic Resource Mobilization Program (DRM).

The mission was led by Tariq Niazi, Senior Director ADB from Manila.

The mission’s objectives included discussion on structural and policy reforms under the DRM Program funded by the ADB. The ADB showed satisfaction on the successful rolling down of the DRM Program. It was noted that significant achievements were made in the Sub Program I of the DRM program and due to the dedicated efforts of FBR, $300 million was disbursed by ADB to the government of Pakistan in December 2023. Subprogram I laid down the foundations for improved policies, laws, and institutional capacity for the FBR. Subprogram II reforms are to be completed by end 2024 which will build on earlier actions to ensure full implementation and operationalisation.

FBR apprised the ADB team that the Revenue Division in line with the vision of the Prime Minister of Pakistan to transform Federal Board of Revenue into a Digital Tax Administration and keeping pace with global trends, has embarked on a journey of digitalization focused towards automation of its processes and digitalizing of the economy.

These initiatives reduce the cost of compliance of taxpayers, document the economy, expand the tax base and lead FBR on a sustainable path to revenue growth.

Contours of a Digital Tax Administration Project of the FBR with the support of ADB were also discussed and the ADB team showed keen interest in this reform. Both sides agreed to explore ways to strengthen collaboration in support of Government of Pakistan’s Digital Tax Administration Project.