TRC suggests tax service independent of CSS

ISLAMABAD: Calculating concessions in taxes costing Rs100 trillion to national exchequer in last four decades, the Tax Reform Commission (TRC) has asked the government to create a specialised tax service cadre totally separate and independent from other civil services of Pakistan.
The TRC also recommends the government to amend FBR Act 2007 to allow employment of high calibre professionals at market-based salaries of MP scales.“In the longer run we need to work on the idea of creating a specialised tax service cadre totally separate and independent from other civil services of Pakistan with its own rules and regulations,” a draft of high-profile TRC states which is available with The News on Wednesday.
To meet the challenges being faced by the FBR, the Federal Board of Revenue Act 2007 needs to be suitably amended to allow employment of high calibre professional at market-based salaries to augment and strengthen the management at Head Quarters and strengthening its enforcement and compliance function at field formation levels. As a short term measure FBR should induct professionals on contract basis on MP grades.
This would also require a complete overhaul of Directorate of Training to convert it into a Centre of Excellence. The government may carry out an independent study for the purpose, the TRC suggested.
The FBR, the report states, needs to differentiate between high performers and others. Good performers should be fast-tracked in promotions and rewards. No one has calculated how much tax loss Pakistan has suffered perpetually since 1977 on account of non-taxation of agricultural income alone as suggested under Finance Act, 1977.
If we add total loss of revenue through various exemptions, non-taxation of benefits given to State Oligarchy and through Statutory Regulatory Orders (SROs) issued during the last four decades, the amount comes to over Rs100 trillion-this explains how unprecedented concessions to the rich have made the State poorer, burdening every citizen of this country with enormous debts. We would not have required any borrowing at all, if tax losses were historically not incurred.
If we look at the Human Resource (HR) profile in FBR, one finds that more than 90% of the staff consists of persons of grade 16 or below with head count of about 20,000. The total officer above the rank of grade 17 and above are 1,966. This profile itself speaks volume about the working of the organisation. The absolute numbers and the ratio of support staff to professional staff is untenable. This 90% staff represents the part of the problem as they are the people who are surplus in the organisation, lacking ability and are in-fact counterproductive.
As tax administration has to deal with state-of-the-art aggressive tax planning schemes involving cross border financial transactions, a tax audit solely comprising of internally promoted auditors could encounter difficulties detecting and analysing these schemes effectively.
Therefore FBR can also alternatively think of induction of mid-career recruitment directly into higher grades of experienced tax consultants with experience in law and accounting. This measure would be an effective countermeasure and would also attend to the needs and of large taxpayer unit with large size clients.
In short to medium term, the curriculum of the training directorate need to be augmented and the training made more rigorous. The period of specialised training should be extended to at-least three years to cater for modern external economic challenges.
Moreover a minimum of six months practical training should be mandatory before a formal posting to make the officer well versed in all practical aspects. All best performers in training and high achievers should be allowed to choose the audit wing and registration wing in the order of priority. All the staff in these wings be allowed initially to get double salary provided they maintain a certain level of performance criteria.
Double compensation should also be offered to outstanding performers in operation or service and support wings. The training needs to be a continuous part & parcel of professional staff at FBR. The Directorate should offer executive training programmes for all levels of staff at the FBR. These executive courses should be mandatory and performance at these courses should be linked with future promotions till grade 20. Moreover the high performers may be allowed to stay in Audit and Registration wings.