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January 23, 2020

FBR’s collection cost stands at 0.88pc per annum over last few years

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January 23, 2020

ISLAMABAD: The FBR has calculated that its collection cost on per annum basis stood in the range from 0.65 percent to 0.88 percent over the last few years.

In the proposed reform plan submitted before the Adviser to Prime Minister on Institutional Reforms Dr Ishrat Hussain-led committee, the FBR officers stated in order to effectively translate the vision of the government to bring institutional reforms in FBR into reality, it is of utmost significance that a consensus on the status of the organisation be developed before any new structure is formalised.

The Institutional Reform Committee recommended state institutions into two categories including executive bodies and second autonomous bodies. They recommended FBR into autonomous bodies but the FBR employees sternly opposed it arguing that they wanted to remain into domain of public sector.

In order to step up its efforts to mobilise domestic resources to achieve the Sustainable Development Goals (SDGs), the FBR officers report states that it is important to take an overview of performance of FBR.

The main goal of the organisation is to increase revenue mobilisation. To achieve the said goal it is imperative that all reforms that are to be introduced should not be reinvention of the wheel but instead earlier introduced reforms should be taken up afresh for feedback and to facilitate removal of the bottlenecks faced by the tax administration.

The solution requires a strategic wide-ranging tax reform with intent to strengthen the tax authority. The government has pledged a reform-based policy agenda, including raising economic competitiveness through pro-business policies, addressing corruption issues, reforming state-owned enterprises, enforcing greater discipline in government spending and broadening the tax base.

The World Bank report highlights that tax collection cannot be improved unless fundamental tax reforms are not introduced. It proposes that fully automated professional and national tax machinery with capacity to improve tax collection by curbing tax evasion through tax intelligence system is the need of the hour.

Despite the factors stated in the World Bank report it would be pertinent to note that FBR performance has substantially increased since introduction of Tax Administration Reform Project (TARP), which was introduced by the World Bank in 2000 and concluded in 2011. The FBR has remained open to reforms and modernisation in the past which reflects the progressive approach of its employees.

FBR employees are determined to contribute to national progress as in the past and contribute a large share of collection in national reserve as can be seen in the chart below: Relevant shares from Economic Survey of Pakistan 18-19, Statistical Appendix, Table 1

In the regional comparison, FBR fares as an organization that is showing progress and ranks second after Bangladesh, which is placed at table below:

Though the functions of the organisation have multiplied over the years the workforce and working environment is not in sync with the global practice of cost of collection. FBR fares as one of the organisation that charges lowest collection charges.

The cost of reduced collection charges has further hampered the capacity of the organisation to provide required impetus to the organisational staff. A comparison of collection cost over the years is placed at the charge below: