Revenue authority plans restructuring of tax departments

KARACHI: The Federal Board of Revenue (FBR) has planned a massive restructuring of its tax departments to facilitate corporate taxpayers and identify new taxpayers, sources said on Friday.
Both functional and circle-based systems will become operational under the new plan, the sources said.
They said the apex tax authority has already taken a few steps to this end. It has recently reshuffled jurisdiction of several corporate entities to large taxpayers units (LTUs).
The sources said the plan was evolved as a result of disappointing performance of the regional tax offices (RTOs), which have been unable to produce results under the functional system introduced more than a decade ago.
Under the restructuring plan, FBR is likely to designate the three RTOs in Karachi with corporate, non-corporate (circle based) and salaried persons.
Further, a number of big corporate cases are likely to be shifted to LTU Karachi under the plan.
The sources said the LTU Karachi will also be divided into two sections to facilitate the corporate sector.
They said in the circle base system an officer in-charge has been entrusted with all the responsibilities of maintenance of record, receipt and enforcement of income tax returns/statements, conducting audit and assessment, recovery of taxes, filing of appeals at various appellate forums, issuance of refunds and assisting the commissioner in issuance of exemption certificates. In the functional system, they added that the tax departments have jurisdiction over all type of taxpayers, including corporate, business individuals, salaried and broadening of tax.
Presently, the RTOs have jurisdiction over taxpayers in alphabetically order.
The LTUs, however, are working under a mechanism to facilitate big corporate entities.
The circle base system was replaced with functional system under the Tax Administration Reform Plan funded by the World Bank.
It was decided, after failure in the system in 2009/10, that the present system was neither functional specialisation-based, nor based on territorial jurisdiction and nor hybrid.
The commission strongly opposed the present system, advising the finance minister to reshape the working of FBR’s tax departments.
Masood Naqvi, Chairman of TRC, told The New that the present setup was not performing well.
“There is no accountability in the system and the taxpayer is dissatisfied with the multiple notices he receives and [there’s] lack of redressal mechanism,” Naqvi said.
He said circle-based tax administration system is best suited for small and medium level taxpayers with one window taxpayer facility, lower transaction costs, performance accountability, sanctity of records, easy accessibility to records and proximity to taxpayers.