FBR Tax Policy, Legislation Wing separate entities

ISLAMABAD: In a major development, the Tax Policy Wing has been separated from the Tax Administration (FBR) and under new scenario policy formation powers will now rest with the Independent Policy Board.

The decision was taken in the fifth meeting of the FBR Policy Board chaired by Dr Hafeez Sheikh the other day. The meeting was also attended by Abdullah Yousaf, Dr Ishrat Hussain, Razzak Dawood, Dr. Waqar Masood, Salman Saddiq and Members FBR.

The meeting decided having an Independent Policy Board separate from Policy Administration within FBR. The idea of having an independent board was strongly opposed by Dr. Waqar Masood, Special Assistant to PM on Revenue. He advocated strongly against this notion and used all sorts of arguments for not separating the two. In many countries, the tax administration is not responsible for tax policy. Advising on policy and designing new tax policy is clearly the responsibility of a separate think-tank or entity.

To this effect a heated debate opened between Mr. Razzak Dawood adviser to PM on Commerce and Investment and Dr. Waqar Masood, SAPM on Revenue, over the issue which went on for quite some time.

However, in the end Dr. Hafeez Sheikh decided very firmly to keep Tax Policy and Legislation Wing separate from Tax Administration.

Advantage of having a separate Policy Board from Tax Administration is that firstly it will ensures check and balance and transparency as the body in charge of collecting tax must not be authorized to formulate tax policy. Secondly, having a separate board prescribes clear understanding of duties. An inefficient or ill-advised policy can be challenged. As per a Latin phrase, nemo judex idoneus in propria causa est (no-one is judge in his own cause). It is a principle of natural justice that no person can judge a case in which they have an interest. Thus, a clear separation will be fair and just. Thirdly, the Policy and Administration should not be in the same hands. It would be most unfair, without any contest, to levy taxes. All aspects of the reforms will be viewed from a different perspective and economic efficacy. And fourthly, having a separate board will help identify anomalies and simplify the taxation system for a better understanding of the business community.

Prime Minister Imran Khan had approved the plan in the Cabinet meeting held on Nov 29, 2018, but the tax bureaucrats took a lot of time to separate tax policy from the tax administration.

In November 2019, the Federal Cabinet took away the powers of making tariff changes from the Customs Department and placed it under the administrative control of the Commerce Ministry.

A tariff policy centre was already established in the Commerce Ministry to deal with tariff changes.