Dissatisfied govt may shuffle second-tier of FBR

Tax machinery faces task of collecting Rs960b in three months to meet target

ISLAMABAD: The government may reshuffle the second-tier of the Federal Board of Revenue (FBR), responsible for enforcing tax laws, in addition to finding ways to recover over Rs350 billion of lost revenue stuck in litigation, as it faces the gigantic task of collecting Rs960 billion in three months to achieve the half-year tax target.

While speaking to the Chief Commissioners Conference, Finance Minister Ishaq Dar hinted at reshuffling the tax machinery. He said that FBR Chairman Nisar Mohammad Khan was authorised to take such decisions, according to officials present at the occasion.



However, the FBR chairman said that no major reshuffling was on the cards but a few changes may take place.



The two-day conference, which concluded Friday, was aimed at reviewing the performance of the first quarter and setting goals for this ongoing three-month period, said FBR chairman.

The Chief Commissioners of Islamabad and Karachi may face the axe, according to officials. The disappointing revenue collection result of the first quarter (July-September) has forced the government to think over other options, they added.

Despite setting a low target, the FBR provisionally collected Rs631 billion during the July-September quarter of this fiscal year - short of the target by about Rs55 billion, according to the FBR. In terms of growth, the collection was hardly 4.1% more than the taxes FBR pooled in the same quarter of the last fiscal year. It came on the back of a negative 37% growth in payment of refunds. The Rs250 billion advances that the FBR took last year are said to be the primary reason for the failure.

This has increased the FBR’s woes as it now has to collect Rs960 billion for the October-December quarter in order to remain on track to achieve the annual target of Rs3.621 trillion.

The authorities also decided to focus on the enforcement of laws and reactivating the forum of Alternate Dispute Resolution Committee (ADRC), said officials. The move appears to be a step in the right direction, as the FBR has so far been focused on levying more taxes instead of plugging loopholes. They also decided to improve the monitoring of withholding taxes and analyse sales tax data. However, similar decisions were also made in the past but remained unimplemented.



The tax experts said that without amending the Income Tax Amendment Act of 2001, the ADRC forum cannot be effectively utilised. In 2009, the then government amended the income tax law to restrict the scope of the ADRC. Moreover, the ADRC decisions are also non-binding on the FBR that has practically rendered this important platform ineffective.

The FBR officials said that at present Rs350 billion to Rs375 billion revenues are stuck in litigation at various forums including provincial high courts and the Supreme Court of Pakistan. They said if the taxpayers are given an option for settlement, this could significantly lower the backlog besides increasing the revenue collection.

Through the Finance Act 2016, the FBR introduced certain changes in the section related to the ADRC but these are not sufficient to address the issue completely. The FBR has now set timelines for constituting and finalising the ADRC, the maximum time limit for the committee to give a decision and for the FBR to implement it. Still, it would take at least eight months, from filing an appeal by the aggrieved person to notifying the decision by the FBR, which will make the process painstakingly slow.

The experts said that the decision of ADRC should be made binding on FBR and only in case of serious reservations and compelling reasons to be given in writing, an authority may be given to reject the ADRC orders after mandatorily obtaining written permission of the FBR chairman.

Published in The Express Tribune, October 8^th, 2016.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.