A vibrant FBR

The classical debt trap results from, inter alia, perpetual revenue-expenditure imbalances. The revenue performance is generally indexed to GDP as a ratio which also reflects elasticity of the taxes. In Pakistan, resources for the social sector and infrastructure development have always remained low-priority areas having only received the leftover, after debt servicing and defence allocations. To put it bluntly, the real cause is the inefficiency of the tax administration which also reminisce poor management of workforce.

In the early decade of 2000, the government, under the aegis of the World Bank, started the Federal Board of Revenue (FBR) Reform Programme, and many strategic HR programmes were initiated but later the thrust of the reform gave way to complacency and inaction resulting in greater inertia and missed targets.

Since the government of Imran Khan is expecting an ambitious revenue target of Rs8 trillion, the FBR’s structure and processes must be revamped including that of human resource management. The State-of-the-FBR HRM and few suggestions are made below for making it a vibrant organisation:

1. Major structural changes, insofar as HRM system is concerned, need to be considered. Currently, Commissioners HRM directly report to the chief commissioners instead of the member (HRM) which is a major anomaly and such an arrangement impedes implementation of human resource strategies. Structural change of hierarchical control must be implemented by placing all field HR commissioners under the hierarchical control of the member (HRM).

2. The FBR is currently using conventional performance appraisal system. Although the government replaced annual confidential (ACR) reports with performance evaluation reporting (PER) system, the system considerably lags modern Performance Management System whereby performance of each subordinate employee is managed by his or her supervisory officer. Such dyadic arrangement is invariably effective in increasing performance and, down the lane, can also be used for annual increment decisions instead of uniform annual pay raises allowed by the government. This system can further result in a differentiated workforce structure where only top employees are assigned core functions while others are given less important or critical assignments. Importantly, the workforce will have to be ranked on bell curve and only the top 20 per cent should be elevated to the top positions.

3. The principal-agent theory envisages greater checks on agents by the principal. This check is, however, always weaker in the case of public-sector organisations because both principals and agents belong to the same group of people with aligned interests unlike private sector organisations where the investors are the ‘principals’ and govern organisations through their boards of directors. Occasionally, however, they also face similar situations due to personal opportunism and information asymmetry. In order to exercise greater control, the FBR should have a good mix of professionals from the public sector and the private sector as members.

4. Under the Reform Programme, the living wage strategy (double salary) for FBR employees was adopted which was idiosyncratic in its nature. The reform strategy also envisaged slowly moving to the market-based salary structure but this objective never saw the light of day. The new salary strategy was, however, in direct contradiction to ‘pay for performance’ concept. Double salary structure is de-motivating and iniquitous because it does not differentiate between good and bad performers. There is a need for a proper compensation strategy, and double salary should be indexed with some performance criteria. This will help in cutting down the cost, create healthy competition among employees and help in weeding out poor performers.

5. In order to reward good performance and behaviour, the FBR, at the end of each year, allows 3 to 4 basic salaries as annual allowance. Again such ‘magnanimity’ is dependent on the will of the seniors and has little to do with performance and behaviours. In fact, such kinds of allowances should be spread out on a quarterly basis so that they have the leading effect instead of the lagging effect because an employee cannot improve his or her performance as the performance period has already lapsed.

6. Culture of any organisations is essentially formed and cascaded downwards by its founders. No conscious efforts have ever been made to change the culture of inefficiency, poor integrity, accountability, decades-old mindset of treating taxpayers with disrespect and suspicion. The managers need to think seriously and must frame strategies to change poor culture and move towards professionalism, integrity and courtesy.

7. Knowledge economies need knowledge workers. During the Reform Programme, the IRS officers, after training at the Civil Services Academy and the Directorate of Training, were deputed to IBA for MBA (Tax Management) degree programme. The programme continued only for three years and was subsequently discontinued resulting in poorly-trained officers who lacked intrusive audit and appraisement techniques, artificial intelligence (IA) and understanding of businesses in the evolving technological and globalised environment. Revival of the MBA Tax Management must be given serious consideration.

The proposition of strategically managing human resources by the FBR would mean greater revenue and reduced fiscal gap scenario. Aligning and implementing HR and business strategies will result in the desired objectives. As Larry Bossidy and Ram Charan put it, nothing can be achieved without properly implementing the strategy. This needs a team of professionally-trained people who possess state-of-the-art knowledge and experience of human resource management. The government’s support will, however, remain a critical factor.

Published in The Express Tribune, December 15^th, 2018.

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