PM approves Rs34b FBR upgrade

The Premier also approves new restrictions that ban non-filers from acquiring major assets.

ISLAMABAD:

Prime Minister Shehbaz Sharif has greenlit new restrictions on compliant taxpayers, barring them from purchasing assets beyond explainable income sources, alongside a ban on non-filers acquiring major assets.

He also approved an additional Rs34 billion to modernise the Federal Board of Revenue (FBR).

While chairing a meeting on the FBR's transformation plan on Thursday, the prime minister ruled out the introduction of a mini-budget, vowing that he would not allow it to bridge the revenue shortfall.

He also instructed FBR Chairman Rashid Langrial to pull his socks up and bridge the anticipated Rs200 billion in first-quarter shortfalls by enhancing the collection.

According to government officials, the premier approved a five-point plan for the FBR and instructed the management to secure the required legal and regulatory approvals from various forums before rolling out these initiatives.

He has agreed to a Rs34 billion financial package to pay rewards, buy scanners and establish 20 new check posts around the River Indus to curb smuggling.

The PM also allowed the hire of 1,560 private consultants for the audit but endorsed the proposal to abolish four positions of the members including the member audit of the FBR.

The positions of member audit, member reform, member digital initiatives and member information technology will be converted into director generals' posts.

Shehbaz Sharif also agreed to hire an independent panel of sector and legal experts. He approved the concept of setting up a model tax office, which largely revolves around paying monthly three additional salaries to the officers.

What is called the FBR's transformation plan, the concept is largely based on incentivising taxmen and going after compliant taxpayers by tracing them through digital means and scrutinising their income tax statements with the help of private persons.

Some of the participants of the meeting underscored that the FBR should not go after the taxpayers and should also not open many avenues simultaneously aimed at avoiding hurting tax revenues.

The PM has instructed that at the initial stage, only those steps should be taken where no legal changes are required.

Earlier, the FBR had proposed to promulgate a presidential ordinance to go after the compliant taxpayers by denying them the right to buy assets if the sources to buy assets were not fully disclosed in their returns.

The government believes that the majority of the existing nearly six million filers, mainly business individuals, associations of persons and companies, have under-declared their assets and incomes in the annual statements filed with the FBR, said the tax authorities.

It has been decided that the people and the firms, already in the tax net, would be targeted to cough more revenues.

According to the approved proposal, which would require legal amendments, despite being filers and taxpayers, individuals and firms having assets not worth buying homes, plots and cars would be denied to purchase these assets.

 

According to another approved proposal, the non-filers would be denied the right to purchase properties and open bank accounts. However, the implementation would be subject to its endorsement by the concerned stakeholders and legal amendments.

 

During the meeting, the PM instructed that the non-filers should not be spared by just charging higher income tax rates. Contrary to this instruction, the FBR this week allowed the late filers to become part of the active taxpayer list by paying a fine.

 

The government is also going to introduce a new column in the income tax returns, which would give an option to the filers to also disclose the current value of their assets –in a move that may not withstand legal scrutiny.

 

The PM approved the proposal to deny the right of investing in mutual funds and the stock market to non-filers.

 

An official statement by the Prime Minister's Office underscored that the transformation "plan calls for strict action on transactions made by those failing to pay full tax on time or those involved in fraud".

 

Such measures would be enforced after consultation with the "good taxpayers", according to the PM's Office.

 

 

 

 

Pumping money in FBR

 

The PM endorsed the recommendation to give Rs34 billion additional funds to the FBR for the purchase of scanners, and equipment, payments of higher salaries and setting up new custom posts around the Indus River.

 

It is rare that the FBR is now establishing a new border concept around the Indus River on the assumption that 80% of imported or smuggled goods are consumed in this area.

 

However, the concept seems flawed as the goods are mostly smuggled from the routes of Balochistan and Khyber Pakhtunkhwa and instead of curbing the smuggling there the FBR wants to quell it at consumption points.

 

 

These check posts would be manned by the Frontier Works Organisation and the Frontier Constabulary.

 

 

 

Better Salaries

 

The PM endorsed the plan to give performance rewards to grade 17 to grade 21 officers. However, these rewards were already in vogue.

 

Against the average basic monthly salary of Rs74,000, an officer would get a minimum quarterly incentive of Rs11,000 to a maximum of Rs777,000 which is equal to seven basic salaries.

 

The grade 18 officer will get a minimum quarterly incentive of Rs143,000 and a maximum of Rs1 million in one quarter.

 

The grade 19 officer will get a minimum of Rs213,000 and a maximum of Rs1.5 million. The grade 20 officer will get a minimum of Rs264,000 and a maximum of Rs1.8 million. The grade 21 officer will get Rs326,000 to Rs2.3 million in a quarter.

 

However, the plan lacks any allocation for the provision of logistics to the grade 17-18 officers and there is also no mention of career progression.

 

The Customs officers have been given special status in the incentive package, which is tantamount to discriminating against the Inland Revenue Service Officer.

 

The customs incentives would be funded by diverting 20% money of the confiscated and auctioned goods. To fund the plan, the FBR has proposed to increase the import taxes.

 

The FBR chairman has not set any integrity-related parameters for giving bonuses to the customs officers. However, in the case of the Inland Revenue Service Officers, the incentives will be determined based on 60% weight of integrity and 40% a highly subjective criterion - and 40% weight is given to the quality of the work.

 

But for improving the quality of the work, there is no plan to improve the overall working and address the issue of the shortfall of the workforce at lower to middle tiers.

 

The Prime Minister's Office stated that the "efficient and competent officers" would be posted in Karachi - the large taxpayer unit which contributes 32% of the receipts - and they would be assisted by the auditors and experts.

 

The PM also approved the plan to hire 1560 private consultants to conduct audits of the compliant taxpayers. In the first phase, about 600 private consultants would be placed in the four large tax offices, half of them in the Karachi large tax office.

 

The government will sign a two to three-year contract with the third party firm and give it access to the taxpayers' data –an act that might be illegal as under Section 216 of the Income Tax law the taxpayers' information cannot be shared with third parties.

 

Similarly, a private panel of experts will be hired for the digitisation of textile, financial and insurance services, iron and steel, fertilizer, iron & steel, beverages, cement and real estate activities.

 

In the first phase, tobacco, fertilizer, beverages and cement sectors will be targeted. However, these sectors had already been targeted under the Track and Trace system but the FBR had failed to yield the results.

 

The PM approved the transformation plan days after his government conceded to the retailers and exempted them from the legal requirement of disclosing their bank accounts and the details of their assets.

 

Additionally, the plan includes rewarding officers who perform well and a mandatory professional degree from the best universities for the officers after their common and specialized training programmes.