Pakistan doesn't just need a better Federal Board of Revenue (FBR); it needs a new social contract on taxation. As long as the system treats taxpayers like suspects and protects evaders like VIPs, nothing will change.
The trust deficit between taxpayers and tax administrators, outdated systems, lack of institutional autonomy, governance weaknesses and poor enforcement are some of the core issues preventing the country from achieving its desired tax-to-GDP ratio and realising its true revenue potential.
Every business needs certainty to plan its short- and long-term goals, especially when it comes to tax policy. If tax policies are constantly shifting based on the government's immediate revenue needs, how can investors be expected to commit capital to Pakistan?
Setting aside issues like repatriation and foreign exchange, there is an urgent need for stable and predictable tax policies that encourage investment, reduce evasion and allow businesses to focus on creating value. This could be achieved by introducing a multi-year tax policy framework with minimal changes each year.
The formation of the Tax Policy Office (TPO) is a milestone in this direction, helping separate policy from administration. However, to be effective, the TPO must be made fully operational with appointments based on merit, not political considerations, something that has long plagued the FBR itself.
The FBR, as the country's tax administrator, must be transformed from a traditional bureaucracy into a performance-oriented organisation. The frequent turnover of FBR chairpersons, seven in the past five years, has made policy continuity impossible.
The chairman should have a fixed term of at least three years and appointments must be based on competence and merit, with clear accountability. Political appointments at any level should be avoided. Institutional autonomy must also be granted, with a governance board that includes top private-sector professionals.
The induction process at the FBR needs to be overhauled to ensure the right people are selected for the right roles. Recruitment must be transparent and promotions should be based strictly on performance against the measurable KPIs.
Too often, capable individuals are bypassed in favour of less competent teams. Continuous capacity building is essential, with training in modern taxation, digital tools and international best practices. In addition to revenue targets, taxpayer service quality must become a KPI for officers.
Training should also emphasise respectful and professional engagement with taxpayers, who are not criminals by default. Officers should avoid undue harassment, especially during quarter- or year-end drives, where threats like bank account attachment are used without due legal process. This is contrary to both the law and the principles of good governance.
Risk-based audit selection, clear audit guidelines and periodic third-party audits are essential to minimise misuse and ensure fairness. We should train our officers on how the IRS of USA, HMRC of the UK, CRA of Canada, etc initiates such proceedings and what practices they follow when they engage themselves with the taxpayers. Rotation policies must also be enforced to prevent collusion between officers and taxpayers.
With greater responsibility must come greater accountability. The FBR should publish annual transparency reports that include performance metrics, audit outcomes, disciplinary actions and top performers, similar to practices in other professional organisations.
This will build public trust and act as a deterrent against corruption. Whistleblowing should be encouraged by ensuring protection and even offering financial rewards for reporting misconduct or leakages.
The FBR cannot operate in isolation in the modern technological era. A tax ecosystem must be created through integration with departments such as the SECP, NADRA, banks, utility companies and property registrars. A centralised tax management system should allow for seamless digital processes, including registration, filing, payments, audits, appeals and even deregistration, with minimal human intervention.
AI and data analytics can be used to detect anomalies and identify potential taxpayers who are currently outside the net. While the FBR has made some digital progress, it still lags far behind global standards in automation, transparency and efficiency.
Equally important is the need to simplify the existing tax laws. They are currently overcomplicated and impose high compliance costs on honest taxpayers. Discretionary powers granted to officers for interpretation should be reviewed. Additionally, harmonisation between federal and provincial sales tax laws is critical to reducing confusion and improving compliance.
The FBR must also work on public awareness and taxpayer education through media campaigns, tax facilitation centres and educational outreach to promote voluntary compliance and shift its focus from enforcement to engagement.
In conclusion, a meaningful reform of the FBR is not just about increasing revenue, it's about restoring trust, improving governance and creating an equitable, predictable and efficient tax environment. Pakistan cannot progress by penalising the compliant and protecting the privileged.
A high-performing, autonomous and service-oriented FBR, supported by strong institutions and stable policies, can help build a fairer society and attract sustainable investment. The path forward requires courage, vision and, above all, a collective commitment to fairness and rule of law in taxation.
The writer is a member of the Institute of Chartered Accountants of Pakistan
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