PM asks FBR to plug tax gap amid pruning plans

ISLAMABAD:

The federal government on Monday dropped the idea of setting up a new tax agency but decided to compulsorily retire non-performing officers by amending the Civil Servants Act, which would allow it to retrench bureaucrats as part of any restructuring.

Chairing a high-level review meeting, Prime Minister Shehbaz Sharif directed that the pace of reforms within the Federal Board of Revenue (FBR) be accelerated, noting that the initial results of the ongoing reforms were encouraging.

The prime minister emphasised that the FBR must continuously enhance its institutional capacity to effectively bridge the tax gap. He stressed that technology, effective professional training, transparency and accountability must remain central to ensuring that the ongoing reforms yield concrete results.

"It is the responsibility of FBR officers to improve their performance in line with the expectations of the nation," a statement from the Prime Minister's Office quoted Shehbaz as saying. "The ongoing reforms were in the broader interest of the state, and the process would continue in any case," the prime minister added.

The prime minister called for zero-tolerance and indiscriminate action against corrupt elements within the department. Staff showing genuine improvement in conduct and performance should be given an opportunity to reform, while there should be no room for corruption or underperformance, he emphasised.

Officials briefed the meeting on the use of technology, procedural workflows and human resource management. They said the FBR reforms had narrowed the estimated tax gap from 6% to 5% of GDP, while the effective use of technology had substantially reduced the discretionary powers of FBR officials.

According to officials who attended the meeting, it was decided to overhaul the FBR's human resources to make the organisation more efficient, less top-heavy and more taxpayer-friendly by removing officers who were either underperforming or falling short of professional benchmarks.

The prime minister directed that action be taken against corrupt elements without discrimination. The FBR was instructed to submit a report on human resource restructuring and reorganisation to the prime minister within this week.

Earlier this month, debate was triggered after the idea of setting up an entirely new organisation was floated at a high-level meeting. Some participants were of the view that setting up a new organisation would take years and that, by the time it became fully operational, it could develop problems similar to those faced by the existing FBR.

After The Express Tribune published a story about the proposed new organisation, the Inland Revenue Service Officers Association (IRSOA) threatened to observe a pen-down strike. The IRSOA later withdrew the threat after seeking assurances from senior officials.

Officials told The Express Tribune that Shehbaz expressed displeasure over the officers' conduct, saying there was no room for an association that could blackmail the government. The FBR's senior management said action could be taken against officers for illegally establishing a collective bargaining body.

The government, however, decided to restructure the FBR's human resources both vertically and horizontally. Surplus and non-performing officers would be sent packing. The meeting was told that amendments to the Civil Servants Act had been pending before the National Assembly since 2024.

The government also decided to fast-track the parliamentary approval of these amendments to secure the legal authority to compulsorily retire tax officials, a senior government official confirmed to The Express Tribune.

According to a proposed new clause 22 A and 22 B, which will be applicable on all service groups, the government will have powers to declare any officer redundant as a result of any restructuring and reorganisation, give him or her a severance package and to compulsory retire the person.

The clause 22B states, the federal government may at any time decide full or partial abolition, restructuring or reorganisation of a division, department or office and in respect of civil servants liable to be affected thereby declare the posts, cadres, or nomenclatures of civil servants to be abolished and incumbent civil servants thereof rendered surplus or redundant.

The sub clause 2 of clause 22B states, on receipt of decision of the federal government, the appointing authority shall offer a severance package to the civil servant declared redundant who shall be obliged to accept it, but can file an appeal only against the monetary value.

According to sub-clause 3 of the clause 22B, the service of a civil servant who stands redundant shall be liable to termination by the appointing authority. It says that provided that nothing contained in the Civil Servants Act, the rules, or any other law for the time being in force, agreement, contract or the terms and conditions of service or any order or judgment of any court or tribunal shall limit or abridge the power of the federal government or the appointing authority to decide full or partial abolition, restructuring or reorganisation of a division, department or office to declare the posts, cadres or nomenclatures of civil servants to be abolished or to decide rendering surplus or redundant civil servants against whom departmental or criminal proceedings are pending finalisation, however, the payment of severance package to them shall be subject to final decision of department.

Meanwhile, an FBR statement later said that two Inland Revenue Service officers - one in BS-20 and the other in BS-19 - had been suspended, while two other IRS officers in BS-20 had been repatriated to FBR Headquarters for further investigation over an unauthorised press statement and a call to halt official work.