The document discusses the restructuring of Pakistan's Federal Board of Revenue (FBR) and its effects on tax collection. It notes that FBR underwent major reforms between 2001-2005 with assistance from the IMF and World Bank, including restructuring FBR along functional lines, automating processes, and improving human resources. While some intermediate goals were achieved, the overall tax-to-GDP ratio target was not met and dropped to its lowest level in over 20 years by 2011. The reforms faced challenges including slow integration, underutilized IT systems, and an ineffective audit function. Further reforms are recommended such as granting FBR full autonomy and expanding the tax base.

1. “Tax Collection- Has The Restructuring in FBR
Being Effective”
By
Tauqeer Ahmed IRS
1

2.  Introduction
 Statement of The Problem
 Research Methodology
 FBR Structure
 Functions
 Need of Reforms
 Reform Process-structural and Legal Reforms
 Effects of Reforms
 Conclusion
 Recommendations
2

3.  Tax is to a country as is blood to the body
 Revenue provides sustainable funding
essential for long term planning.
 Tax revenue reduces aid dependency
 Dependence on citizens’ tax revenues for
social and public services strengthen the
accountability of governments
 Current dependency on non-tax sources of
funding – has put our country on the back
track
3

4.  Narrow Tax base has been the hall mark of
our performance in the past
 Most of the common measures is tax to GDP
ratio
4

5.  What is the effect of restructuring of
the FBR on tax collection?
 What may be the course of action of
the FBR to improve its core activities?
5

6.  Primary Data
◦ Survey Reports
◦ Interviews
 Secondary Data
◦ FBR
◦ Research Papers
◦ World Bank Report on Reforms
 Data Analysis
6

7.  FBR collects nearly 90% of tax revenue in the
country
 FBR Taxes
◦ Inland Revenue
 Direct Taxes
 Income Tax
 Withholding Taxes
 Indirect Taxes
 Sales Tax
 Federal Excise Duty
◦ Customs Duty
7www.fbr.gov.pk

8.  Formulation and administration of taxation
policy
 Levy and collection of federal taxes
 Quasi-judicial function of hearing of appeals
 Enter into double-taxation treaties with other
countries
 Liaison with all Ministries as well as
Chambers of Trade and Industry
 Prepare reports on FBR activities.
8FBR Year Book 2010-11

9. 9www.fbr.gov.pk

10.  Officers: (BS 17-22) 1,538
 Mid-level Officials: (BS 11-16) 7,761
 Junior level staff: (BS 1-10) 14,996
Total: 24,295
10FBR Year Book 2011-12

11.  Low Tax to GDP ratio
 Poor Management Information System
 Trust Deficit between the taxpayer and the
taxman
 Narrow tax base in Pakistan
 Need of Taxpayer Facilitation Model
 Combating Corruption
 Reforms to enhance the professional
capability of the workforce
11

12.  Task force under the chairmanship of Syed
Shahid Hussain was appointed in 2001
 IMF also submitted its report in August
2001
 Afterwards the Government started
negotiating with the World Bank/IMF and
FBR developed Strategy Document in
November, 2001 with the help of M/S Max
Stamp Well.
 The Tax Administration Reforms Program
was formally Launched in 2005
12

13. S. No Description of
TARP Heads
Total Budget (Rs.
Million)
GOP Component (Rs.
Million)
Share (%) World Bank/ DFID
Component
(Rs. Million)
Share (%)
1 Technical Assistance 938.9 112.7 4.9 826.3 11.5
2 Customized Software 3,177.6 381.3 16.5 2,796.3 38.9
3 Hardware and Allied Equipment 2,059.2 411.8 17.8 1,647.3 22.9
4 Infrastructure Development 1,406.0 351.5 15.2 1,054.5 14.7
5 Automobiles 175.5 35.1 1.5 140.4 2.0
6 Training 585.2 - 585.2 8.1
7 Program Management 178.9 35.8 1.6 143.1 2.0
8 Sub-Total 8,521.2 1,328.2 57.6 7,193.0 100.0
9 Cost Escalation 979.4 979.4 42.4 0 0.0
10 Total 9,500.6 2,307.58 100.0 7,193.0 100.0
Source TP&R wing FBR

14. To be a modern progressive,
effective, autonomous and
credible organization for
optimizing revenue by providing
quality service and promoting
compliance with the tax laws
14www.fbr.gov.pk

15.  Pursuing twin track reforms of tax policy and
tax administration to meet medium –term
revenue targets
 To boost the tax to GDP ratio by around 3.5%
in five years time
 Make the tax base as broader as possible
 Keep tax rates as low as possible; and
 Make compliance cost simple and non
compliance expansive.
15

16.  Improve compliance with the tax laws
 Develop a customer centered focus
 Foster organizational renewal and an
efficient, ethical and adaptive organization
 Increase productivity and cost effectiveness
 Maintain community confidence
 Steps to improve Voluntary Compliance
 Ensure revenue is available to fund
government programs
16

17.  Ensure people receive payments they are
entitled to i.e. Refunds
 The Pakistan Revenue Automation Limited(
PRAL) to play a key role in automation of the
whole system from filing of the returns to the
selection of the cases through computer
ballot.
17World Bank Reprt 2013

18.  Restructuring of FBR along functional lines
and integration of income, sales and excise
taxes
 Reengineering and automating business
processes and work flows
 Establishing database for reporting and audit
purposes
 Improving services for taxpayers
 Strengthening the human resource base
18World Bank Report 2013

19.  Recruitment and maintenance of quality
professionals
 Comprehensive audit selection plans were
given by the professionals appointed from
the private sector
 Reconstituting FBR on functional as against
cylindrical basis
 Merging Inland Revenues- Income Tax, Sales
Tax and Federal Excise
19world bank reprot 2013

20.  Assigning functions/responsibilities to
specialized divisions
 Trade/industry specialization in tax audit
with support systems
 Providing pre-audit anonymity of tax auditors
 Establishing LTUs and RTOs
 Capacity Building- all levels
 Reducing taxpayer/tax collector interface
20

21.  Creation of Inland Revenue Service( IRS)
 Replacing the Income Tax Ordinance 1979
with ITO 2001
 Selective audit based on risk management
analysis
 A well skilled professional workforce
 Electronic Filing of Tax Returns and
statements
21

22.  13 Model Customs Collectorates
 18 Regional Tax Offices (RTOs)
 6 Large Taxpayers units (LTUs)
 76 Taxpayer Facilitation Centers
(TFCs)
22FBR Year Book 2011-12

23. Effects of Reforms
Tax Mix – Historical data
Customs
Duty
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%49-50
54-55
59-60
64-65
69-70
74-75
79-80
84-85
89-90
94-95
99-00
04-05
09-10
Current
%ageShareinRevenue
Financial Year
Inland Revenues
23FBR Revenue Budget wing

24. Effects of Reforms
Tax Mix – Historical data
Income Tax
Sales Tax
Federal Excise
Duty
Customs
Duty
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
49-50
54-55
59-60
64-65
69-70
74-75
79-80
84-85
89-90
94-95
99-00
04-05
09-10
Current
%ageShareinRevenue
Financial Year
24FBR Revenue Budget Wing

25. Effects of Reforms
Income Tax- Collection Mix
Out of Demand
(Current &
Arrear)
Voluntary
Payments (With
Return +
Advance Tax)
Withholding
Taxes
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13P
%ageshareofIncomeTaxCollection
Financial Year
25FBR Revenue Budget wing

26.  The underlining development objective in terms
of FBR tax to GDP ratio was not achieved
 Despite progress in key intermediate outputs and
substantial investments in IT, physical and
human infrastructure at FBR.
 Notwithstanding moderate gains during
2004/2005 to 2008/2009, FBR tax to GDP
collection has dropped substantially to reach 8.6
percent of GDP by the end of FY 2011, the lowest
level in more than two decades
26The world Bank Report 2012

27.  Slow integration of FBR organization along
functional lines
 Underutilization of IT related systems due to
poor integration of the new systems
 Continued weakness of the audit function
 Replacement of time tested law did not pay
 IT system existed with manual legacy
 Professionals from private sector were not
effective
 Change in mind set still a far cry
27world bank report 2013

28. 28FBR Year Book 2012-13

29. Tax-GDP Ratio - 2012
0
5
10
15
20
25
30
35
TaxasapercentageofGDP
29www.google.com

30. 30
18%
51%
20%
2%
9%
Declining real incomes
Corruption in tax administration
Lack of trust regarding tax utiliation
Cumbersome tax filing
Others
Why we do not pay taxes
SDPI

31. 31
3%
30%
27%
37%
Registration will curtail growth Afraid of Intrusion Compliance is costly Lack understanding on tax matters
Why we do not register with FBR
SDPI

32.  Full autonomy to FBR
 Gradual reduction in reliance on withholding
taxes
 Amendment in law to do away with USAS
 Broaden the tax base
 Further simplification of electronic tax filing
 Effective taxpayers audit plans
 Enhancement of professional capabilities-
use of IT skills
 Strong enforcement mechanism of tax laws
vis-à-vis audit, recovery, integration of laws
32

33. 33