FBR Reform

The government’s performance is not such that the country can afford the revenue loss caused

That the Federal Board of Revenue needs reform is not disputed by anyone except ostriches, or perhaps diehards in the taxation departments. The low tax-to-GDP ratio, the tax officials continue to be mistrusted by the business community, and the IMF’s heavy breathing keep reform a high priority. However, is this what caretakers are supposed to do? The reform proposed by the caretakers would break up the FBR into three, with separate boards for Customs, Inland Revenue and Tax Policy. The reform seems to have run into resistance over the appointment of private-sector board members, chartered accountants or tax practitioners for example. Finance Minister Shamshad Akhtar explicitly told the assembled FBR officials at an all-day meeting on Friday that the caretakers could give no guarantees about whether the new government would appoint such members. The FBR officials fear that such members would embody a conflict of interest. The parties have not been canvassed on whether those reforms would be acceptable. Would they be satisfied by appointing party hacks to the new Oversight Boards, or would they restore the old system? There is also the issue of whether the tax administration would be improved or not. There is danger that recalcitrant officials will cause revenue to plunge, and blame the reforms.

The involvement of the Special Investment Facilitation Council apex committee is a new feature. The SIFC approved the policy before it went to the Cabinet. There is some dispute about the summary that will go to the Cabinet, such as the role of the Revenue Secretary in the Boards, whether he would be their chairman, as he presently is of the FBR, or would he merely be a member. So far, the FBR has collected record revenues, and has exceeded its half-yearly target of Rs 975 billion, collecting Rs 982 billion. The caretakers cannot entirely congratulate themselves on the state of the economy, for if imports are a little down so are exports, while short-term inflation, as measured by the Sensitive Price Index is running at 44.64 percent. Inflation had decelerated to 24.4 percent in August, but has climbed ever since the caretakers took over. They might claim that they dampened the runway depreciation, but they cannot claim to have shielded the economy from the wave of inflation that is afflicting the entire world.

At this point, with the coming election less than a month away, the caretakers should stop any policy initiatives and leave them to the next government

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The Editorial Board of Profit can be contacted at: [email protected].

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