The Chairman CBR to deal with top 150 tax payers
From SHAMIM A.
Nov 26 - Dec 02, 2001
President General Musharraf approved, on Saturday
last, the much awaited restructuring plan for the Central Board of
Revenue (CBR) giving it limited autonomy against the recommendation of a
fully autonomous status for the CBR by the task force. Under the new tax
reform strategy approved by the President, CBR will continue to be a
revenue division as a part of Ministry of Finance but it has been
empowered to spend, recruit and offer compensation to its efficient
officers without seeking prior permission from the Ministry of Finance.
The President also approved the proposal to have a
separate tax office in Karachi under Director Supervision of the
Chairman CBR to deal with top 150 tax payers who pay over Rs.150 billion
annually. The restructuring plan was approved after a lengthy meeting
with Finance Minister, Secretary General Finance, Chairman CBR and other
top government officials of the relevant ministries.
The task force on CBR and tax system restructuring
headed by Shahid Hussain, and also the IMF and World Bank had proposed
full autonomy for CBR by turning into a revenue service. This was also
insisted upon by the Chairman CBR only a few days back. While briefing
the visiting Vice President of World Bank, the Chairman CBR, Riaz Ahmad
Malik stressed the need for early transformation of the tax collecting
machinery into an autonomous organization. According to him, this step
alone would ensure improved working of the organization which would be
converted into a highly professional and technically automated
institution. He felt that the autonomy should be in the spheres of
management and financial power so that the restructured organization
could be enabled to go ahead with recruitment of highly skilled and
technically qualified personnel at market-oriented salary scales without
any interference from the finance ministry. The briefing also included
an explanation about the causes of substantial shortfall in tax
collection during the first four months of the current financial year
which led to downward revision of the tax collection target for the
first half of the year. The explanation delay in the restructuring the
major cause of the relatively poor performance.
The World Bank has promised to provide, over a
three-year period, 200 million dollars in loan to Pakistan for the
specific task of restructuring the country's tax collection machinery.
The proposed restructuring was aimed at making the Central Board of
Revenue (CBR) completely autonomous in the matter of its budget and
administrative policies and in respect of the recruitment and training
of its personnel. Under the proposed plan, a 'supervisory council' equal
to the status of a cabinet was also to be set up within the next three
months. The council will approve the revenue target, CBR's budget, its
human resource development policy, compensation, delegation of powers to
the CBR and the exercise of federal authority The council was proposed
to be headed by the federal finance minister, as its chairman while its
members would include the Minister of Commerce, Secretary-General of
Finance, Deputy Chairman, and Chairman of the CBR, The members to be
co-opted would include minister for science and technology, law
secretary, the president of the FPCCI and a panel of three private
There are of course a number of logical reasons for
making the CBR as autonomous as possible. Since the Board at present
functions under the direct supervision of the finance ministry it is
constrained by the budgetary needs of the finance ministry in fixing the
annual revenue targets and more often than not it would find itself
agreeing to a target which may be wholly unrealistic in the context of
the economy's revenue-yielding potential or which may be arbitrarily
fixed by the finance ministry. Also because it works as a department
accessible to every one connected with the government, including the
intelligence agencies, it becomes very difficult for the CBR to operate
independent of the needs of other departments which again, more often
than not, work in direct conflict with the objectives of the revenue
collectors. So the lack of adequate freedom to act has constrained the
working of the CBR all these years and undermined its ability to perform
to the best of its ability. Its dependence on the regular government
channels for recruitments, promotions and placements has also over the
years worked against its interest in the sense that the CBR has come to
be manned overwhelmingly by officers not well grounded in the
intricacies of finance and revenue generation.
In recent years, the government had conducted several
studies on administrative reforms of the CBR, but none of them could be
implemented due to lack of political will, and vested interests of the
tax machinery. The last victim was a report prepared by Syed Shahid
Hussain, former Vice President of the World Bank. He proposed complete
autonomy of CBR, with a market-based pay structure, reengineering of
processes and induction of information technology to revamp the tax
system. His findings also revealed that majority of the tax officials
were corrupt and dishonest.
The Finance Minister, while briefing the newsmen
after the meeting said that good proposals in the Shahid Hussain report
had been incorporated in this final strategy, with inputs from the
International Monetary Fund (IMF), World Bank and the CBR bosses.
However, the report had fallen short of the much-needed surgical change
in the overall structure of the organization by, deciding to work with
the same 30,000 workforces, which lacks skills and motivation to meet
new challenges. The CBR collects less than 11 per cent of GDP in taxes,
and about 1-2 per cent collection is made by the provincial governments.
However, the international experience of countries at similar stage of
development shows that the tax revenue collection should be around 20
per cent of GDP which is the current expenditure level of the state.
This seven per cent of GDP shortfall (Rs.250 billion) in revenues is
generally perceived as money going to the pockets of the tax officials
through corrupt practices.
According to strategy approved the CBR would induct
five new functional members for information technology, human resource
management, audit, tax policy and taxpayer facilitation in addition to
three existing line members for income tax, sales tax and customs. New
indications would be offered remuneration, which is compatible for
similar skills in the private sector (MP-I and MP-II pay scales).
The whole structure would supervised by the Cabinet
Committee on CBR, headed by the finance minister, including minister
commerce, secretaries of finance, commerce, establishment, deputy
chairman planning commission and chairman CBR.
This model is similar to what Dr. Hafiz Pasha had
proposed in 1997, but then government messed up the whole process by
abruptly sacking late Moeenuddin Khan, as the tardy tax officials were
reluctant to accept an outsider as Chairman, and the government was wary
due to his efforts to crack down on owners of the smuggled vehicles.