The CBR's reform strategy focuses on significant reduction in the number of tax officials

Aug 11 - 17, 2003

The government seems to be determined to carry out the major restructuring of Central Board of Revenue (CBR) and implement the reform programme to make it more efficient, effective and corruption free organisation as suggested by various committees of exports both national and international. To achieve its objective, the government has agreed to set up a high level watchdog body (Revenue Reforms Commission) to effectively monitor/evaluate the performance of the CBR and ensure timely implementation of tax administration reforms by meeting revenue target and fulfilling World Bank conditionate.

The constitution of such a body has been considered necessary for implementing the reforms agenda devised by experts committees including donor agencies. The proposed commission will have the authority to negotiate with international donors like World Bank on all issues pertaining to the CBR who have undertaken to finance the reforms programme.

In the meanwhile a World Bank mission arrived recently to discuss the CBR restructuring plan with tax authorities and finalise its recommendations to meet financial requirements of US$150 million for meeting cost of the plan during its three-week stay in Pakistan.

The CBR has already communicated to the bank that it required $150 million for restructuring plan. On the recommendations of Pakistan tax consultant Maxwell Stamps and International Monetary Fund (IMF), the tax authorities have principally agreed to curtail the Central Board of Revenue (CBR) members of six or seven from 17 under tax reform strategy to be implemented over a period of six years.

The blueprint of the strategy revealed that the functional members would operate in four management categories, i.e. revenue operations (member customs, member sales tax and member direct taxes); revenue services (member revenue services); management services and policy and reforms (member policy and reforms and member audit).

These members would work with director generals (DGs) of different taxes. Sources said that presently, the management team of the chairman comprises of 17 members, which was contrary to international practices where only six-seven executives report to the chairman.

With such a large team of top tax managers, the decision-making would become cumbersome for the chairman. Small number of senior management would take part in decision-making process with the chairman performing his intended role of chairing the executive team and resolving issues of overall direction and policy.

The CBR's reform strategy focuses on significant reduction in the number of tax officials directly answerable to the chairman. This will be achieved through creating a smaller executive team of the CBR. This team will meet regularly, under the leadership of the chairman to discuss, plan, coordinate and direct the policies and operations of the CBR.

Under the new structure, member customs would be directly linked with the DG export and DG import: member sales tax, DG sales tax and DG LTU: member direct taxes, DG direct taxes and DG LTU.

Member revenue services would work with the DG intelligence: DG taxpayer education and facilitation: DG risk management: DG investigation: DG collection and enforcement and DG taxpayer audit. Member management services would deal with the DG facility management: DG legal: DG human resources management: DG information management system (IMS), and DG training and development.

Member policy and tax reforms would coordinate with the DG project coordination and DG fiscal research and statistics. Member internal audit would work with the DG internal affairs.

The sources also said that the first milestone was evolving top level structure of seven streams reporting to the chairman, i.e. customs, revenue services, direct tax, management services, sales tax, policy and reforms and internal audit.

At later stage, it was envisaged that the three revenue streams would report through a single channel, i.e. member revenue operation thereby, reducing the chairman's direct reports to the five members. Specialist revenue functions such as intelligence, taxpayer education, taxpayer audit, etc., are brought together under a revenue services members while the administrative and management support functions such as IT, human resources, facilities management, etc., are combined into a management services stream.

Furthermore, the CBR will set up regional hubs for the following functional areas to provide technical assistance to the line administrations across all tax administrations and ensure quality assurance of the policies and procedures developed by the central office of the same functional organisation.

Revenue services; intelligence and investigation, taxpayer education and facilitation, collection and enforcement, registration, return processing and accounts and audit function. Management services include facility management, human resources management, legal, training and development and information management system and support.

In the short and medium term, whether reporting to the chairman directly, or through member revenue operations, the sales and direct tax stream will remain separate. However, a programme of co-location had already begun and would be continued through the establishment of addition Large Taxpayer Unit (LTU).