Govt to separate tax policy, tax administration functions of FBR

November 16, 2023 (MLN): The government is actively working to separate the tax policy and tax administration functions of the Federal Board of Revenue (FBR) to remove the apparent conflict of interest in tax collection, the caretaker finance minister Dr. Shamshad Akhtar stated during the Future Summit on Thursday.

Speaking virtually at the Future Summit organized by the Nutshell Group, the caretaker finance minister emphasized the need to completely overhaul the government’s fiscal apparatus to lower the revenue-expenditure gap.

Tax to GDP has remained low at 10% to 11% in the last 3 decades, with the government forced to finance large fiscal deficits through borrowing from domestic and external creditors. 

Accordingly, in order to enhance tax collection and improve compliance the caretaker government has initiated the process of restructuring Pakistan’s tax administration.

The digital transformation of tax administration is a crucial step in meeting the objectives of enhanced tax collection and improved compliance.

Innovative digital technologies need to be implemented to minimize tax gaps, increase tax collection, and reduce the share of the shadow economy.

Tax policy has to be designed to be fair, equitable, and productive.

The revenue and fairness objectives need to be pursued by expanding the tax base, reducing tax exemptions, and through a more efficient digital tax administration. 

Simultaneously, there is a need to enhance the efficiency and effectiveness of public expenditure.

There is an urgent need to improve coordination within the federal government and with provinces and reorient expenditure priorities towards social welfare.

Towards this end, the government has initiated dialogue with the provinces for sharing expenditures on BISP and PSDP projects falling under the domain of provinces.

“A review is being conducted to close departments at the federal level for devolved subjects,” she added.

Moreover, options are being explored to shift the large infrastructure projects under the PPP mode, providing sizeable savings on budgetary resources for both federal and provincial governments.

The government is also looking at ways to enhance allocation to the Viability Gap Fund for undertaking Infrastructure projects in PPP mode.

“We are also exploring avenues to seek credit guarantees from INFRAZAMIN to enhance private-sector investment in Infrastructure,” she further addressed.

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