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“If we realise that the FBR cannot be fixed, we will create a new FBR. This is because Pakistan’s survival is linked to it. It’s not about our liking or disliking: if our tax collection authority does not function properly, it could lead to a security risk. No nation that relies on loans can maintain its pride and independence”—address of Prime Minister to the 11th All-Pakistan Chambers President Conference in Islamabad on March 7, 2019

“The FBR contributes around 80% of the total revenues of the federal government; therefore, any miscalculation or miss targeting can severely cripple the budget, not just of the federal but the provincial governments as well”—Budget 2020-21: Highlights & Commentary, Pakistan Institute of Development Economic (PIDE)

For implementing meaningful tax reforms, the PTI Government must concentrate on fundamental structural reforms as discussed in recent studies of Pakistan Institute of Development Economics (PIDE), Doing Taxes Better: Simplify, Open & Grow Economy and Growth inclusive tax policy: A reform proposal.

The results of prescriptions by World Bank(WB) and International Monetary Fund (IMF) to fix the ailing economy and anti-growth tax system are discussed in detail in Tax Reforms in Pakistan: Historic & Critical View, recently published by PIDE (available free at:

There cannot be two opinions about a paradigm shift in our tax policy and administration. We need to end the VIP culture, tax-free perks and perquisites and tax expenditure of around 25% of total collection. Low-rate taxes on broad-base with effective enforcement system are suggested in Towards flat, low-rate broad and predictable taxes-revised and expanded edition (2020). It is available free at: It needs nation-wide debate and considered as “proposal” sought by FBR. This alone can help in inducing investment, growth, productivity, efficiency and job creation. The main cause of our pathetic situation in all areas of governance is existence of inefficient, outdated and apathetic State institutions that deny with impunity the legitimate rights of people and treat them as subjects as in raj days.

After over 22 months of the above statement by Prime Minister, Imran Khan, telling the nation that that “reforming FBR is essential and until that is done, we [the state] will not be able to meet our expenses”, the things have changed for the worse. The government after removing the fourth head of FBR since coming in power on August 13, 2018, gave additional charge of Chairman and Secretary Revenue Division to Member Customs Policy, Muhammad Javed Ghani (grade 22 officer). He assumed the additional charge on July 7, 2020. It took over 6 months for the competent authority to make him full-time Chairman of FBR. He took charge of Chairman FBR on January 4, 2021 according to official gazette notification.

According to a Press report: “….the decision to bring the chairman for hardly four months shows a lack of consistency in economic policymaking. The prime minister has changed five chairpersons of the FBR after assuming office”. Is this a desirable way to run FBR, what to speak of reforming or restructuring it? Many people keep on asking: How long will FBR remain a house in disorder just because of inaction on the part of government? In the wake of difficult days due to Covid-19 endemic, the officers of FBR, especially in the field, are working without required facilities, resources and even full strength of staff. For this state of affairs, the sole responsibility lies with the government. The officers working in FBR headquarter and in field formations deserve appreciation that despite all constraints and difficulties, they have given satisfactory results. It is strange that those performing well are deprived of what they deserve. On the other hand, the inefficient, deadwood and black sheep within the organisation are not purged. This issue was raised in detain in ‘A detailed anatomy of FBR—I’, Business Recorder, November 16, 2018 but till today no action has been taken. There is a long list of officers who have managed to enter into the mainstream Internal Revenue Service (IRS) seniority list through back door entries either by exploiting rules or through ill-interpreted court judgments. The IRS seniority list of officers can be divided into two broad categories: the Central Superior Service (CSS) officers, and the non-CSS officers. The non-CSS officers can be further divided into four sub-categories: the Inland Revenue Officers (IRO), the defunct Assistant Collectors directly hired by the Peoples Party Prime Minister in the 1990s, the auditors and the inspectors. It was highlighted in the above article:

“FBR’s IRS is perhaps the only bizarre organization that is said to have unjustly inducted non-CSS officers into the mainstream IRS officers’ seniority list. These non-CSS officers were inducted into FBR in BS-16 as Income Tax Officers (ITOs), later named as IROs. The IROs batch was promoted to BS-17 as Assistant Commissioners in just three years and their seniority was fixed between 29th Common Training Program (CTP) and 30th CTP officers. As a result they were promoted to next grades with the same speed as the CSS officers. Now the entire batch of IROs has been promoted to the senior positions of Additional Commissioners (BS-19) working all over the field formations in Pakistan. Now the entire IRO batch is part of mainstream IRS merit list ready for promotions to BS-20 in about two years. It is widely believed that between 2023 and 2030, most Chief Commissioners, Members and even Chairman could be from the non-CSS IRO cadre. This is the biggest compromise that the FBR has made as an organization towards human capital development”.

The above needs immediate attention of Chairman FBR and cell of Prime Minister Office dealing with human resource management and reforming of FBR. The changing of chairman or other officers is not the solution. The real challenge is how to restructure and reconstruct the existing outdated and anti-growth tax system. It imposes undue incidence on the poor and middle-class people e.g. about 60 withholding provisions under income tax law alone! 17% sales tax (in fact 30% to 70% on many finished imported goods after levy of various taxes at source). It takes away larger portion of low-income groups compared to high-income groups. On the contrary, the rich and mighty enjoy tax-free perks and perquisites, exemptions and concessions on their colossal income/assets and are also offered generous asset-whitening and tax amnesties frequently.

On January 13, 2021, the FBR vide Letter C.No.4(72)IT-Budget/2015-6255-R, FBR said it is “currently engaged in the formulation of proposals for the Finance Bill 2021”. It further added: “In order to benefit from the collective wisdom of all the stake-holders for improvement of tax policy, proposals are invited for the upcoming Budget 2021-22”.

The remaining part of letter says as under:

  1. Your input/suggestions in the following policy areas shall be highly appreciated:-

(i) Broadening of tax base for a wider participation in revenue generation efforts;

(ii) Taxation of real Income on progressive basis;

(iii) Phasing out of tax concessions and exemptions;

(iv) Removal of tax distortions and anomalies;

(v) Facilitation of taxpayers and ease of doing business;

(vi) Promoting equity in taxation by introducing measures where incidence of tax is higher on affluent classes. The areas identified above are just illustrative and not exhaustive.

The areas identified above are just illustrative and not exhaustive.

  1. It is requested that the proposals may be provided by 15th February, 2021. The proposals may also be emailed in MS Word/Excel format on the following e-mail addresses and preferably on the format given below:

i. [email protected]

ii. secv.itb(


Section/Clause/Rule Proposed Rationale Revenue

                    Amendment                         Impact


(1) (2) (3) (4)


The above is a ritualistic exercise in futility. Every year after receiving proposals from officers, trade/professional bodies, tax bars, and other stakeholders, the Finance Bill only contains meaningless amendments in tax codes, imposing further obligations on citizens as withholding tax agents, with no policy shift and administrative reforms. For it, blame cannot be attributed to FBR. The successive governments have miserably failed to reform FBR to make it an efficient and people-friendly organisation.

The fundamental element of tax reforms is providing a simple tax system that is manned by an efficient and competent administration, which is nowhere visible in Pakistan. Tax administrations, both at federal and provincial levels, lack the requisite level of digitization, professionalism and human skills. Any exercise relating to comprehensive tax reforms cannot be a time-bound affair and does not mean merely altering tax laws or suggesting cosmetic changes here and there. Reforms can be successful only if a comprehensive analysis is made of the whole system, that is, tax structure, tax administration, state of economy, taxpayers’ behaviour, revenue needs of the country and many other allied aspects.

(To be continued tomorrow)

(The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS))

Copyright Business Recorder, 2021

Dr Ikramul Haq

The writer is a lawyer and author of many books, and Adjunct Faculty at Lahore University of management Sciences (LUMS) as well as member of Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE). He can be reached at [email protected]

Huzaima Bukhari

The writer is a lawyer and author of many books, and Adjunct Faculty at Lahore University of management Sciences (LUMS), member of Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE). She can be reached at [email protected]


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