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The Pakistan Business Council (PBC), one of the country’s largest corporate advocacy platforms, has urged the incoming government to effectively implement the Federal Board of Revenue (FBR) restructuring measures announced by the caretaker setup.

“The good work done by the caretaker government and SIFC (Special Investment Facilitation Council) on charting restructuring of the FBR must be implemented effectively by the incoming government,” said PBC in a post on social media platform X on Wednesday.

The remarks come after the caretaker federal cabinet on Tuesday approved the reorganisation and digitisation of the FBR after the recommendations of the inter-ministerial committee headed by the finance minister were presented.

Under these reforms, a Federal Tax Policy Board will be formed in the Revenue Division, which will be responsible for the formulation of tax policy in the country, determination of revenue targets and cooperation between stakeholders. The Federal Policy Board will be headed by the federal finance minister.

As a result of the restructuring, Customs and Inland Revenue will be headed, separately, by Director Generals of the respective cadre, who would have complete authority over the administrative, financial and operational matters of their respective departments.

There will also be separate oversight Boards for Customs and Inland Revenue. Federal secretaries of finance, revenue, and commerce, chairman NADRA, and experts from related fields will be the members of each board while the finance minister will be its head.

However, with general elections just days (February 8), the incoming government would be largely responsible for the overall implementation of the approved reforms.

PBC in its post said no political party has denied the need to enhance the tax-to-GDP ratio or to equitably broaden the tax base and create long-term growth-oriented policies.

It noted that “focus will be sharpened (and tax revenues improve) by the split of FBR into Customs and IRS.”

“Accountability will also improve through oversight boards composed of a cross-section of ministries and independent experts,” it said.

The PBC was of the view that fiscal policy must not be made by those who collect or otherwise control the tax collectors. “Ideally, the Fiscal Policy Board, also composed of a cross-section of ministries and independent experts, should report to the PM or the Ministry of Planning,” the body said.

Earlier, Caretaker Finance Minister Dr Shamshad Akhtar in an address on Tuesday stated that Pakistan’s tax-to-GDP ratio has been declining, with FBR tax-to-GDP ratio barely 8.5% in 2022-23, while the country’s tax capacity has remained largely around 22% of GDP including the taxes under the purview of provinces that yield barely one percent of GDP revenues.

The number of taxpayers in Pakistan is barely 2.3 million, she said. Corporate tax filers are 0.8% of commercial and industrial electricity users and GST-registered entities are barely 13% of the 1.4 million taxpayers, she added.

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