ISLAMABAD: The Federal Board of Revenue (FBR) has admitted that the abolished “Circle-based system” was much better than the reformed “Functional-based system” operating in field formations of Inland Revenue (Large Taxpayer Units and Regional Tax Offices).

The FBR has given a comparison of the old “Circle-based system” with the existing “Functional-based system” in a report (Stakeholder Engagement Plan) issued under the World Bank-funded Pakistan Raises Revenue Project (PRRP).

The FBR report stated that in terms of the work process structure, initially there was a Circle-based system, under which, each Circle was responsible for closely monitoring the performance of all taxpayers falling within its territorial jurisdiction.

The officer incharge was entrusted with all the responsibilities of maintenance of records, receipt, and enforcement of income tax returns/statements, conducting audit and assessment, recovery of taxes, filing of appeals at various appellate fora, issuance of refunds, and assisting the Commissioner in the issuance of exemption certificates.

Since all the work was the responsibility of one person, there was a unity of command, a better understanding of issues, and a sense of ownership among the tax officials, the report said.

In 2000 it became Functional-based, in which there was a lack of ownership and officers did not know anything outside their function. The system has now introduced a “composite system” broadly similar to the comprising work units, the jurisdiction of which is by and large based on “territorial” specifications, and the work is entrusted to one person.

Hence IRS is organised along tax instruments, territorial jurisdictions, and taxpayer segments (e.g. Large Taxpayer Offices) rather than functions, for instance, taxpayer registration, assessment, and tax audit.

This aspect of the organisation may be explored further through consultations as it has implications for the efficiency of work processes and would impact the reform agenda of the reform project, the report added.

Copyright Business Recorder, 2023