7

Project

FBR & its Importance in Pakistan

Subject : Introduction to Taxation Project Topics : FBR & its Importance in Pakistan Submitted To : Mr. Faiz Ahmad Submitted By : Mr. Aaqib Sarwar Mr. Ali Haider Dated : 28th May, 2015

Introduction:TheFederal Board of Revenue(more commonly known by its initials asFBR) is the semi-autonomous, supreme federal agency of Pakistanthat is responsible for auditing, enforcing and collecting revenue for the government ofPakistan.FBR has the responsibility for(i) formulation and administration of fiscal policies, (ii) levy and collection of federal taxes and(iii) Quasi-judicial function of hearing of appeals. FBR is estimated to be the largest federal bureaucracy in Pakistan. As the agency conducts audit of taxpayers regularly, it's regarded as the guardian of national treasury in Pakistan. FBR primarily operates through its main collection arms, its field formations, the Regional Tax Offices (RTOs) and Large Taxpayer Units (LTUs) across the country. FBR has two major wings: The Inland Revenue Wing (Income Tax Department) which brings in about 54% of FBR's total collection and Customs Wing now called as Pakistan Customs Service. Mostly in the media, the acronym 'FBR' is also often mentioned when speaking in relation to Inland Revenue Officers (previously Income Tax Department officials) in Pakistan. Income Tax Officers (now Inland Revenue Officers) are considered some of the very powerful officers in the country. For the purpose of collection of revenue and pursuing tax evaders, FBR's powers & functions also include but are not limited to: carrying out inquiries and audits/investigations into the tax affairs, commanding arrests, attachment as well asauction of movable and immovable assets of a non-compliant. Tariq Bajwa is the current chairman of FBR; he was appointed by the Prime MinisterHistory:TheCentral Board of Revenue (CBR)was created on April 1, 1924 through enactment of the Central Board of Revenue Act, 1924. In 1944, a full-fledged Revenue Division was created under the Ministry of Finance. After independence, this arrangement continued up to 31 August 1960 when on the recommendations of the Administrative Re-organization Committee, CBR was made an attached department of theMinistry of Finance. In 1974, further changes were made to streamline the organization and its functions. Consequently, the post of ChairmanCBRwas created with the status ofex officioAdditional Secretary and Secretary Finance was relieved of his duties asex officioChairman of the CBR. In order to remove impediments in the exercise of administrative powers of aSecretaryto theGovernmentand effective formulation and implementation of fiscal policy measures, the status of CBR as a Revenue Division was restored under theMinistry of Financeon October 22, 1991. However, the Revenue Division was abolished in January 1995, and CBR reverted to the pre-1991 position. The Revenue Division continued to exist since from December 1, 1998; however, owing to the recent controversy which arose when the federal government appointed the new CBR Chairman of the seventh common, bypassing several senior-most officials in the Customs & Federal Excise department, Prime Minister of Pakistan gave an additional charge of Revenue Division, Government of Pakistan to the then Secretary Finance and now the chairman of the agency Salman Siddiq, Government of Pakistan, thereby violatingFederal Board of Revenue Act, 2007as the senior officials in the then Customs & Excise Group now Pakistan Customs Service (PCS) refused reporting to a junior officer.By the enactment ofFBR Act 2007in July 2007 the Central Board of Revenue has now become Federal Board of Revenue. The status of FBR as Revenue Division has again been restored.

Vision of FBR:To be a modern, progressive, effective, autonomous and credible organization for optimizing revenue by providing quality service and promoting compliance with tax and related laws.Mission of FBR:Enhance the capability of the tax system to collect due taxes through application of modern techniques, providing taxpayer assistance and by creating a motivated, satisfied, dedicated and professional workforce.Values: Integrity Professionalism Teamwork Courtesy Fairness Transparency Responsiveness

Organizational Chart:The Federal board of Revenue presently comprises chairman and eleven member appointed by federal government.

Head of Board (Chairman):In existing setup, the chairman FBR being the executive head of the board as well as secretary of the revenue Division has the following responsibilities.I. Formulation and administration of fiscal policy.II. Levy and collection of federal taxes.III. Judicial function of hearing of appeals.His responsibilities also involves interaction with the offices of the president, the prime minister, all economic ministers as well as trade and industry.

Tax collection Trend:This is a chart of trend of taxes collected by the Central Board of Revenue of Pakistan with figures in millions of Pakistani Rupees. YearTotalDirect TaxesIndirect Taxes

1996129,282,087658,485,060211,597,027

2000982,392,277251,124,585124,5267,692

2005429,282,087129,282,087611,597,027

Powers and functions of the Board: The Board shall exercise powers and perform all such functions that are necessary to achieve the objects and purposes of this Act and include the following, namely: (i) To implement the tax administration reforms; (ii) To promote voluntary tax compliance and to make the Board a service oriented organization, and to implement comprehensive policies and programs for the education and facilitation of taxpayers, stakeholders and employees, etc., in order to develop the Board into a modern efficient authority. (iii) To improve the productivity through a comprehensive and effective human resource strategy. (iv) To identify and select through Internal Job Posting process the employees for designated jobs.(v) To grant additional allowances or any other incentives and rewards to the employees and members of the Board.(vi) To take appropriate measures including internal controls to combat corruption within the organizations under the Board and provide checks to ensure the integrity of employees that is verified periodically through applicable procedure which shall be made one of the criterion for promotion and incentives. (vii) To re-designate existing posts within its jurisdiction, prepare job description of any post and create posts in accordance with the rules. (viii) to direct or advise, where necessary, investigation or inquiry into suspected duty tax evasion, tax and commercial fraud, money-laundering, financial crimes cases and to coordinate with the relevant law enforcement agencies. (ix) To introduce and maintain a system of accountability of performance, competence and conduct of the employees. (x) To implement international obligations pursuant to a treaty, resolution or any international commitment.(xi) To establish a foundation for the welfare of the present and retired employees and their families, and to create, establish, organize, and assist in the social and cultural facilities. (xii) To create a surplus pool of employees as and when required. (xiii) To make regulations, policies, programs, strategies in order to carry out the purposes of this Act. (xiv) To engage any person or entity on contract basis to carry out assignments or for the consultancy in accordance with the rules of the Federal Government. (xv) To regulate and enter into any agreement, contract, understanding, with any international organization or institution or donor agency or counterpart entity with approval of the Federal Government. (xvi) To create field formations of Board for greater efficiency in implementation of fiscal laws and refer to them with appropriate titles. (xvii) To set up mechanism and processes that facilitate removal of grievances and complaints of the tax payers. (xviii) To carry out any other function, activity and acts, etc., as decided and determined by the Board. (xix) To perform any other functions entrusted from time to time by the Federal Government.

FBR committed to broaden the Tax Base: FBR has started an intensive effort to broaden the Tax Base through using the National Data Warehouse and has finalized a detailed implementation plan in this regard.The most important step in this direction has been the decision to use the National Data Warehouse (NDW) for identification of new taxpayers who can be brought into the tax net. The NDW would be used in various ways for this purpose including its usage for acquisition of data through profiling loading and Data mining & usage. Once this is done, respective RTOs would be sent the details and electronic profiles of these potential taxpayers so that BTB notifications are issued by the concerned tax commissioners. All the monitoring and control of the process would be automated and system based. FBR has also upgraded its call center facility for the facilitation of the taxpayers. Linkages with 3rd party sources, including provincial revenue authorities have also been established for effective implementation and monitoring.To strengthen the enforcement mechanism for the BTB plan, various decisions have been made by FBR which includes initiation of statutory proceedings against persons who fail to respond to Outreach notifications through issuance of notices under section 114 of the Income Tax Ordinance, 2001. In case of taxpayers persistence on non-compliance, provisional assessment would be finalized and the taxpayer would still have the option to file a return accompanied by a wealth statement and reconciliation of wealth statement within the period of sixty days whereby the provisional assessment order will be automatically vitiated. If the taxpayer does not file the return and required documents within sixty days, the tax liability raised as per the provisional assessment order would become final and will be recoverable and, if necessary, penal and prosecution proceedings, which may culminate in imprisonment and imposition of fine, will also be initiated in selected cases for creating a credible deterrence.