The government has decided to create a tax policy unit (TPU) within the Domain of Revenue Division for making the tax policy of the country, highly-placed government officials told Propakistani here on Monday.
Officials said that the Special Assistant to the Prime Minister on Revenue has convened a meeting on the creation of the TPU and future course of action. The meeting was attended by the senior officials of the FBR.
The proposed TPU would be created within the Revenue Division comprising both the tax officials as well as private sector experts for the drafting of the tax policy. Under the proposal, the tax policy would not be completely taken away from the FBR, but tax officials would continue to remain part of the tax policy. The ultimate objective is to separate the tax policy from the revenue administration.
Officials said that the Rules of Business 1973 assign the business of tax policy to the Revenue Division. It also empowers the Revenue Division in the matter of revenue administration. The Revenue Division is expected to formulate tax policy in consultation with the ministries and divisions, but the function is solely performed by the FBR.
The government wants to implement the signature tax reforms of the incumbent government envisaging separation of tax policy and administration.
In the past, Prime Minister Imran Khan had nominated six new members of TPU including Adviser for Commerce, Industries & Textile Industries Abdul Razak Dawood, an information technology professional Syed Javed, NADRA Chairman, former FBR chairman Abdullah Yousaf, economist Dr. Ijaz Nabi and former FBR chairman Salman Siddique.
The federal cabinet had approved to separate tax policy from revenue administration and constituted a committee to work out legal and technical modalities to this effect.
The government has decided to formulate Tax Policy Board (TPB) as per the longstanding demand of the business community.
The cabinet had also set up an implementation committee to work out the modalities, roles and responsibilities of the Finance Division and Revenue Division for seamless transition and activities. The committee will comprise the finance minister as chairman, minister of state for revenue, cabinet secretary, finance secretary, and FBR chairman as members. The committee can also co-opt any other member.
The purpose of separating tax policy from tax administration is to improve governance and tax laws in Pakistan, according to the FBR’s summary. The combination of the tax policy and revenue administration has an inherent problem of using the policy as a tool to maximize revenues at the expense of investment and economic growth.
The tax policy unit will be responsible for revenue forecasting, tax expenditure analysis, distributional analysis, economic impact analysis, cost-benefit analysis, and tax indicator analysis, sources added.