The Federal Board of Revenue (FBR) lacks the capacity to analyze big data to detect tax evasion as well as access to data taxpayers, says the World Bank (WB).
The Bank in its project document on “Environmental and Social Management Plan Pakistan Raises Revenue Project (PRRP)” stated that effective compliance control in modern revenue administration relies on the collection and analysis of taxpayer/trader data from various sources such as provincial tax authorities, other government entities, foreign jurisdictions, and withholding agents.
The FBR lacks both access to many of these data sources and the capacity to analyze big data to detect tax evasion. The FBR’s main Information Technology (IT) systems—the Inland Revenue Information System for income tax, the Sales Tax Realtime Invoice Verification (STRIVE) system for General Sales Tax (GST), and the Web Based One Custom (WeBOC) system for Customs—have automated some business processes, such as filing of tax returns and goods declarations (GDs). However, these systems do not share data and lack important functionalities such as tracking tax arrears or a transit module (WeBOC).
The FBR, therefore, needs the Information and Communication Technology (ICT) infrastructure and technical skills to integrate and analyze big data with adequate data security. ICT investments in simplified and automated business processes will generate efficiency gains by enabling paperless administration, real-time communication with FBR field offices, and e-services for taxpayers.
ICT investments in simplified and automated business processes will generate efficiency gains by enabling paperless administration, real-time communication with FBR field offices, and e-services for taxpayers.
FBR is undertaking Pakistan Raises Revenue Project (PRRP) to upgrade its Information and Communication Technology systems across Pakistan. The project objective is to contribute to a sustainable increase in domestic revenue by broadening the tax base and facilitating compliance. The majority of existing equipment at FBR offices is decades old and is prone to failure, thus, prompting the need to replace existing equipment before any system break could occur resulting in discontinuation of services to tax-payers.
This is a five-year project and does not involve major civil works, land acquisition, and displacement, or operations in protected areas or in areas inhabited by indigenous people.
The project’s classification for social risks is moderate owing to the risks of exclusion and labor-related risks. Environmental risks are classified as Moderate and related to the risks associated with e-waste management. Consequently, the overall environmental and social risk classification of the project is moderate.
PRRP is subdivided into two components. Component 1 includes the simplification of the tax administration framework to make procedures, including appeals and penalties, more transparent and intelligible to taxpayers and tax administration staff alike. Component 1 also focuses on the implementation of risk-based inspections and post-clearance audits (PCA) in Customs, the expansion of e-services for taxpayers and traders, and the institutional development of FBR for efficiency and accountability.
Component 2 of PRRP targets the replacement of outdated Information and Computer Technology (ICT) equipment from FBR offices across Pakistan. The intervention includes upgrading to a high-capacity data warehouse to support big data analysis and integration of databases along with the replacement of equipment that has reached its useful life in the FBR’s data centers. The ICT equipment to be replaced and provided through PRRP will include computers, printers, copiers, and scanners as well as networking components such as network switches, routers, and servers.
Component 2 also has the provision of vehicle/container scanners under the Pakistan Customs Automated Entry-Exit System (AEES) at ports. Following the World Bank ESSs and Environmental and Social Commitment Plan (ESCP) as well as national and provincial laws and Good International Industrial Practices (GIIP), an Environmental Assessment study of PRRP has been conducted to identify the environmental and social impacts of the project and to develop an Environmental and Social Management Plan (ESMP) containing mitigation measures following the principles of mitigation hierarchy for the identified impacts.
The project will support the implementation of the FBR’s long-term transformation roadmap. The solutions offered by the project are based on the ‘low rate-broad base’ principle, whereby a sustainable increase in revenues is achieved by expanding the tax base and increasing compliance, rather than introducing new taxes or raising tax rates. The project, therefore, focuses on the implementation of a simplified and strengthened tax and customs administration.
Project interventions will equip the FBR with the needed ICT tools and technical skills to make effective use of taxpayer information, with big data techniques and modern risk-based tools for more efficient, targeted compliance control. The project also includes ICT tools and electronic scanning equipment for the FBR’s initiatives for taxpayer and trade facilitation.
FBR is aiming to upgrade its Information Technology (IT) systems, including a high-capacity data warehouse to support big data analysis and integration of databases along with the replacement of end-of-life equipment of its data centers. The tax regulator needs to modernize its Information and Computer Technology Infrastructure to execute its reform initiatives by utilizing modern technologies in its data centers.
