ISLAMABAD, July 16: The World Bank has linked releasing of $120 million grant to the implementation of a plan to re- structure Pakistan's tax administration by 2006, well-placed sources said on Friday.

The sources told Dawn that a World Bank appraisal mission had recommended in its report to the government to grant autonomy to the Central Board of Revenue (CBR) in execution of its policies at the earliest in what they described as a key condition for releasing the fund for the project.

The mission also proposed the enactment of a separate law to enable the CBR to effectively execute its polices in respect of financial and administrative functions, make its own recruitment, postings and transfers and devise policies, the sources said.

A Pakistan Revenue Authority Bill designed to give autonomy to CBR was presented by the government to parliament in 1998 but was not enacted. The sources said the World Bank mission had asked for regular meetings of the Cabinet Committee on Federal Revenue (CCFR), which is headed by the finance minister and has met only twice to review tax issues since its constitution in 2002.

Elaborating the approved implementation of reform agenda, the sources said that during 2004, the government would establish medium taxpayers units (MTUs) based on the functional system of income tax in Quetta, Faisalabad, Rawalpindi, Peshawar and Karachi.

Similarly, during the year under review, a Large Taxpayers Unit (LTU) would be established in Lahore. The MTUs in Rawalpindi and Peshawar had already been established from July 1, 2004. The rest would be in operation by end of the current year, the sources said.

Following the establishment of these six MTUs in 2004, the sources said that these MTUs would be converted into regional tax offices (RTOs), which would collect income tax and sales tax under the same roof.

The sources said that RTOs were aimed at co-locating all income tax and sales tax work in 12 units and merging certain functions like registration, taxpayers facilitation, information processing and collection.

At each RTOs office, tax facilitation centres (TFCs) would be set up. It was planned to establish 60-70 TFCs across the country. In 2005, one each RTO will be established at Lahore, Quetta, Faisalabad, Rawalpindi, Peshawar, respectively. The RTO at Karachi would include MTU Karachi, common services centre and sales tax house.