ISLAMABAD: The Inland Revenue Service (IRS), created by the Federal Board of Revenue (FBR) to enhance collection and tax-to-GDP ratio, has come under harsh criticism by its own officials who claim the reforms are bound to fail.

On the contrary, FBR Chairman Sohail Ahmad said that tax reforms started in 2004 were a continual process and these would go to its logical conclusion. ‘IRS is the ‘need of the hour’ and its application needs to build a consensus,’ he remarked.

The resentment is not too much, but FBR would honour the High Court decision whether the office memorandum issued by the Establishment Division is legal or not. The case is likely to go to Parliament for final approval, another official said.

Addressing a news conference at FBR House on Tuesday, Mr Sohail said that ‘no legislation is required for the creation of IRS being a new occupational service as it is part of the rules of business. FBR has no role in it as it was issued by the Establishment Division,’ he clarified.

On the acceptability of IRS, Mr Sohail stated that around 1,000 officials of FBR had already opted to join the IRS. ‘Majority of them belongs to the Income Tax Group and they consist of at least 20 senior officials,’ he disclosed.

In case, all the officers of the Customs and Excise Group and Tax Group opt for the new service, the service will be renamed as ‘Pakistan Revenue Service’ with common seniority and doing all the revenue and tax business, he added. The FBR chairman refuted the notion that the World Bank and IMF were behind the creation of IRS, saying that ‘we have no pressure from any side it is part of the reform process.’

While seeking loan from IMF, the government had informed the Fund that it had reached understandings with World Bank on the organisation of a functionally structured tax administration which will integrate the responsibilities for domestic taxes, including the sales, income, and excise taxes, in one occupational group within the FBR.

This functional organization is designed both to increase the effectiveness of tax administration and facilitate the introduction of the VAT.

To ensure swift implementation of this reform, the FBR chairman had issued an Executive Order in June to put in place the new FBR management structure. The functional reorganisation of tax administration was planned to be completed in September.

To this end, the government had to approve structural benchmark to form new occupational groups within the FBR; and revise the structures of Regional Taxpayer Offices (RTOs) and Large Taxpayer Units (LTUs).

Legislative amendments to harmonise the sales tax, income tax, and the federal excise tax laws were already with the Ministry of Law and would soon be put before the Parliament.

Mr Sohail attributed IRS as a national issue, saying that the taxpayers were also suffering due to the fact that different types of auditors were being engaged to handle audit cases which made taxpayers unhappy.

The FBR chairman stated that the major challenge for revenue authorities was to increase the tax-to-GDP ratio. The integrated tax management and the unified database will increase the tax ratio.