ISLAMABAD: The Federal Board of Revenue (FBR) has finalised a plan to transform all tax offices into model tax offices (MTOs) and streamline enforcement and intelligence directorates to reduce the menace of smuggling.

These offices will be converted between October and January 2028 with a greater emphasis on digitalisation, improved auditing and strong enforcement to close the tax gap and achieve actual collection.

There are four large taxpayer offices (LTOs) in Karachi, Lahore, Islamabad, and Multan. In the first phase, preparations for converting LTO Karachi to MTO will begin on Oct 20 and will be completed by January 2025.

The LTO Lahore will be converted to MTO in the second phase by July 2025. There are three corporate tax offices (CTOs) in Karachi, Islamabad and Lahore. Moreover, there is also one medium tax office (MTO) in Karachi.

In the third phase, two LTOs — Islamabad and Multan, all CTOs and one MTO will be converted into MTO by January 2026.

Currently, there are 17 regional tax offices (RTOs), one each in Islamabad, Karachi-1, Karachi-2, Lahore, Multan, Abbottabad, Bahawalpur, Faisalabad, Gujran­wala, Hyderabad, Peshawar, Quetta, Rawalpindi, Sahiwal, Sargodha, Sialkot and Sukkur. In the fourth phase, all RTOs will be converted into MTOs.

An official source on Saturday told Dawn that the prospective MTOs would differ from present structures in six respects, beginning with high-quality and integrity officers/staff and five specialised auditors in each unit. Tax authorities will get performance-based incentives, incorporated technological competence, rigorous performance management, and a dedicated taxpayer facilitation zone.

According to the official, the incentives would be based on composite criteria of integrity, which will be measured through peer-rating and forced ranking mechanisms, along with competence, which will be measured through anonymous rating by a panel of experts.

Currently, 68pc of FBR revenue comes from LTOs — 32pc from Karachi, followed by 17pc Lahore and 15pc from Islamabad.

The proposed MTOs will have a tax facilitation zone, a panel of sectoral/industrial experts, legal firms, and audit advisors/mentors. Currently, 355 auditors are working in the FBR, while the required number is 1,559 auditors. In three hiring rounds, this gap will be covered.

The independent panel of experts will be from the following sectors — textile, financial and insurance activities, chemical and fertilisers, POL, tobacco, iron and steel, beverages, tea, cement and real estate.

Published in Dawn, October 6th, 2024