ISLAMABAD: The government has decided to withdraw the Inland Revenue Service’s (IRS) powers to propose tax increases and place it with a special cell to be constituted under the federal finance minister.

Since 2019, the Federal Board of Revenue (FBR) has assured the Inter­national Monetary Fund (IMF) that tax policymaking and collection would be independent. The FBR will be confined to the function of tax collection.

FBR Chairman Rashid Mahmood Langrial told Dawn on Friday that the planned Tax Policy Office (TPO) will be set up in the finance ministry. The director general of the TPO will report to the finance minister only.

The DG will present reports to the finance minister on tax policy relating to income tax, sales tax, and federal excise duty. He said the TPO would not be a wing of the finance ministry but rather a think tank for tax policy formation.

The government will appoint tax specialists, academics, and other professionals to develop tax policy measures while keeping the entire economy in mind. The IRS officials will no longer be able to suggest raising tax rates or imposing additional taxes.

The power to charge tariffs and impose regulatory duties had already been withdrawn from the customs department and placed with a special cell established under the Commerce Division in 2019.

The special cell reports to the commerce minister and has worked indep­endently in the first two years of its est­ablishment to propose tariff modifications that promote trade, particularly exports, rather than revenue creation.

However, the cell has become ineffective because the current government did not take the proposals into account while preparing the budget for FY25.

The implementation of TPO proposals was done through a TPB chaired by the commerce minister with the minister for industries and production, secretaries of finance, revenue, commerce, the Board of Investment, the FBR chairman and NTC as its members.

According to Finance Minister Muhammad Aurangzeb, it is high time to focus on tax implementation to plug loopholes and minimise tax fraud. He said FBR would only focus on implementing tax proposals to raise maximum revenue. The current administration of FBR has identified a tax gap of over Rs7 trillion, which needs to be collected rather than increased tax rates or levy new taxes.

Published in Dawn, October 12th, 2024