ISLAMABAD: In order to reduce a startling tax gap of more than Rs6 trillion, the Economic Coordination Committee (ECC) of the cabinet on Tuesday approved five proposals to transform the Federal Board of Revenue (FBR) at an estimated cost of Rs25 billion.

The ECC meeting, chaired by Finance Minister Muhammad Aurangzeb, also approved a technical supplementary grant for the Pakistan Post Office Department and the Election Commission of Pakistan (ECP) to hold local bodies elections in provinces and the federal capital.

Rashid Mahmood Langrial, the FBR chief, and his reform team have worked out the transformation plan to lower the Rs6tr tax gap, of which Rs3.5tr is related to sales tax. Five proposals were drafted and previously approved by Prime Minister Shehbaz Sharif.

An official announcement said that the ECC approved all five proposals submitted by the FBR in principle, but with the proviso that a third-party impact evaluation of the recommended processes would be conducted before the next budget.

Clears five proposals with a third-party impact evaluation condition

It was also decided that a similar impact evaluation of the outcomes to be drawn up under the proposals would be carried out at the end of the calendar year 2025 to evaluate the merit of the entire exercise and its impact on the overall goal of enhanced revenue generation and resource mobilisation.

The ECC also decided that the Revenue Division and Finance Division would hold a consultation to chart a roadmap for the execution of the plan, including budget allocation.

An anti-smuggling strategy calls for the installation of digital enforcement stations on 24 Indus and Hub bridges. Ten choke points would be set up in Balochistan. Dedicated customs enforcement centres will be established at the national level, and all petrol pumps will be digitally connected.

To increase tax compliance and reduce tax gaps, it was decided to provide mobility vehicles at the ACs and DCs level, which would be accessible for operational purposes. A dedicated fleet was deployed last year as part of a track-and-trace initiative for tobacco monitoring, leading to 308 raids and recovery of Rs1 billion.

This fleet conducted 611 raids this year, resulting in recovery of Rs3bn.

At the same time, it was also decided to pay four basic salaries to tax officers in A-grade, followed by three for B-grade, two for C-grade, and no incentive for E-grade.

The incentives are intended to motivate officers to improve tax compliance. Tax officials would also be given housing options in places such as Karachi and Lahore.

Offering IBA degrees and foreign certifications were also proposed so that tax officers can improve their skills.

The ECC approved a summary submitted by the Ministry of Communications for a technical supplementary grant amounting to Rs16.995bn for clearing of verified pending liabilities of companies/agency partners of Pakistan Post Office Department.

The ECC approved a summary submitted by the Election Commission for a TSG of Rs1.317bn in connection with local government by-elections in the four provinces and the federal capital during the current financial year (2024-25).

The meeting was attended, among others, by Industries Minister Rana Tanveer Hussain, Minister for Power Sardar Awais Ahmad Khan Leghari, Commerce Minister Jam Kamal, Ali Pervaiz Malik, Minister of State for Finance; the State Bank governor, the FBR chairman and federal secretaries.

Published in Dawn, November 13th, 2024