ISLAMABAD: In the light of a potential major overhaul in the tax machinery, the FBR’s consulting firm, McKinsey, has recommended that the Board integrate domestic and trade data, identify five million potential tax dodgers and bring them into the tax net. On Tuesday, McKinsey provided a detailed briefing to the FBR that lasted over two hours, during which participants posed numerous questions. An official announcement from the FBR stated that the first meeting of Task Force on Digitisation was held at the FBR headquarters, chaired by the Minister of State for Finance and Revenue, Ali Pervez Malik, and co-chaired by DG C41, Major General Syed Ali Raza.
The meeting was attended by Chairman Rashid Mahmood Langrial, members, and senior officers of the board, along with Task Force members, including Ghazi Akhtar from Lotte Akhtar Beverages Ltd, Asif Peer from Systems Ltd, Amir Malik, CEO PRAL, Ms. Tania Aidrus, and Gohar Marwat, Project Officer at NADRA. Waqas-ul-Hasan and Fareed Zafar participated virtually.
In his opening remarks, the state minister for finance said that the prime minister has constituted the Task Force to submit recommendations for the complete digitisation of all FBR systems. He emphasized that end-to-end digitisation is crucial for the country’s transition to more inclusive and sustainable growth. The minister explained that the Task Force’s goal is to develop policy interventions to improve FBR efficacy and enhance revenue streams.
The DG C41 reiterated that the government’s reform agenda aims to increase the country’s tax-to-GDP ratio for better revenue generation and highlighted the need for effective implementation of various initiatives. The FBR chairman expressed commitment to maximising revenue through data automation and software solutions, urging the committee members to provide practical recommendations. He stressed the importance of integrating and deploying new systems to modernise the tax agency and meet future targets.
Ali Malik from McKinsey provided a comprehensive presentation on the progress towards digitisation. He outlined the firm’s focus on two major areas: the overall digitisation of the FBR and identifying and implementing quick wins. He noted that data sharing among key stakeholders is underway to compile high-quality data for identifying non-filers and tax evaders.
The presentation highlighted four key areas of improvement based on global experience and available data within the FBR: income tax, sales tax, customs duty, and collections. The meeting also discussed the Terms of Reference (TORs) for the Task Force, which include vertical and horizontal data sharing, supply chain automation, an integrated track and trace system, restructuring PRAL, and trade data sharing with trading partners. The need for a robust data-sharing mechanism was emphasized to identify potential taxpayers and broaden the tax base.
The use of advanced technological interventions and automation was seen as essential for developing a more formalised and documented economy for sustained economic growth. The Task Force decided to include members from the SECP, State Bank, and ministries of commerce and foreign affairs in future meetings. Four working groups were established to deliberate on the TORs assigned to each group.
The Working Groups will prepare draft recommendations and present them at the next Task Force meeting on August 21, 2024. Sources say top members of the FBR’s Inland Revenue Service (IRS) and Customs groups may be replaced soon. Some officials might go on leave or be replaced in the coming days.
The newly appointed chairman of the FBR will select his own team, including new members for IRS (operation), IRS (policy) and Customs. The Task Force on Digitisation of the FBR has identified five million potential tax dodgers who lead luxurious lifestyles and own properties, vehicles, credit cards, memberships in elite clubs, and more, but have not participated in the tax system. In the first phase, a sample of these potential tax dodgers will be selected based on their significant transactions in properties, vehicles, credit cards and elite clubs, as well as other indicators of wealth.
Surveillance will be conducted to verify the accuracy of the data. Following this, a centralised system will be developed to dispatch tax notices, minimising human discretion. The Task Force on Digitalisation, which includes Major General Syed Ali Raza from GHQ, has been tasked with expanding the tax base and achieving a challenging tax collection target of Rs12,970 billion (Rs12,913 billion as agreed with the IMF) for the current fiscal year.
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