The Election Commission of Pakistan (ECP) has directed the caretaker federal government to refrain from implementing structural reforms in the Federal Board of Revenue (FBR). The commission emphasized the need for the caretaker administration to concentrate on routine governance and to avoid major policy decisions.
The directive from the ECP came after the federal cabinet, under Prime Minister Anwaar-ul-Haq Kakar, approved the FBR’s restructuring and digitization and initially raised concerns from senior officials over potential conflicts of interest. The cabinet initially supported the plan but later received advice against major reforms before the elected government assumed office.
In response to inquiries about potential immediate implementation through an ordinance, a government official preferred to defer legislative action to the forthcoming elected government. Consequently, the cabinet decided to submit the reform plan for the next administration’s review.
The caretaker finance minister’s urgency in advancing FBR reforms has led to a postponement. The reform summary, prepared by the Revenue Division’s secretary and the FBR chairman, was initially forwarded to the finance minister but is now on hold.
The ECP’s intervention included a letter to the caretaker prime minister’s secretary, citing relevant constitutional provisions and the Elections Act 2017. Authored by ECP Secretary Dr. Syed Asif Hussain, the letter stressed that the caretaker government’s mandate is limited to managing daily affairs and avoiding substantial policy shifts that might influence the future elected government’s authority.
The letter asserts that the FBR’s proposed overhaul is a significant policy decision, falling within the elected government’s purview. As a result, the caretaker government has been advised to postpone any major reforms in the FBR until after the 2024 general elections.
Meanwhile, Caretaker Finance Minister Dr. Shamshad Akhtar presented the key features of the FBR reform plan, targeting an increase in the tax-to-GDP ratio to 18% by FY2029. However, her speech did not reference the ECP’s directive. The plan, resulting from comprehensive consultations and research, aims to tackle macroeconomic challenges in Pakistan and prioritize domestic resource mobilization.
The FBR’s tax-to-GDP ratio has declined at just 8.5% in 2022/23. The FBR is grappling with challenges in tax collection due to complex administration, management issues, and a substantial undocumented sector. The proposed reforms address these issues and boost the country’s revenue collection efficiency.
