Govt considers new tax agency amid concerns over FBR performance

The government is considering establishing a new tax collection agency or restructuring the existing Federal Board of Revenue (FBR) after repeated reform efforts failed to deliver the desired results.

The FBR has been directed to submit comprehensive proposals on human resource reforms, revamping and restructuring to Prime Minister Shehbaz Sharif on October 19, according to directives issued by the Prime Minister’s Office.

Officials said the proposal for a new organisation was discussed at a high-level meeting last Saturday. However, deliberations remain at an early stage, with no final decision taken on the future structure of the tax machinery.

The FBR said its reform process was ongoing and that the prime minister was personally overseeing efforts to make the institution more efficient and taxpayer-friendly. It denied reports that revenue collection would be outsourced to a private company.

The debate comes amid continued challenges in tax collection. The FBR’s tax-to-GDP ratio stood at 10.3% last fiscal year, while it missed its original annual collection target by more than Rs1.1 trillion.

For the current fiscal year, the board has been assigned a target of Rs15.263 trillion, requiring growth of more than 17%. Sources expect collection growth of around 12%, potentially leaving a shortfall exceeding Rs650 billion.

Broadening the tax base remains another challenge. Of 19 million people with national tax numbers, only 6.9 million had filed returns by Thursday evening, compared with 8.5 million returns during the previous tax year.

The FBR said reforms were under way across staffing, technology and procedures, including performance-based assessments, digital invoicing, artificial intelligence-based risk management and faceless customs assessments.

Any transfer of the FBR’s powers to a new agency would require amendments to several laws, including the FBR Act 2007 and at least four tax laws.