ISLAMABAD:
As tax shortfall widens to Rs428 billion in five months, the International Monetary Fund (IMF) has expressed concern over hiring a new management in the data arm of the Federal Board of Revenue (FBR) and outsourcing its core functions without first developing a conflict of interest policy.
The observations made by the IMF in its Governance and Corruption Diagnostic Assessment about the Pakistan Revenue Automation Limited (PRAL) confirmed a February story of The Express Tribune that had highlighted these lapses.
“Although legally required, a code of conduct and conflict of interest policy have not been developed,” said the IMF report released last week. It stated “this is particularly concerning as PRAL is currently recruiting staff at competitive salaries – also using third parties to outsource some of its core functions”.
A meeting took place on Friday in the Prime Minister’s Office where participants had to struggle to find a way to defend the government in parliament and before the media, said the government sources. There was a proposal that Minister of State for Finance Bilal Azhar Kayani should give the government’s response in parliament.
The IMF’s remarks about PRAL highlight the poor state of affairs in the data and technology arm of the FBR, which is run on an ad hoc basis and where board members are directly intervening in the management’s affairs. The government has not yet appointed a new chief executive officer of PRAL.
But the IMF has now pointed out that the government is hiring people from the market without developing a conflict of interest policy.
The Express Tribune had reported in February that the PRAL board had started its work without first disclosing the potential conflict of interest or developing a code of conduct, a requirement under the law.
The IMF report stated that the FBR’s management and oversight of core risks, such as the risks created by entrusting data management to PRAL, needed significant strengthening. It added PRAL lacks a systematic overview of potential data management and security risks, and does not maintain a risk register. Transaction logs are only reviewed after a reported incident, rather than being used proactively to identify potential risks, according to the report.
The IMF said that effective FBR oversight of PRAL is crucial. While basic mechanisms such as weekly project portfolio meetings and a service-level agreement are in place, the FBR must have continuous assurance that PRAL operates within its mandate and complies with all FBR requirements.
Tax collection
The FBR’s tax shortfall is widening with every passing month, making it difficult to recoup losses in the coming months. Statistics showed that against the target of Rs5.14 trillion, the five-month (Jul-Nov) collection amounted to Rs4.715 trillion, a shortfall of Rs428 billion. The FBR has requested the central bank to keep commercial banks open on Saturday in the hope of receiving about Rs15 billion more.
This comes even though the government imposed new taxes in the budget, increased rates and took some enforcement measures. The FBR was struggling to achieve a healthy growth rate despite taking huge advances.
There is also no permanent member of the Inland Revenue Operations. The three-month additional charge for Dr Hamid Ateeq Sarwar expired in mid-November, which the government has not yet extended.
The FBR collected Rs2.19 trillion in income tax in five months, missing the target by Rs177 billion. Sales tax collection amounted to Rs1.67 trillion, falling behind the target by Rs250 billion.
Federal excise duty collection stood at Rs326 billion, slightly lower than the five-month target. Customs duty collection was Rs520 billion, higher by Rs1 billion from the target due to increased imports.
The FBR missed its November tax collection target of Rs1.035 trillion by a margin of Rs157 billion. Total collection stood at Rs878 billion.
A senior tax official said that the monthly shortfall would be reduced to Rs135 billion, provided some advances were maturing on Saturday.
Businesses are already crippled by the heavy tax burden, which has also been acknowledged by the national coordinator of the Special Investment Facilitation Council, Sarfraz Ahmad. He has outlined a plan to reduce these taxes.
