ISLAMABAD: In a significant move to comply with International Monetary Fund (IMF) conditions, the Pakistan government has issued a notification that removes key powers from the Federal Board of Revenue (FBR) and establishes a new Tax Policy Office under the Ministry of Finance.
This reform aims to enhance the transparency and efficiency of Pakistan's tax system, aligning with the country's commitments to the IMF for better governance and economic stability.
According to the details, the government has separated tax policy formulation from tax collection in a bid to improve accountability and reduce conflicts of interest. As a result of the restructuring, FBR will now be solely responsible for tax collection, implementation, and enforcement, while the new Tax Policy Office will take charge of designing and developing tax policies.
The newly established Tax Policy Office will directly report to the Finance and Revenue Minister and will be responsible for formulating tax reform agendas. This office will also analyze tax policies and proposals related to income tax, sales tax, and federal excise duty. A key focus of the office will be to develop strategies for reducing tax fraud and improving the enforcement mechanisms to ensure the efficient collection of taxes.
The decision to restructure the FBR is part of the government’s broader efforts to enhance revenue generation, minimize tax evasion, and improve overall economic governance. The government aims to address long-standing issues in Pakistan’s tax system, such as loopholes and inefficiencies, that have hindered the country's ability to collect adequate revenue.
By separating policymaking from tax collection, the restructuring seeks to create a more autonomous and independent tax system. This move is expected to align Pakistan’s tax administration with international best practices and strengthen its commitment to fiscal discipline, which is essential for securing continued financial support from the IMF and other international financial institutions.
This restructuring also aligns with the broader framework set by the IMF to help Pakistan develop a sustainable and transparent economic governance model. The IMF has long emphasized the need for an independent and efficient tax system as a key condition for ongoing financial assistance to the country.
In a related development, a visiting delegation of IMF experts met with the Auditor General of Pakistan on February 12 to discuss the audit procedure and transparency in the public sector. The IMF delegation was briefed about Pakistan's parliamentary audit tradition, wherein the opposition typically holds the role of head of the Public Accounts Committee. This system is designed to ensure checks and balances in government spending and public sector accountability.
The IMF mission is in Pakistan to conduct a Governance and Corruption Diagnostic Assessment (GCDA) to assess the effectiveness of the country’s audit procedures and improve transparency in public financial management. The delegation’s visit underscores the IMF’s commitment to fostering good governance in Pakistan as part of its ongoing support for the country's economic reforms.
