Prime Minister Shehbaz Sharif has directed the Federal Board of Revenue to accelerate reforms and close the FBR tax gap, while the government dropped the idea of setting up an entirely new tax agency.
Chairing a high-level review meeting on Monday, the prime minister said the initial results of ongoing FBR reforms were encouraging and the pace of change must quicken. He stressed that technology, professional training, transparency and accountability must remain central to the reform drive.
FBR tax gap narrowed from 6pc to 5pc of GDP
Officials briefed the meeting that FBR reforms had narrowed the estimated tax gap from 6 per cent to 5 per cent of GDP, while the effective use of technology had substantially reduced the discretionary powers of tax officials.
The planning ministry told the meeting that the FBR had assured it the reforms would lift the tax-to-GDP ratio to 13.5 per cent by 2029 and bring more taxpayers into the net.
“It is the responsibility of FBR officers to improve their performance in line with the expectations of the nation,” the prime minister was quoted as saying. He added that the reforms were in the broader interest of the state and the process would continue.
The prime minister called for zero tolerance and indiscriminate action against corrupt elements within the department. Staff showing genuine improvement in conduct and performance should be given a chance to reform, he said, but there should be no room for corruption or underperformance.
The FBR was instructed to submit a report on human resource restructuring and reorganisation to the prime minister within a week.
New agency idea dropped, retirement law revived
The government decided to compulsorily retire non-performing officers by amending the Civil Servants Act, which would allow it to retrench bureaucrats as part of any restructuring. The plan for a new tax agency was dropped.
Earlier this month, debate was triggered after the idea of setting up an entirely new organisation was floated at a high-level meeting. Some participants argued that building a new body would take years and it could develop the same problems as the existing FBR by the time it became fully operational.
After The Express Tribune published a story about the proposal, the Inland Revenue Service Officers Association threatened a pen-down strike. The association later withdrew the threat after seeking assurances from senior officials.
Officials told The Express Tribune that Shehbaz expressed displeasure over the officers’ conduct, saying there was no room for an association that could blackmail the government. FBR’s senior management said action could be taken against officers for illegally establishing a collective bargaining body.
The government decided to restructure FBR’s human resources both vertically and horizontally. Surplus and non-performing officers would be sent packing. Amendments to the Civil Servants Act have been pending before the National Assembly since 2024, and the government decided to fast-track their parliamentary approval.
The FBR recently extended the deadline for filing 2026 income tax returns after technical glitches on the IRIS portal, a move that underscored the capacity problems the reform drive is meant to fix.
Two senior officers suspended
In a related move, an FBR statement said two Inland Revenue Service officers, one in BS-20 and the other in BS-19, had been suspended. Two other BS-20 officers were repatriated to FBR headquarters for further investigation over an unauthorised press statement and a call to halt official work.
The revenue board has increasingly turned to data and artificial intelligence to monitor returns, part of the technology push the prime minister wants accelerated.
| Measure | Detail |
|---|---|
| New tax agency | Plan dropped |
| Tax gap | Narrowed from 6pc to 5pc of GDP |
| Tax-to-GDP target | 13.5pc by 2029 |
| Civil Servants Act | Amendments fast-tracked for compulsory retirement |
| HR report | Due within a week |
| Officers suspended | Two BS-20, one BS-19 action taken |
What is the tax gap?
The tax gap is the difference between the tax the government should collect and what it actually collects. Officials say reforms have cut it from 6 per cent to 5 per cent of GDP.
Why was the new agency idea dropped?
Participants at an earlier meeting argued a new organisation would take years to build and could develop the same flaws as the FBR. The government chose to restructure the existing board instead.
What happens to non-performing officers?
Proposed amendments to the Civil Servants Act would let the government declare officers redundant during restructuring, offer a severance package, and compulsorily retire them.
The FBR’s tax return filing season has already seen one deadline extension this year.
*Source: The Express Tribune*
