ISLAMABAD (August 02 2003) : On the recommendations of Pakistani tax consultants Maxwell Stamps and International Monetary Fund (IMF), the tax authorities have principally agreed to curtail the Central Board of Revenue (CBR) members to six or seven from 17 under tax reform strategy to be implemented over a period of six years.
When contacted to comment on the proposal, a senior tax manager said “yes, the consultants from the UK have devised a plan to considerably reduce CBR members directly reporting to the chairman”.
The blueprint of the strategy revealed that the functional members would operate in four management categories, ie, revenue operations (member customs, member sales tax and member direct taxes); revenue services (member revenue services); management services (member management services) and policy and reforms (member policy and reforms and member audit).
These members would work with director generals (DGs) of different taxes.
Sources said that presently, the management team of the chairman comprises of 17 members, which was contrary to international practices where only six-seven executives report to the chairman.
With such a large team of top tax managers, the decision-making would become cumbersome for the chairman.
Small number of senior management would take part in decision-making process with the chairman performing his intended role of chairing the executive team and resolving issues of overall direction and policy.
The CBR's reform strategy focuses on significant reduction in the number of tax officials directly answerable to the chairman.
This will be achieved through creating a smaller executive team of the CBR.
This team will meet regularly, under the leadership of the chairman to discuss, plan, co-ordinate and direct the policies and operations of the CBR.
Under the new structure, member customs would be directly linked with the DG export and DG import; member sales tax, DG sales tax and DG LTU; member direct taxes, DG direct taxes and DG LTU.
Member revenue services would work with the DG intelligence; DG taxpayer education and facilitation; DG risk management; DG investigation; DG collection and enforcement and DG taxpayer audit.
Member management services would deal with the DG facility management; DG legal; DG human resource management; DG information management system (IMS) and DG training and development.
Member policy and tax reforms would co-ordinate with the DG project co-ordination and DG fiscal research and statistics.
Member internal audit would work with the DG internal affairs.
The sources also said that the first milestone was evolving top-level structure of seven streams reporting to the chairman, ie customs, revenue services, direct tax, management services, sales tax, policy and reform and internal audit.
At a later stage, it was envisaged that the three revenue streams would report through a single channel, ie member revenue operations, thereby, reducing the chairman's direct reports to the five members.
Specialist revenue functions such as intelligence, taxpayer education, taxpayer audit, etc, are brought together under a revenue services member, while the administrative and management support functions such as IT, human resources, facilities management, etc, are combined into a management services stream.
Furthermore, the CBR will set up regional hubs for the following functional areas to provide technical assistance to the line administration across all tax administrations and ensure quality assurance of the policies and procedures developed by the central office of the same functional organisation:
Revenue Services; Intelligence and investigation, taxpayer education and facilitation, collection and enforcement, registration, return processing and accounts and audit function.
Management services include facility management, human resource management, legal, training and development and information management system and support.
In the short and medium term, whether reporting to the chairman directly, or through member revenue operations, the sales and direct tax streams will remain separate.
However, a programme of co-location had already begun, and would be continued through the establishment of additional Large Taxpayer Unit (LTU).
In addition, integration of some revenue support functions is also in progress at the LTU in Karachi.
The long-term intention is that the two streams will integrate fully into one stream organised by the type of the taxpayer.
The customs operations are acknowledged to be significantly different from direct and sales taxation operations.
As a result, even if reporting through the envisaged member revenue operations, customs will remain a separate wing for the foreseeable future. Initially, there will be little change beyond the re-engineered procedures and systems arising from the reform process.
In the medium to long term, however, as many as possible of the support functions' activities would be merged into the revenue services stream.
Pakistan Revenue Automation Limited (PRAL) will report formally to the member information management system and user support.
The basis for segmentation at the top level of the structure determines the direction and ethos of the organisation as a whole.
Careful consideration will, therefore, be given to the allocation of responsibilities to the members on the executive team.
The CBR's strategy in relation to the segmentation of its organisation structure is to move in the long run towards a functional and type-of-taxpayer segmentation, but to do so in a co-ordinated manner and at a pace which allows its managers and workforce to acquire the necessary skills and experience to work effectively in the new structure.