Institutional Reforms in the Central Board of Revenu

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Institutional Reforms in Pakistan The Central Board of Revenue

Institutional Reforms in Pakistan The Central Board of Revenue Submitted By Noor Mohammed Khan

Supervised By: Dr. Ric Shand Executive Director: ASARC

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Acknowledgements

Institutional Reforms in Pakistan The Central Board of Revenue

This research project is thankful to the following institutions that have contributed to the completion of this report. • • • • • • • Australia Asia Management Centre, ANU Australia South Asian Research Centre, ANU Lahore University Of Management Sciences The World Bank “Resident Mission Pakistan” The Central Board of Revenue Pakistan The High Commission of Pakistan in Australia Economic Planning Division Pakistan

The project is thankful to all who participated and gave their valuable insights on the issues discussed in the report. I am grateful to the employees of CBR whose support and inputs have made this report possible in a short period of time. I am also grateful to the World Bank resident mission Pakistan for their financial support and Australia South Asia Research Centre at ANU for support logistics and in particular to Dr Ric Shand, Executive Director, (ASARC) who was instrumental in initiating the project and in guiding it through to completion with his advice and meticulous supervision.

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Chapter: 1

Institutional Reforms in Pakistan The Central Board of Revenue

Introduction and Objectives

The government of Pakistan has embarked upon a stabilisation program rooted in wide ranging structural reforms supported by a three year ESAF/EFF program of the IMF. This study examines major tax administration reforms an integral part of the support by the World Bank which is assisting the fiscal reforms. Pakistan’s structural problems include a high fiscal deficit and heavy debt obligation. The government is taking strong steps in the area of fiscal policy reform. The Central Board of Revenue as a core revenue administration body of the government is being restructured for the purpose of raising the Tax/GDP ratio, in the context of a changing economic environment. The research project first provides an overview of the structural problems of Pakistan, It then discusses recent policy developments on revenue administration reforms. It analyses federal tax administration performance over the years, elaborating on the performance of direct and indirect taxes. The concluding section argues the urgent need for institutional reforms in CBR to meet the challenges of the current economic realities, and offers a number of recommendations to change management approaches. The Central Board of Revenue as an important arm of the government fiscal policy, has been targeted for major reform. A restructuring committee was formed headed by the Deputy Chairman, Planning Commission. The committee has developed proposals for the restructuring of the CBR. This study outlines important aspects of the proposals and of the new governing structure of the CBR. When recently presented publicly these proposals attracted criticism and concern from a range of stakeholders. The report reviews these concerns and perceptions as presented by different stakeholders through interviews who would be affected by the institutional reforms in the CBR. These interviews helped in identifying the key issues between the stakeholders and the revenue administration. These are interpreted in terms of the environment in which the institutional change is being undertaken. The report discusses issues of cultural norms and quality of services CBR is currently delivering. The specific stakeholders who will be affected by change are listed. The concluding section urges the need for institutional reforms despite the many concerns and arguments of stakeholders. Keeping in view the contextual framework of CBR we discuss the effective and most efficient approach to change. It is critical to understand the fundamental theories and strategies...
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