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Date: May 09, 2014

The Federal Board of Revenue has empowered the Directorate General (Intelligence &
Investigation), Inland Revenue (IR) to enforce filing of income tax returns, wealth statements
and compulsory registration of new taxpayers, authorising the directorate to carry out
assessment/provisional assessment and audit of the registered persons for recovery of taxes.

The FBR has issued SRO.351(I)/2014 here on Thursday to considerably enhance the powers of
the agency to operate like a Regional Tax Office (RTO). Through SRO.351(I)/2014, the
Directorate General (Intelligence & Investigation), IR has become a parallel assessment
organisation in the presence of Large Taxpayer Units (LTUs) and Regional Tax Office (RTOs),
sources said.

According to the notification, the powers of agency’s officials have been enhanced including
Director General I&I IR; Directors I&I IR; Additional Directors I&I IR; Deputy/Assistant
Directors I&I IR and Inland Revenue Officers I&I IR. The officers of Directorate General
(Intelligence & Investigation), IR have been empowered to exercise powers under section 114
(return of income), section 116 (wealth statement), section 119 (extension of time for furnishing
returns and other documents), section 120 (assessments), section 121 (Best judgement
assessment), section 122 (amendment of assessments), section 122A (revision by the
Commissioner), section 122C (provisional assessment), section 123 (provisional assessment in
certain cases), section 124 (assessment giving effect to an order), 124A (powers of tax authorities
to modify orders, etc), section 125 (assessment in relation to disputed property), section 126
(evidence of assessment), section 161 (payment of tax collected or deducted), section 162
(recovery of tax from the person from whom tax was not collected or deducted), section 174
(records), section 175 (power to enter and search premises), 176 (notice to obtain information or
evidence), section 177 (audit), 178 (assistance to commissioner), section 179 (accounts,
documents, records and computer-stored information not in Urdu or English language), section
180 (power to collect information regarding exempt income), section 181 (taxpayer’s
registration), section 182 (offences and penalties, section 205 (default surcharge), section 221
(Rectification of mistakes) and other sections mentioned in the notification.

Under the notification, in exercise of the powers conferred by section 230 of the Income Tax
Ordinance, 2001 (XLIX of 2001), read with section 208 and sub-section (1) of section 209
thereof, and in suppression of its Notification No SRO 51(I)/2013, dated the 29th January, 2013,
the FBR conferred upon the officers of the Directorate General (Intelligence & Investigation),
Inland Revenue to exercise powers and perform functions under the provisions of the Income
Tax Ordinance. Director General I&I (Inland Revenue) can exercise powers of sections 114, 116,
119, 120, 121, 122, 122A, 122B, 122C, 123,124,124A,125,126,161,162,174,175,176,177,
178,179,180,181,182, Chapter VIII, Part III, Part IV and Part XI of Chapter X,
Sections 205, 209,221 and 222 of the Income Tax Ordinance 2001. Directors of I&I (IR) can exercise powers under sections
114,116,119,120,121,122,122A,122C,123,124,124A,125,126,161, 162, 174, 175, 176, 177, 178,
179, 180,181,182, Chapter VIII, Part III, Part IV and Part XI of Chapter X, Sections 205 and 221
of the Ordinance 2001.

Business Recorder

FBR Lobbies to Switch Back to ‘Old Circle System’

Date: April 04, 2014

‘Imported’ administrative reforms implemented over the last 12 years in the Federal Board
of Revenue (FBR) with the help of $149 million in external assistance could not work in
Pakistan, believe top tax officials who have now started lobbying for reverting back to the
old ‘circle system’.

The sweeping reforms that started changing the face of the FBR from 2001-02 had been financed
by the World Bank and Department for International Development (DFID) of the United
Kingdom. In the old system, called circle, the country had been divided into over 700 small
circles for tax collection. The circles were present at the tehsil level.

Under the new system, known as functional system, the tax affairs are managed through 18
Regional Tax Offices (RTOs) and three Large Taxpayer Units (LTUs).

In a smart move, the FBR has brought Pakistan Tax Bar Association President Munawar Sheikh
and the association’s former head Abdul Qadir Memon as members of the Tax Advisory Council
(TAC) for seeking support for the old system, say sources.

TAC has recently been constituted to advise the government on tax affairs. Both of them were
not members of the council and were brought later.

Proponents of the circle system argue that before the reforms, the in charge of the circle was
entrusted with all the responsibilities.

“Under the present system, four different officers deal with one tax file,” said Dr Ikramul Haq, a
former tax official and leading tax expert.

The FBR believes that its experience over the years suggests that working on functional lines
created a lot of coordination problems amongst various divisions. It added the abolition of the
circle system had created chaotic conditions in activities of the tax machinery.

With the present functional system, the goals of broadening the tax base and individual
ownership of the work by tax officers could not be achieved, said Shahid Husain Asad, Member
Tax Policy of FBR’s Inland Revenue Services.
Asad said the FBR wanted to implement a hybrid system where it wanted to replace the RTOs
with the circles but the LTUs would be kept in place. So far no decision had been taken and it
would be up to the political leadership to decide, he said.

Asad pointed out that the FBR needed an indigenous system as Australian and UK models could
not work in Pakistan. India was still going on with the circle system, he said.

The functional system was built on the pillar of automation – a core goal that the FBR has failed
to achieve so far.

The problem is that policies and systems are changed in the country due to the conditions
attached with foreign loans. Despite a dismal outcome of the first phase of reforms, the World
Bank is ready to give $500 million in the name of tax reforms. The loan is expected to be
approved in the first week of next month.

However, the bank may oppose the latest move to reverse the changes in the system, according
to the sources.

Before switching back to the circle system, the FBR should conduct a comprehensive study and
make a three-year plan, as sudden changes in tax structures would never be beneficial, said Dr
Ikramul Haq.

He said the world was moving towards automation and the FBR should focus on automation too.
Even if the FBR reverted back to the old system, it would have to rely on automation, he added.
Also, the FBR is said to be pushing for the move in a bid to restore the old glory of the Income
Tax Service, as there was a time when the deputy commissioner was a powerful man.

The Express Tribune