ISLAMABAD – The Federal Government has announced plans to fundamentally restructure the nation’s fiscal landscape by establishing an independent Tax Policy Office (TPO) under the Ministry of Finance. To facilitate this shift, the government will introduce a landmark bill to amend the Federal Board of Revenue (FBR) Act, 2007 before June 2026.
This strategic move aims to separate tax collection from policy formulation, ensuring that tax laws are developed through “independent advice” rather than being influenced by administrative collection targets.
Key Legislative Changes
To operationalize the TPO as a standalone statutory body, the government is targeting several specific legal frameworks:
• FBR Act, 2007: Amendments to Section 6 will be introduced to delete provisions related to the current Policy Board, effectively stripping the FBR of its policymaking powers.
• Income Tax Ordinance, 2001: Section 230J will be amended to remove policymaking functions from the FBR’s International Centre of Technical Excellence (ICTE).
• New TPO Legislation: A dedicated law will be enacted to give the TPO statutory effect, outlining its mandate, transparency standards, and periodic reporting framework.
Defining the TPO’s Mandate
The restructuring is designed to provide clear “institutional linkages” while maintaining a sharp distinction between the TPO and existing entities. The TPO’s primary responsibilities will include:
1. Independent Policy Advice: Formulating data-driven tax policies free from the FBR’s operational pressures.
2. Tax Treaty Leadership: Leading negotiations and setting policies regarding international tax treaties.
3. Governance & Transparency: Operating under a new set of notified rules and regulations to ensure public accountability.
Why This Matters for Pakistan’s Economy
By creating a dedicated office for tax policy, the government aims to create a more stable and predictable investment climate. Moving policymaking to the Ministry of Finance aligns Pakistan with international best practices, where tax administration (collection) and tax policy (law-making) are kept distinct to avoid conflicts of interest.
The government expects the new governance arrangements and key institutional processes to be fully in place following the parliamentary approval of the bill this summer.