Pakistan is taking a significant step in advancing its tax policy development by establishing the International Centre of Tax Excellence.
The Finance Bill 2023 has introduced Section 230J to the Income Tax Ordinance, 2001, outlining the formation and functions of this institute.
The key provisions of the newly introduced section are as follows:
1. Establishment of the Institute: An Institute known as the International Centre of Tax Excellence will be established.
2. Functions of the Institute: The Institute will have several functions, including: a. Contributing to the development of tax policy. b. Preparing model national tax policies. c. Conducting interdisciplinary research in tax administration and policy, international tax cooperation, and revenue forecasting. d. Organizing international seminars, workshops, and conferences on current issues faced by tax authorities in the field of international taxation. e. Capacity building of Inland Revenue Officers. f. Improving the design and delivery of tax administration to maximize revenue within existing provisions and close the tax gap. g. Undertaking any other function directed by the Board or the Federal Government.
3. Nominating Committee: A Nominating Committee will be established, consisting of the Minister in Charge, Secretary of the Revenue Division, and Secretary of Finance. This committee will recommend a panel to the Federal Government for the appointment of an Executive Director and independent members of the Executive Committee.
4. Executive Committee: An Executive Committee will be formed, comprising the Chairman of the Federal Board of Revenue, Member (IR-Policy), Member (IR-Operations), and two independent members appointed by the Federal Government. The Executive Director will act as the Secretary of the Executive Committee.
5. Appointment of Executive Director and Independent Members: The Federal Government will appoint the Executive Director and independent members based on the recommendations of the Nominating Committee.
6. Role of Executive Director: The Executive Director will serve as the Chief Executive of the Institute, responsible for its efficient functioning and day-to-day administrative functions. The Executive Director will have independent authority in carrying out the functions specified under subsection (8).
7. Responsibilities Assigned by the Executive Committee: The Executive Committee, for each fiscal year, will assign the requirements of the Board to be undertaken by the Institute during the year.
8. Recruitment of Employees: The Executive Committee will establish rules for the recruitment of Institute employees, and the Executive Director will act in accordance with these rules. At least fifty percent of the employees should be serving or retired Inland Revenue officers with a minimum of five years of experience in tax policy or tax administration.
9. Remuneration and Employment Terms: The remuneration and term of employment for Institute employees will be prescribed by the Federal Government.
10. Monitoring Committee: The Board may establish a committee to monitor the establishment of the Institute, including the appointment of a Project Director.
11. Provision of Data: The Board may provide necessary data to the Institute for processing, analysis, and fulfilling its obligations. The provided data will be anonymized, and taxpayer information will be kept confidential in accordance with the provisions of subsection (7) of section 216.
12. Rule-making Authority: The Executive Committee may issue rules through a notification in the official gazette to facilitate the implementation of the purposes of this section.
The establishment of the International Centre of Tax Excellence reflects Pakistan’s commitment to enhancing its tax policy and administration. By creating a specialized institute, the government aims to develop robust tax policies, foster international cooperation, and improve revenue collection. This initiative is expected to contribute to the growth and effectiveness of the country’s taxation system.