rime Minister Shahbaz Sharif’s decision to remove 25 senior officials, apparently in a critical move aimed at cleansing the Federal Board of Revenue of corruption, has ignited a fierce tug-of-war. The showdown between the leadership and the tax machinery threatens to impact the country’s fiscal performance. The government has struggled to meet crucial revenue targets as it prepares to hold discussions with the International Monetary Fund for a long-term bailout package. The talks are set to begin this month.

Insiders say there is a crisis situation in the organisation. However, the chairman and the federal minister for finance have not been pro-active. “The lack of leadership from the FBR chairman has complicated the situation. A disaster can result any time as the IMF pushes for reforms in the Board. Most of the FBR employees are seen resisting it. The government has been in office for two months. The budget will be presented next month,” says a senior official. “Some senior officials of the Inland Revenue Service have met the chairman and requested him to play his role. Failing that, they have threatened to start a visible protest,” he says.

Last month, the Supreme Court grilled the FBR chairman for “trying to save a tainted and corruption official.” “Why shouldn’t action be taken against corrupt people?” the chief justice asked.

The prime minister’s decision to remove ‘compromised’ officers from the FBR, based apparently on reports from the premier intelligence agencies, has instigated strong resistance from the ranks of the tax-collectors.

FBR officials, primarily from the Inland Revenue Service, have mobilised against the crackdown, questioning the government’s action and demanding justification for the dismissals. “Two-thirds of the senior staff of the FBR consists of Inland Revenue Service personnel; the remaining third is from the Customs service. Officials from the Inland Revenue Service hold key positions. They are the primary opponents of the proposed reforms,” the official says.

The clash underscores a broad effort by the Shahbaz Sharif administration to overhaul the FBR, a critical pillar in Pakistan’s economic revitalisation strategy.

The urgency to root out corruption and inefficiencies in the revenue collection system has taken centre-stage. The prime minister’s office is said to be determined to uphold transparency and accountability. The decision to remove 25 senior officers from Grade 21 and 22 jobs, based on intelligence agency reports highlighting integrity concerns, has triggered discontent among affected groups.

The move signifies a pivotal moment in Pakistan’s tax reform agenda. The government, it is claimed, is committed to installing capable and clean leadership at the FBR.

The repercussions of the internal strife are quite evident. The FBR’s failure to meet its April revenue collection target has been followed by disruptions caused by the ongoing tug-of-war.

Sources in the revenue collection system say deliberate delays in customs and tax procedures have adversely affected the achievement of monthly targets, a consequence of the internal discord.

The economic landscape, burdened by a severe financial crisis and looming IMF negotiations, necessitates a robust and effective tax collection system. The success of the IMF bailout negotiations as well as a broad economic recovery hinge significantly on the FBR’s ability to enhance revenue collection and streamline operations.

The reform agenda championed by the new government pivots on separating the customs and internal revenue functions. This strategic restructuring is intended to optimise efficiency, curb corruption and enhance revenue generation capabilities.

Under this plan, ‘clean and competent’ officers are being appointed to top positions. Only Category A officers of good reputation and exceptional skills are to be given the FBR’s top managerial positions, including the members of the board, chief commissioners, commissioners, chief collectors and collectors.

Category B officers will get relatively less important positions and Category C officers will be sidelined. Category D officers in Grades 21 and 22 were removed on Friday.

“Reform in the FBR is a top government priority,”Azam Nazir Tarar, the law minister, told a press conference on May 2. Tarar, accompanied by the information minister, Atta Tarar, said the prime minister had taken the situation as a challenge. He referred to the recent decision of the PM and said that the process of appointment of eight persons to the right jobs has already started.

Despite mounting pressure, the prime minister remains resolute in his stance against the FBR leadership. Sources in the government say he believes that “backing down will undermine the core objectives of the reform effort, jeopardising not only the credibility of the tax collection system but also the government’s authority.”

The spotlight remains on the prime minister’s commitment to fiscal reforms and the arduous task of transforming Pakistan’s tax collection machinery amid formidable headwinds. So far, the government has faced stiff resistance to its ambitious plan to plug the loopholes in the taxation system which has been leaking billions of rupees every month.

Caretaker minister Shamshad Akhter had tried earlier to restructure the FBR saying this could help raise the tax-to-GDP ratio to 15 percent.

Last year, the FBR had missed its tax collection target by Rs 496 billion and collected Rs 7.144 trillion against a target of Rs 7.640 trillion. The target was missed despite the imposition of nearly Rs 800 billion new taxes, including a mini-budget introduced in February 2023.

The writer is an Islamabad-based researcher and journalist with interests in health and taxation policies