ISLAMABAD: A two-member team of the World Bank’s inspection panel, currently on a visit to Pakistan, has held meetings with secretaries of the finance and establishment divisions and chairman of the Federal Board of Revenue to ascertain if an investigation should be initiated into the alleged violation of the bank’s operational policies in implementation of the $83 million tax reforms programme.
The World Bank’s representative office in Islamabad and the FBR tried to give a new spin to the controversy in an apparent move to ward off looming investigation by the inspection panel.
The chief of the FBR, Sohail Ahmed, told a news conference that the team, led by Alf Morten Jerve of Norway, was visiting Pakistan to ascertain if the complaint registered at the request of the Pakistan’s Customs and Excise Officers Association needed an investigation.
The association alleged that by pressing the government for creation of an inland revenue service (IRS), the World Bank had violated its own operational policies and the country’s Constitution to their disadvantage.
The FBR chief said his prediction that the World Bank’s decision to delete steps relating to a new integrated tax administration from the policy matrix would result in unwelcome negative media attention proved correct and was needlessly reported by the media.
He said media reports about his letter to the finance minister were incorrect. But when asked to show the letter for fair judgement, Mr Sohail declined to oblige and said: “It was an internal note and not a letter.”
He said that if the panel decided to go for an investigation into the complaint it would be against the World Bank staff, and not against the government of Pakistan or the FBR because the panel could not launch an investigation against a sovereign state.
The FBR chief took pains to maintain that the creation of IRS was originally decided by the government in 2004 and was later picked up by World Bank staff as part of the tax administration and reforms project. He said the IRS was a home-grown agenda and not dictated by the World Bank.
Finance Minister Shaukat Tarin had turned down his proposal to withdraw a request for extension in the WB funding for the project till Dec 2011, he added. He quoted the finance minister as saying that the government should let the World Bank complete the process.
In his letter to the finance minister, Mr Sohail had said: “It was informed by Ms Satu Kahkonen, the lead economist of World Bank, that action relating to the new integrated tax administration is being deleted from the policy matrix. The reason given by her was that on certain complaints received by the World Bank in the context of merger of CE and IT groups into the IRS, the inspection panel had taken cognisance and registered the matter for investigation.” The FBR chief had further stated: “It is totally inappropriate and undesirable for the World Bank to initially press the FBR to undergo these reforms and make them as benchmarks in GoP’s negotiations with IMF, and to now take adverse notice of successful implementation by the FBR/GoP. This development has put the FBR/GoP in a needlessly embarrassing position, especially since the FBR has kept the World Bank completely informed about the process.” Meanwhile, commenting on a Dawn report, the WB Islamabad office tried to correlate its position on creation of the IRS with the overall tax administration reforms. It said the World Bank had not “distanced itself from the tax administration reforms project”.
However, WB office did not comment on whether or not it had supported the creation of IRS which was earlier part of the tax administration reforms project and the main issue under debate.
World Bank Country Director Yusupha Crookes said the FBR had demonstrated a strong commitment to increase efficiency of tax collection, improve the level of service to taxpayers and ensure a fair and more equitable application of tax laws. “The World Bank is committed to continuing our support to the FBR for the implementation of this ambitious reform strategy, primarily through the tax administration reforms project,” he said.