Wednesday, October 5, 2011


Income Tax Authorities

The Federal Board of Revenue

The Federal Board of Revenue (more commonly known by its initials as FBR) is the semi-autonomous, supreme federal agency of Pakistan that is responsible for auditing, enforcing and collecting revenue for the government of Pakistan.. FBR is estimated to be the largest federal bureaucracy in Pakistan. As the agency conducts audit of taxpayers regularly, it's regarded as the guardian of national treasury in Pakistan. FBR primarily operates through its main collection arms, its field formations, the Regional Tax Offices (RTOs) and Large Taxpayer Units (LTUs) across the country. FBR has two major wings: the Inland Revenue Wing which brings in over 90% of FBR's total collection and Customs Wing.              
 Mr. Tariq Bajwa is the current chairman of the FBR and under his capacity as Chairman FBR, he is authorized Office of the Secretary, Revenue Division, Government of Pakistan
Up till 30th June  2006 the  Board meant Central Board Of Revenue as established under the central board of revenue act, 1924. On the commencement of Federal Board of Revenue Act 2007, Board means the Federal Board of Revenue.

Who appointed the FBR?
The Federal Government has appointed the Federal Board of Revenue (FBR) by the authority of the Federal Board of Revenue Act, 2007.

Basic function of the FBR:
Tax collection shall be the basic function of the FBR.

Status of the FBR:
FBR shall be the highest executive authority in Pakistan.

Head of the FBR:
Chairman of the FBR shall be the main authority in the FBR who shall be appointed by the Federal Government. He is responsible for
a- Formulation and administration  of fiscal policies.
b- Levy and collection federal taxes.
c- Judicial function of hearing of appeals.
     His responsibility also involve  interaction with the officers of the president, the prime minister, all economic ministries as well as trade and industry.

Members of the FBR:
The FBR currently comprises chairman and eleven members appointed by the federal govt. as follow;

a- Three line members which include
Member (Direct Taxes),
Member (Sales & Federal Excise) and
Member (Customs)

b-Four functional members are
Member Fiscal(Research & Statistics),
Member(Human resource management),
Member (Audit) and 
Member (Administration)

c-Support members include
Member( Legal),
Member(Tax policy & Reforms),
 Member(Information management system) and
 Member(Facilitation & Tax Education)

Appointment of Authorities By FBR.
The following tax authorities are appointed by the federal board of revenue.
  1. 1. Chief commissioners inland revenue,
  2. commissioner inland revenue,
  3. commissioner inland revenue appeals,
  4. deputy commissioner inland revenue,
  5. assistant commissioner inland revenue,
  6. inland revenue officers,
  7. inland revenue audit officers,
  8. superintendents inland revenue,
  9. inspectors inland revenue,and
  10. such other ministerial officers and staff as may be necessary.
    Besides this, the Board may appoint firms of chartered accountants and cost and management accountants to conduct the audit of any person. The scope of audit is determined by the Board on case to case basis.

    Powers and Functions of the Federal Board of Revenue (FBR):
    The FBR has following powers and performs the following functions in the presence of its powers:
    1)         Approval of research institutions: [26(2)]
                The FBR may approve any institution engaged in scientific research in Pakistan    as “Scientific Research Institution” so that such institution may claim its scientific     research expenditures as deduction against income from business.
    2)         Approval of employee training scheme: [27(c)]
    The FBR may approve a Pakistani employee training scheme against which deduction is allowed to business.
    3)         Approval of Leasing Companies and Modaraba: [28(3)]
    The FBR may approve any leasing company or Modaraba, where lease rental payment made to such company is allowed as deduction against income from business to that person who makes such payment.
    4)         Approval of charitable institutions: [61]
                The FBR may approve any institution as a charitable institution for the        purposes of the Income Tax Ordinance, 2001, especially, for donation      purposes.
    5)         Method of accounting: [32(3)]
                The FBR may specify that any class of persons shall record its "Income from        Business" on a cash or accrual basis.
    6)         Apportionment of deductions: [67(2)]
                The FBR may make rules u/s 237 for the purposes of apportioning             deductions where the expenditure relates to the derivation of more than one      head of income.
    7)         Permission for tax year: [74]
                The FBR may permit person or class of persons to use special tax year instead of normal tax year.
    8)         Power to demand particular data: [180]
    The FBR may demand any data regarding exempted income of any industrial and commercial organization (By delivering data collection and compilation responsibility to any government or private department)
    9)         Authority of circulars: [206]
                The FBR may issue circulars to achieve consistency in the administration of the   Ordinance and to provide guidance to taxpayers and officers of the FBR.
    10)       Empowerment of general administration:
                The FBR shall exercise the general administration of the Income Tax         Ordinance, 2001.
    11)       Appointment of income tax authorities: [208]
                The FBR may appoint as many income tax authorities as are necessary.
    12)       Criterion for selection of audit: [177(1)]
    The FBR may define criterion to guide the Commissioner of Income Tax that how the CIT select a particular person to conduct audit of its income tax affairs during a particular tax year.
    13)       Appointment of the auditor: [177(8)]
                The FBR may appoint a firm of Chartered Accountants, to conduct an audit of the             income tax affairs of any person.
    14)       Determination of the scope of audit: [179(8)]
                The scope of any audit conducted by firm of Chartered Accountants or Cost and   Management Accounts shall be determined by the FBR on a case to case basis.
    15)       Determination of jurisdiction: [209(6)]
    Where a question arises as to whether a Commissioner has jurisdiction over a person or not, the question shall be decided by the RCIT or RCITs concerned and, if they are not in agreement, it is determined by the FBR.
    16)       Authority of approval: [212]
                The FBR may authorize the RCIT or the CIT to grant approval on behalf of the       FBR.
    17)       Registration of income tax practitioners: [223(10)]
                The FBR may make rules u/s 237 for the registration of income tax            practitioners.
    18)       Power to make rules: [237(1)]
                The FBR may, by notification in the Official Gazette, make rules for            carrying out the purposes of the Income Tax Ordinance, 2001.
    19)       Delegation of powers: [209(2)]
    The FBR may delegate all or any of its powers and functions to any income tax authority.
    20)       Unexplained income or assets:
    The FBR may make rules u/s 237 for the procedure of taxation of any unexplained income or asset of any person discovered by any income tax authority.
    21)       Supervision of subordinate authorities:
                The FBR supervises the functions, duties and jurisdiction of its subordinate           authorities.
    22)        Approval of securities:
                   Approve a security for the purpose of taxation as "profit on debt"

    The FBR  has the powers to select persons or class of persons for audit of income tax affairs through computer ballot which may be random or parametric on the discretion of the board.