ISLAMABAD: The Ministry of Finance is inducting six professionals from the market to operationalise the Tax Policy Office (TPO), which will directly report to the finance minister in line with commitments made with the IMF under the $7 billion Extended Fund Facility (EFF).

The ministry on Monday sought applications for the positions — one for the director general of TPO and five directors having different expertise like economic analysis, business taxation, personal taxation, international taxation and direct/indirect taxation.

All of them would be hired at Special Professional Pay Scales (SPPS). The DG will get SPPS-1 while the directors will be hired on SPPS-II.

Last April, the prime minister had approved the revised remuneration structure for four grades of SPPS, involving an all-inclusive package of Rs2 million for SPPS-1, up to Rs1.5m for SPPS-II, up to Rs1m for SPPS-III, and up to Rs500,000 per month for SPPS-IV.

After decades of lapses, the government last month took the first step towards separation of tax policy from the revenue administration and notified the creation of TPO directly under the Federal Minister for Finance and Revenue Muhammad Aurangzeb.

The TPO will lend support to the analysis of tax policies and proposals through data modelling, revenue and economic forecasting as well as the country’s international tax treaties and obligations, it added.

Successive governments have been announcing plans under advice from international lenders to separate the functions of tax policy from the tax administration to avoid policy capture by revenue machinery and ensure that the Federal Board of Revenue focused on revenue collection, but could not separate the two functions — tax policy and administration — mainly due to resistance from the FBR.

Under the ongoing $7bn EFF, Pakistan had given an undertaking to set up a TPO under direct supervision of the finance minister to ensure that it had sufficient teeth for policy implementation. There had been discomfort within the revenue bosses and the ministry’s leadership in policy domains even in recent months.

According to IMF documents, Pakistani authorities had committed to “establish a Tax Policy Office under the Minister to improve tax policy analysis and allow the FBR to focus on revenue collection”.

The ministry’s notification said the “TPO shall report directly to the Minister for Finance & Revenue. Staffing of the TPO, as approved by the federal cabinet, shall be undertaken with the approval of Establishment Division and Finance Division on terms and conditions prescribed by the government”.

The finance minister had given a written commitment to the IMF to set up the TPO in the first quarter of fiscal year 2025 “thereby allowing the Federal Board of Revenue (FBR) to sharpen its focus on revenue collection” but it was delayed to the third quarter and was notified just ahead of the visit of IMF’s review mission.

Published in Dawn, March 25th, 2025