ByIslamabad, Pakistan: The Economic Coordination Committee (ECC) of the Cabinet has approved a comprehensive restructuring plan for the Pakistan Revenue Automation Limited (PRAL), allocating Rs3.7 billion for the current fiscal year and Rs4.5 billion for FY2025-26 onwards to support its transformation.
PRAL, the IT arm of the Federal Board of Revenue (FBR), plays a pivotal role in automating tax systems, digitizing income and sales tax returns, and integrating data with provincial revenue authorities. Despite its crucial role in improving Pakistan’s tax-to-GDP ratio, PRAL has struggled to keep pace with modern technological advancements and operational demands.
Challenges Identified in PRAL’s Operations
The FBR’s Taskforce on Digitization identified significant gaps in PRAL’s governance, talent capacity, working model, and technology infrastructure. These challenges have hindered PRAL’s ability to fully support FBR’s objectives. To address these shortcomings, the restructuring plan outlines several key initiatives:
Governance and Board Empowerment:
An independent and empowered board for PRAL has been established to oversee its operations and decision-making processes effectively.
Technological Upgrades:
PRAL will upgrade its hardware and data center infrastructure to replace outdated systems. Funding for this is being provided under the Pakistan Raises Revenue (PRR) project through the Public Sector Development Programme (PSDP).
Analytics Hub Creation:
A dedicated analytics hub will be established to utilize PRAL’s extensive data for actionable insights, addressing the current lack of front-end data analytics capabilities within FBR.
Procurement Capabilities:
A dedicated procurement cell will streamline the acquisition of technological solutions, ensuring timely and efficient procurement processes.
Organizational Reforms:
Skilled professionals will be hired, performance incentives introduced, and a task prioritization model implemented. Collaboration with FBR will also be enhanced to improve communication and efficiency.
Financial Streamlining:
A separate cost center for PRAL under the Revenue Division will be created. Budgetary grants will be allocated as one-line items or under specific employee-related and non-employee-related expenditures.
Budgetary Implications
The restructuring plan entails a financial requirement of Rs3.7 billion for the current fiscal year 2024-25, with recurring costs of Rs4.5 billion starting in FY2025-26. As PRAL currently receives Rs1 billion annually, the net additional funding required for subsequent years is Rs3.5 billion.
To ensure accountability, the ECC mandated that PRAL’s performance will be assessed annually against Key Performance Indicators (KPIs) based on measurable outcomes. Additionally, the Finance Division’s Review Committee will scrutinize expenditures before fund releases.
Impact on Revenue Collection and Taxpayer Services
The FBR emphasized PRAL’s role in addressing longstanding issues, including delays in refund claims and reliance on outdated income tax assessments. The restructuring aims to modernize PRAL’s systems, enhance taxpayer services, and contribute to broader revenue collection efforts.
The ECC further instructed that an impact assessment of PRAL’s restructuring efforts be conducted at the end of the current fiscal year. Future funding approvals will depend on demonstrable progress in achieving outlined objectives.
Way Forward
The ECC’s decision underscores the government’s commitment to leveraging technology to improve tax administration and revenue collection. The PRAL Board’s Chairman/CEO will update the ECC on the restructuring progress during the first quarter of the next fiscal year, ensuring ongoing oversight and alignment with national fiscal goals.
By addressing its operational challenges, PRAL is expected to become a dynamic and efficient organization, bolstering FBR’s efforts to improve Pakistan’s tax-to-GDP ratio and modernize revenue collection systems.
