In a major policy shift, the government of Pakistan has officially transferred responsibility for tax policy from the Federal Board of Revenue (FBR) to the Finance Division, marking one of the most significant structural changes in the country’s fiscal governance in recent years. The announcement was made during a session of the Senate Standing Committee on Finance, chaired by Senator Saleem Mandviwalla, where Finance Minister Muhammad Aurangzeb outlined the reform strategy.
Under the new arrangement, the Finance Division will prepare the federal budget through a dedicated Tax Policy Office, separating the functions of tax collection and tax policy-making. This clear distinction is intended to improve efficiency, transparency, and accountability in the country’s taxation system, which has long been criticized for inefficiencies and conflicting roles within the FBR.
Finance Minister Muhammad Aurangzeb told the committee that the Prime Minister is personally overseeing the transformation of the FBR, receiving regular reports to ensure the reforms are implemented effectively. The newly established Tax Policy Office is already nearing full staffing capacity, with an advisory board expected to be formed soon. This board will include members of Parliament and private sector representatives, providing broader perspectives on policy-making and creating a more consultative framework for tax decisions.
The committee session also touched upon several contentious fiscal issues, particularly the FBR’s response to a presidential order. Concerns were raised that the FBR had chosen to challenge a directive from the President in the Sindh High Court rather than implementing it. Legal representatives for affected citizens argued that the agency was obligated to comply with instructions from the President, the Prime Minister’s Office, and the Ministry of Law, but had failed to do so. Attorney General Mansoor Usman Awan, who attended the session, was asked to help resolve the legal and administrative dispute.
This controversy reflects broader concerns over governance and compliance among state institutions. Committee members emphasized that bodies such as the FBR must respect constitutional authorities and directives to restore public trust and ensure accountability.
Alongside the structural tax reforms, Finance Minister Aurangzeb highlighted encouraging signs on the economic front. He pointed out that Pakistan had successfully repaid its Eurobond obligations, which he described as a demonstration of improved financial discipline and credibility in international markets. In addition, the government is actively negotiating with China to issue a $250 million Panda Bond by the end of November, part of a larger plan to attract up to $1 billion in investments through such instruments.
The dual focus on domestic fiscal restructuring and external financial management reflects the government’s attempt to stabilize the economy while addressing long-standing inefficiencies in tax administration. Analysts view the establishment of a separate Tax Policy Office as a positive step toward depoliticizing tax decisions and creating policies based on economic needs rather than administrative convenience.
Committee members welcomed the reforms but stressed the importance of ensuring institutional compliance, particularly by the FBR, with directives from constitutional authorities such as the President and the Ombudsman. They argued that without strong adherence to governance principles, structural changes would fall short of delivering the accountability and efficiency the government aims to achieve.
As Pakistan moves forward with these reforms, the Finance Division’s leadership of tax policy will be closely watched by both domestic stakeholders and international partners. The effectiveness of the new Tax Policy Office, combined with strict oversight of the FBR’s role in revenue collection, will play a critical role in shaping the country’s fiscal stability and economic growth trajectory in the years ahead.
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