The World Bank Implementation Status & Results Report Pakistan Raises Revenue (P165982) Pakistan Raises Revenue (P165982) SOUTH ASIA | Pakistan | Governance Global Practice | IBRD/IDA | Investment Project Financing | FY 2019 | Seq No: 4 | ARCHIVED on 29-Jun-2021 | ISR46362 | Implementing Agencies: Islamic Republic of Pakistan, Federal Board of Revenue Key Dates Key Project Dates Bank Approval Date: 13-Jun-2019 Effectiveness Date: 18-Jun-2019 Planned Mid Term Review Date: 31-Dec-2021 Actual Mid-Term Review Date: Original Closing Date: 30-Jun-2024 Revised Closing Date: 30-Jun-2024 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) Contribute to a sustainable increase in domestic revenue by broadening the tax base and facilitating compliance Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Results-based component: This component includes four objectives areas: 1. Simple & transparent tax system, 2. Control of taxpayer obligations, 3. Compliance facilitation, 4. Institutional development:(Cost $320.00 M) Traditional IPF component: Upgrade of FBR's ICT systems:(Cost $80.00 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Overall Implementation Progress (IP) Moderately Satisfactory Moderately Satisfactory Overall Risk Rating Substantial Moderate Implementation Status and Key Decisions Component 1: Results Based The project's achievements include the reduction in the number of withholding lines from 49 in FY 2019/2020 to 37 in the FY2020/2021 (DL1) and the MoF has published in the Annual Budget Statement (ABS) detailed tax expenditure and evidence-based revenue forecasts in the Finance Bill currently under discussion in the parliament (DLI#2). There is, however, slow progress in measures to strengthen provincial coordination on exchange of taxpayer data and harmonization of property tax (DLI3). The FBR has assigned its provincial representatives to work with selected district authorities to review market valuation of immovable property. The FBR has recently awarded the license for Track and Trace (T&T) to enable the electronic monitoring of production in key sectors (DLI4). The establishment of T&T in the initial four sectors is now frozen following a court injunction. To strengthen the audit capacity, the FBR has recently restructured its Audit Wing (DLI6) to create two units, namely Compliance Unit and Audit Unit. This is expected to further strengthen the ecosystem for risk-based audit function. The FBR and all the 12 provincial revenue authorities have recently signed a Memorandum of Understanding (MoU) establishing a single tax return and single portal for the General Sales Tax 6/29/2021 Page 1 of 11 The World Bank Implementation Status & Results Report Pakistan Raises Revenue (P165982) (GST), part of a broader framework for harmonizing the GST on goods and services (DLI7). Progress has also been made in strengthening customs processing with the reduction in the frequency of physical inspections at the border. The volume of good declared through the red and yellow channels has now been reduced from a baseline of about 60 percent in 2018/2019 to about 42 percent in FY2020/2021 (DLI8). Pre-arrival and Pre-clearance business process standard procedure and flow chart have been drafted and the pre-arrival procedures tested at Karachi International Airport. There is also progress in the development of the Automated Entry-Exit System (AEES) which now includes the Non-Intrusive Inspection (NII) technology for the four seaports in Karachi. Piloting of the scanning of goods through the new blue channel has been undertaken at the Karachi International Airport. Simplification of FBR’s core business processes-is proceeding and to date, FBR has completed the review of about 24 business processes. Finally, the FBR has continued to track the Key Performance Indicators and published the results on its website to enhance transparency (DLI10) . Component 2: Investment Project Financing There has been satisfactory progress under this component during the period under review. Following the approval of the PC1 the delayed recruitment of the Chief Information Officer has now been completed. There is satisfactory progress in the definition of a common conceptual approach for the customs risk management system and post clearance audit (PCA). The PCA framework has been prepared and the compliance risk based approaches developed. Procurement of several IT equipment has commenced following the approval of the Procurement Plan. In the next six months, it is expected that key activities such as the replacement of end of life equipment and update of legacy software as well as the establishment of the data warehouse and business intelligence systems will be well underway. Procurement under this component will need to be stepped up to meet implementation timelines. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance Substantial Substantial Moderate Macroeconomic Substantial Substantial Moderate Sector Strategies and Policies High High Moderate Technical Design of Project or Program Moderate Moderate Moderate Institutional Capacity for Implementation and Substantial Moderate Moderate Sustainability Fiduciary Substantial Substantial Substantial Environment and Social Moderate Moderate Moderate Stakeholders High Substantial Substantial Other -- -- Low Overall High Substantial Moderate Results PDO Indicators by Objectives / Outcomes Increased tax and customs receipts (% of GDP) IN00982781 6/29/2021 Page 2 of 11 The World Bank Implementation Status & Results Report Pakistan Raises Revenue (P165982) ►Tax to GDP ratio (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 13.00 11.00 12.70 17.00 Date 29-Jun-2018 01-Oct-2020 31-May-2021 28-Jun-2024 The data for FY2018/19 (July 2018-June 2019) is updated on August 12, 2020 as reported by the Ministry Comments: of Finance, in Fiscal Operations report. Expanded tax net IN00982782 ►Number of compliant tax payers (Number (Thousand), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 1,159.00 1,996.07 2,859.00 3,500.00 Date 29-Jun-2018 01-Oct-2020 31-May-2021 28-Jun-2024 This shows total number of income tax filers who paid taxes in FY19 (updated data as of September 2, 2020). Data for FY20 is not yet available as the returns for the period are currently being filed. Total Comments: number of income tax filers are 2,859,000 in FY20. Taxpayer compliance facilitated IN00982783 ►Hours to prepare, file and pay/withhold CIT and GST measured by 'paying taxes indicator' in Doing Business (excluding social security contributions) (Hours, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 253.50 243.00 243.00 130.00 Date 31-Dec-2018 01-Oct-2020 31-May-2021 28-Jun-2024 In the 'paying taxes' indicator in the Doing Business 2020 report, the time to file and pay CIT and GST Comments: was brought down to 243 hours from 253.5 in the previous report. Customs clearance facilitated IN00982784 ►Hours spent for customs clearance at the border per the 'trading across borders' Doing Business indicator (average of exports, imports) (Hours, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 97.50 89.00 89.00 48.50 Date 31-Dec-2018 01-Oct-2020 31-May-2021 28-Jun-2024 In the Doing Business 2020 report, Pakistan's ranking rose from 142nd to 111th and time waiting for border clearance was reduced to 58 hours for exports and 120 hours from imports, resulting in an Comments: average waiting time of 89 hours for imports and exports, down from 97.5 hours in the previous year's report. This result has exceeded the project's target of 90 hours for year 1. Data for the Doing Business 2021 Report have not been released. 6/29/2021 Page 3 of 11 The World Bank Implementation Status & Results Report Pakistan Raises Revenue (P165982) Intermediate Results Indicators by Components Results-based: a) Simpler tax system, b) Compliance control, c) Facilitation, d) Institutional devt IN00982786 ►Simplified regulations for tax administration (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target The Customs Act, Sales Work has been Tax Act, the Income Tax initiated for the Tax laws do not Ordinance and the development of a Tax laws updated to incorporate later Federal Excise Act have single IRS Code by include all subsequent amendments in the main been updated merging the amendments in the text and have different incorporating all admnistrative text; unified tax provisions for tax amendments, including provissions of all taxes administration Value administration. Customs those introduced by the administered by IRS, provisions for all tax Act not fully in line with Finance Act of June 2019 i.e. Income Tax, Sales instruments; and international agreements that are highlighted the Tax, Federal Excise Customs Act is fully that Pakistan is a party main text. The Customs Tax, Capital Value Tax aligned with Kyoto and to. Act has also been as well as Tax on TIR Conventions. aligned with the Kyoto Goods and Services in and TIR Conventions. ICT. Date 29-Mar-2019 01-Oct-2020 31-May-2021 28-Jun-2024 IN00982789 ►Automated sharing of taxpayer data (number of entities sharing data with the FBR) (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 3.00 8.00 84.00 20.00 Date 29-Mar-2019 01-Oct-2020 31-May-2021 28-Jun-2024 There has been an important advance in the number of entities with which information is shared for tax purposes Comments: IN00982791 ►Systematic tracking of arrears (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Tax arrears tracked through Management Information System, No regular monitoring FBR has developed its Analysis of arrears not collectability analyzed, Value and reporting system on Arrears Management completed and at least of 60% of tax arrears in place. System. collectable arrears at the start of the FY are recovered. Date 29-Mar-2019 01-Oct-2020 31-May-2021 28-Jun-2024 IN00982792 6/29/2021 Page 4 of 11 The World Bank Implementation Status & Results Report Pakistan Raises Revenue (P165982) ►Effective risk management in Customs (% inspections & audits that detect material violations) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 2.50 2.50 46.41 6.50 Date 29-Jun-2018 01-Oct-2020 31-May-2021 31-Jul-2024 IN00982793 ►E-services for taxpayers and traders (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Mobile applications for Filing by mobile GST taxpayer phone, payments by registration and for credit/debit card and registered users' access non-banking services Partially achieved as Online filing and to the Customs WeBOC enabled; taxpayers Income Tax return Value payment, and ATM system launched. able to review their may be filed through payments launched. FASTER system for e- records online; tax Asaan aap submission and taxpayers able to processing of GST and offset liabilities against federal excise refunds receivables across launched. taxes and fiscal years. Date 29-Mar-2019 01-Oct-2020 31-May-2021 30-Jun-2023 IN00982794 ►Resolution of refunds (% of refunds claims resolved within 90 days) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 5.00 15.00 15.00 50.00 Date 29-Jun-2018 01-Oct-2020 31-May-2021 28-Jun-2024 99% under Sales Tax Act, 1990 from July 2020 to March, 2021 wheres 59% of rebates have been Comments: processed under Customs Act, 1969. IN00982795 ►Authorized Economic Operator (AEO) program (# of firms accredited) (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target The Finance Act FY2020/21 introduced an amendment to the No AEO program in 3 firm registered in the Value Customs Code to enable 20 firms accredited place pilot program the AEO program, which is expected to start in September 2020. Date 29-Mar-2019 01-Oct-2020 31-May-2021 28-Jun-2024 IN00982796 ►Technical streams and specialized functions established (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value FBR staff are not Technical streams have Technical streams At least 40% of grade assigned to a specific not been established. have not been 17 officers assigned to function with career established. a technical stream and 6/29/2021 Page 5 of 11 The World Bank Implementation Status & Results Report Pakistan Raises Revenue (P165982) prospects within the receive specialized function. Specialized training. Dedicated non-core functions units for non-core (procurement, internal functions established audit, communications, and staffed with human resource externally hired management) staffed by professionals. generalists from within FBR. Date 29-Mar-2019 01-Oct-2020 31-May-2021 28-Jun-2024 IN00982797 ►Timely transfer tax receipts and reconciliation of accounts in the TSA (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Banks transfer tax Some tax receipts are Finance Act for FY21 receipts to the TSA at Finance Act for FY21 reported manually and requires transfer of tax the end of each requires transfer of tax Value transferred to the TSA receipts to the TSA on business day and receipts to the TSA on with a delay of 30 days the same business reconciliation of the same business day. or more. day. accounts takes place monthly. Date 29-Mar-2019 01-Oct-2020 31-May-2021 28-Jun-2024 IN00982798 ►Women's representation among FBR staff (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 4.50 5.10 5.10 10.00 Date 29-Mar-2019 01-Oct-2020 31-May-2021 28-Jun-2024 Upgrade of ICT systems (traditional IPF) IN00982785 ►Obsolete ICT equipment replaced, legacy branded software updated, and active-active private cloud established (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 100.00 Date 28-Feb-2019 01-Oct-2020 31-May-2021 28-Jun-2024 This activity is delayed. The technical requirements have been prepared, but the procurement has not Comments: been launched and is in the process of being finalized. IN00982787 ►Data Warehouse with big data capacity and Business Intelligence tools are functional (Yes/No, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No No No Yes Date 28-Feb-2019 01-Oct-2020 31-May-2021 28-Jun-2024 Comments: This activity is delayed 6/29/2021 Page 6 of 11 The World Bank Implementation Status & Results Report Pakistan Raises Revenue (P165982) IN00982788 ►FBR offices with full, permanent and reliable connectivity (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 6.00 6.00 6.00 42.00 Date 28-Feb-2019 01-Oct-2020 31-May-2021 28-Jun-2024 This activity is delayed. The technical requirements have been prepared, but the procurement has not Comments: been launched and is in the process of being finalized. IN00982790 ►Customs border stations with Automated Entry-Exit System (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 4.00 Date 28-Feb-2019 01-Oct-2020 31-May-2021 28-Jun-2024 Functional requirements for the system have been prepared but procurement has not been launched. Comments: Performance-Based Conditions IN00982799 ►PBC 1 Scope of withholding regime reduced (number of withholding lines) (Number, Intermediate Outcome, 32,000,000.00, 0.00%) July 1, 2023 - June Baseline Actual (Previous) Actual (Current) 30, 2024 Value 58.00 49.00 37.00 20.00 Date -- 01-Oct-2020 30-Jun-2021 -- One withholding line (section 236 W of the Income Tax Ordinance) on advance collection of income tax by Comments: persons/firms transferring or selling immovable property from the buyer/transfer beneficiary was abolished by amendments introduced with the Finance Bill in June 2019. IN00982800 ►PBC 2 Transparent tax system (Text, Output, 32,000,000.00, 0.00%) July 1, 2023 - June Baseline Actual (Previous) Actual (Current) 30, 2024 Detailed statement of tax MoF (with input from Detailed statement of tax Aggregate tax expenditure expenditure published as FBR) has published Value expenditure published as is published. annex to the ABS of in the ABS detailed annex to the ABS of FY2020/21 budget. tax expenditure, 6/29/2021 Page 7 of 11 The World Bank Implementation Status & Results Report Pakistan Raises Revenue (P165982) FY2020/21 budget evidence-based presented to Parliament. revenue forecasts, and tax gap estimates disaggregated by tax instrument Date -- 01-Oct-2020 30-Jun-2021 -- IN00982801 ►PBC 3 Coordination with provinces (Text, Intermediate Outcome, 34,000,000.00, 0.00%) July 1, 2023 - June Baseline Actual (Previous) Actual (Current) 30, 2024 MoUs on data-sharing signed with 8 out of 12 provincial tax authorities. FBR has One data-sharing MoU with MOUs with remaining 4 harmonized the FBR to be signed by KP authorities under process. definitions of Revenue Authority with MoUs on data-sharing Work on updating economic activities Value FBR by June 30, 2019, as signed with 8 out of 12 immoveable property subject to prior result of KP Revenue provincial tax authorities. valuation tables is GST/GSTS Mobilization PForR underway, and related harmonized with all (P162302). agreement is yet to be 4 provinces signed with all 4 provinces. Date -- 01-Oct-2020 30-Jun-2021 -- IN00982802 ►PBC 4 Track & Trace and electronic monitoring of production in key sectors (# of sectors) (Number, Intermediate Outcome, 32,000,000.00, 0.00%) July 1, 2023 - June Baseline Actual (Previous) Actual (Current) 30, 2024 Value 0.00 0.00 0.00 1.00 Date -- 01-Oct-2020 30-Jun-2021 -- The application process for granting licenses to firms to undertake track and trace/ electronic monitoring of Comments: production is underway. IN00982803 ►PBC 5 New taxpayers identified through automated data sharing and ICT-based business intelligence (Number (Thousand), Outcome, 32,500,000.00, 0.00%) July 1, 2023 - June Baseline Actual (Previous) Actual (Current) 30, 2024 Value 5.80 121.06 221.06 500.00 6/29/2021 Page 8 of 11 The World Bank Implementation Status & Results Report Pakistan Raises Revenue (P165982) Date -- 01-Oct-2020 30-Jun-2021 -- IN00982804 ►PBC 6 Risk-based audit (Text, Intermediate Outcome, 40,000,000.00, 0.00%) July 1, 2023 - June Baseline Actual (Previous) Actual (Current) 30, 2024 FBR has completed at least 45 additional The FBR has amended comprehensive field the regulations of the tax audits of Large laws to make automated, Taxpayers and 15 risk-based selection of issue-oriented audits FBR has restructured the audit cases mandatory for cases selected Risk-based audits piloted in Audit Wing to include a Value for at least 90% of annual by the risk-based one FBR office Compliance Unit and an audits and making any selection tool and Audit Unit. audits proposed by FBR monitored by the field offices subject to Compliance Unit approval by the Member through AMIS with Audit. associated reports submitted to FBR management. Date -- 01-Oct-2020 30-Jun-2021 -- IN00982805 ►PBC 7 GST filing simplification (Text, Intermediate Outcome, 32,000,000.00, 0.00%) July 1, 2023 - June Baseline Actual (Previous) Actual (Current) 30, 2024 The MOU to provide for a standardized tax return Standardized GST return form for GST/GSTS Single portal form prepared, integrated signed by FBR and all automatically Online filing available on in the GST portal, and provincial GSTS revenue Value calculates and pays FBR website MoUs signed with 3 out authorities. Standardized GST refunds to of 4 provincial GTS- form for GST/GSTS filing taxpayers collecting tax authorities. yet to be made available on federal/provincial websites. Date -- 01-Oct-2020 30-Jun-2021 -- Comments: The FBR has also recently launched a mobile app for the registration of new GST taxpayers. IN00982806 ►PBC 8 Goods declarations going through the red and yellow channels at the border (Percentage, Outcome, 40,000,000.00, 0.00%) July 1, 2023 - June Baseline Actual (Previous) Actual (Current) 30, 2024 6/29/2021 Page 9 of 11 The World Bank Implementation Status & Results Report Pakistan Raises Revenue (P165982) Value 65.00 42.18 41.95 25.00 Date -- 01-Oct-2020 30-Jun-2021 -- Amendments to the Customs Act passed by the Parliament on June 27, 2019 provide for inspections of goods Comments: consignments at the border according to risk-based selection. IN00982807 ►PBC 9 FBR core business processes (BPs) simplified and automated (Text, Intermediate Outcome, 35,500,000.00, 0.00%) July 1, 2023 - June Baseline Actual (Previous) Actual (Current) 30, 2024 FBR has eliminated 14 additional steps and replaced 3 business processes completed for Business previously paper- mapped Process Improvement. based processes 3 business processes Chief Information Officer Chief Information Officer with the newly Value mapped (exports, transit, has been appointed recruited and onboard. automated business transshipment) Full time staff from Inland Full time staff from Inland processes created Revenue Services and Revenue Services and under the Business Customs not assigned Customs assigned to Process Business Domain Team. Improvement. Date -- 01-Oct-2020 30-Jun-2021 -- Comments: Position of CIO has been advertised. IN00982808 ►PBC 10 Organizational effectiveness and transparency (Text, Output, 10,000,000.00, 0.00%) July 1, 2023 - June Baseline Actual (Previous) Actual (Current) 30, 2024 FBR has published six-monthly report FBR does not publish FBR has adopted KPIs within 2 months of regular reports on KPIs, so FBR Published annual endorsed by the Ministry end of Q2 and Value no details of FBR report on the KPIs on its of Finance and published annual report on the performance are available website. them on its website. KPIs within 3 to the public. months of end of FY. Date -- 01-Oct-2020 30-Jun-2021 -- Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P165982 IDA-64350 Effective USD 400.00 400.00 0.00 101.74 309.21 25% 6/29/2021 Page 10 of 11 The World Bank Implementation Status & Results Report Pakistan Raises Revenue (P165982) Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P165982 IDA-64350 Effective 13-Jun-2019 17-Jun-2019 18-Jun-2019 30-Jun-2024 30-Jun-2024 Cumulative Disbursements PBC Disbursement Achievement Disbursed amount in Disbursement % PBC ID PBC Type Description Coc PBC Amount Status Coc for PBC Restructuring History There has been no restructuring to date. Related Project(s) There are no related projects. 6/29/2021 Page 11 of 11