Muhammad Luqman

The Punjab Revenue Authority (PRA) continues to face significant challenges despite receiving support from successive governments over the past 13 years, reports WealthPK.

Established in 2012, the Authority was tasked with collecting General Sales Tax (GST) on services across various economic sectors in light of the 18th Amendment, which devolved powers to the provinces. According to tax experts, many of the challenges are common to the revenue authorities in developing countries. “There is a need for massive restructuring and reforms to enhance the PRA’s effectiveness.

However, this should not involve dismantling, but rather optimizing the PRA’s structure, powers, and operational modalities,” said Javed Ahmad, former chairman of the PRA, in an interview with WealthPK. He highlighted that the Authority’s heavy reliance on human resources borrowed from various federal and provincial institutions, particularly the Federal Board of Revenue (FBR), has been a major weakness.

“People seconded to the PRA for short periods rarely develop a sense of ownership or professional identity with the organization,” he observed. To address this, Ahmad recommended the formation of a dedicated PRA cadre to end reliance on a temporary workforce. He also criticized the practice of offering hefty salaries under the guise of “market-based remuneration” and instead advocated performance-based incentives that reward merit and discourage complacency.

While the PRA collected Rs280 billion from services in Fiscal Year 2024–25, Ahmad pointed out that this figure remains negligible when compared to Punjab’s multi-trillion-rupee budget. He emphasized that the PRA should be further empowered through legislation to effectively implement its mandate. This includes establishing a clear legal framework for the use of digital tools, e-invoicing, and data analytics for enforcement and compliance, he added.

According to Ahmad, implementing a multi-pronged strategy could help the PRA evolve into a modern, efficient, and taxpayer-friendly organization. He also noted that frequent changes in government and shifting political priorities have disrupted long-term tax reform efforts in the past. “Weak institutional capacity, coupled with political interference, has undermined the independence and effectiveness of this relatively young revenue body,” he said.

Ahmad further stressed the need to bring the agriculture, real estate, and information sectors within the PRA’s tax net to unlock their revenue potential and strengthen provincial finances. Economists argue that the 18th Amendment has provided provinces with greater access to resources than ever before, potentially even more than the federal government.

“The provinces can significantly boost their revenues by making their revenue authorities more efficient and focused,” said Dr. Irfan Ahmad Chattha, a research fellow at the Sustainable Development Policy Institute (SDPI). Talking to WealthPK, he expressed optimism about the PRA’s recent introduction of a “negative list,” which aims to tap into previously untaxed or undertaxed sectors of the service economy.

Dr. Chattha also proposed consolidating all provincial tax collection agencies, including the revenue authorities, excise and taxation departments, and boards of revenue, under a single umbrella organization, similar to the FBR at the federal level. This, he argued, would minimize jurisdictional overlap and reduce the operational costs.

“At present, there is a significant lack of coordination and overlap between the federal (FBR) and provincial revenue authorities. This fragmentation leads to inefficiencies and encourages tax evasion,” he explained. He further recommended reviving the role of district governments and local bodies in tax collection, warning that the proliferation of district-level companies has complicated rather than improved the system.

Credit: INP-WealthPk