PRAL Board Begins Amid Governance Concerns
Non-Disclosure of Conflict of Interest Violates SOE Act
A significant governance controversy has emerged as the newly appointed board of Pakistan Revenue Automation Limited (PRAL) begins its operations without disclosing potential conflicts of interest. This move raises serious concerns regarding compliance with the State-Owned Enterprises (SOE) Act and the SOE policy—two legal frameworks developed with international financial institutions’ assistance to enhance transparency in state-run entities.
Lack of Conflict of Interest Declarations
The board, responsible for overseeing PRAL’s Rs3.7 billion restructuring plan, has been conducting meetings without ensuring that its members do not have direct or indirect conflicts of interest. Sources revealed that the board has initiated key policy discussions and approvals without first obtaining conflict of interest declarations from its directors.
According to the SOE Act, the SOE Policy, and the Companies Act 2017, all directors must sign a declaration confirming they have received and understood the policy on conflicts of interest. The failure to comply with this requirement could lead to penalties under the Companies Act.
PRAL’s Response to Governance Concerns
When approached for comments, PRAL management issued a written response stating that they strive to comply with all legal requirements. However, the PRAL Board Chairman, Arif Saeed, and the FBR spokesperson, Dr. Najeeb Memon, did not respond to repeated queries on the matter.
Following media inquiries, sources confirmed that the PRAL board had begun drafting a conflict of interest policy. This reactive approach raises questions about the board’s commitment to regulatory compliance and governance integrity.
Appointment of New PRAL Board Members
The government recently constituted the PRAL board, with Finance Minister Muhammad Aurangzeb and FBR Chairman Rashid Langrial endorsing it as a highly competent team. The board comprises:
- Chairman: Arif Saeed
- Independent Directors: Salman Akhtar, Dr. Muhammad Fareed Zafar, Ehsan Saya, Nazish Afraz
Despite their credentials, governance lapses in the board’s initial activities have sparked concerns regarding transparency and adherence to legal obligations.
Third-Party Hiring and Data Security Risks
One of the most contentious decisions by the PRAL board has been the hiring of 50 data experts through a third-party firm. This move has led to concerns about data security and taxpayer privacy.
External firms may not uphold the same standards of confidentiality as government agencies. Critics argue that entrusting sensitive tax data to private firms could lead to data leaks and security breaches. The board chairman has not clarified whether proper vetting processes were followed in outsourcing this critical function.
Key Decisions Taken by the PRAL Board
Despite the governance concerns, the PRAL board has made several key decisions in its recent meetings:
- Creation of an operational unit to address FBR’s requirements.
- Establishment of a dedicated data analytics and governance wing.
- Validation of Change Request Forms (CRFs) by assigned experts.
- Formation of an Apex Committee for project approvals.
- Structuring software development teams based on project scope.
- Implementation of a Data Governance Policy.
- Initiation of recruitment for a Chief Information Security Officer (CISO) and a Chief Data Officer (CDO).
- Formation of an internal FBR committee to streamline project prioritization.
Financial Implications of PRAL’s Restructuring
In December, the federal cabinet approved a supplementary grant of Rs3.7 billion for PRAL’s restructuring. Official documents reveal that the estimated recurring cost for the next fiscal year is Rs4.5 billion.
The restructuring plan includes:
- Enhancing software development and maintenance capabilities.
- Upgrading hardware and data centers.
- Replacing outdated equipment.
- Establishing an analytics hub for data-driven decision-making.
The government has provided PRAL with a one-line budget, giving its board the authority to approve the annual budget based on state grants and its own revenue.
Future Outlook and Concerns
While the restructuring is expected to improve Pakistan’s tax-to-GDP ratio, concerns over governance issues remain. Experts believe that unless the PRAL board adheres to corporate governance best practices and legal requirements, the restructuring plan could face setbacks.
The lack of accountability in conflict of interest declarations and the decision to outsource critical IT functions pose significant risks to data integrity and public trust. Moving forward, it is crucial for PRAL to address these governance gaps and implement a robust oversight mechanism.
FAQs
1. What is PRAL and its role in Pakistan’s tax system?
PRAL (Pakistan Revenue Automation Limited) is the IT arm of the Federal Board of Revenue (FBR), responsible for managing tax data, automation, and digital services related to tax collection and compliance.
2. Why is there concern over PRAL’s governance?
The PRAL board began operations without disclosing potential conflicts of interest, violating the SOE Act and SOE Policy. Additionally, the decision to outsource data services to a third party has raised data security concerns.
3. How much funding has PRAL received for restructuring?
The government approved Rs3.7 billion for PRAL’s restructuring in December, with an estimated recurring cost of Rs4.5 billion in the next fiscal year.
4. What are the key initiatives under PRAL’s restructuring?
The restructuring focuses on improving software development, upgrading data centers, replacing outdated equipment, and establishing an analytics hub for data-driven decision-making.
5. What measures should PRAL take to improve governance?
PRAL should immediately implement a conflict of interest policy, ensure transparency in board operations, and establish strict data security protocols to safeguard taxpayer information.
