ISLAMABAD: Federal Board of Revenue (FBR) has envisaged a wide-ranging plan to expand the tax base, improve resource enlistment and increase tax-to-GDP ratio in the current fiscal year.
According to the FBR’s quarterly review, taking into consideration the various fiscal challenges, FBR has embarked upon various strategies to broaden the tax base and enhance resource mobilization. This step would improve the tax to GDP ratio from 8.5 per cent in previous fiscal year to 9.5 per cent in one financial year. Moreover, a target of 0.7 per cent increase in the next two fiscal years is a major goal which would further improve tax to GDP ratio and bring the country at par the competing/emerging economies. In order to achieve these goals, FBR is fully committed to broaden its tax base and improve tax administration significantly.
For broadening of tax base several initiatives have been taken and some are under study. Initially the objective is to incorporate 300,000 new taxpayers. In this regard 49,440 notices have already been issued, and a total of 100,000 notices will be issued by June 30, 2014. Similarly, a detailed plan for outreach program including provisional assessment, collection procedures, penal actions and prosecution proceedings has been chalked out.
In order to remove distortions and discrimination in tax structure and to abolish unnecessary concessions a plan for tariff rationalisation and SROs reduction is being chalked out. A Committee headed by Chairman, FBR would submit the plan by December 31, 2013.
Since VAT is primarily a tax based on value addition at source, and exports are zero-rated, there is an inbuilt need for the documentation of transactions involved in entire supply chain. While textiles caters is for major exports of Pakistan, various intermediary manufacturing and processing activities are largely carried out in the unorganised and undocumented sector. This gap is filled by fake invoicing to inflate refunds and suppress local supplies, consequently the refund issue assumed staggering intensity and emerged as a big challenge for the VAT administration in Pakistan. In order to resolve these issues FBR has successfully prepared and implemented Computerised Risk Based Evaluation of Sales Tax (CREST), FBR said.
The FBR said that the introduction of an e-filing process accessible to taxpayers for income tax, sales tax and excise at e-FBR portal has been ensured. Automation of systems has helped in minimising the contact between taxpayer and tax officer and as a consequence the complaints of harassment has been reduced accordingly.
The FBR stated that a risk based audit has been reintroduced to accompany the self-assessment scheme and to overcome weak tax compliance. Substantial progress has been achieved for infrastructure up-gradation and development with the introduction of the integrated tax management system (ITMS), which is available to all the field formations.
Customs modernisation reforms are being introduced, aiming at simplifying, standardising and automating customs clearance procedures supported with strong post-clearance audit controls. Online connectivity of Customs posts has been developed. Risk management principles have been adopted and a Vehicle and Container Tracking System for monitoring transit trade is now in place. The Afghan Pakistan Transit Trade Agreement 2010 has replaced the 1965 agreement, with better controls and enhanced facilitation, FBR maintained.
The FBR said that the initiatives for administrative improvement in all the taxes have been finalised and implementation strategy is also being developed which shall be launched within 6 months. Certain policy reforms have already been taken and GST coverage has been expanded. Exemptions have been restricted to food items, health, education and agriculture produce. Human Resource Management has been improved and major structural initiatives are being taken by FBR in its organisational reform program, FBR added.
