Federal Board of Revenue is making efforts to broaden its tax base and in the outgoing financial year ending on June 30, the Board has sent notices to 100,000 non filers. Under the IMF program of $6.67 billion, the government has made commitments to send tax notices to 300,000 non filers over three year period in order to expand its narrow tax base.
With challenging tax collection target of Rs2,810 billion for the fiscal year 2014-15, the broadening of tax base can provide the long term solutions to the woes of tax managers who are making all out efforts to achieve the fix target at all costs.
The job of tax machinery will not be easy until and unless the tax net is broadened in Pakistan. Out of 180 million populations, less than 0.8 million file their tax returns. The FBR’s reliance is heavily dependent upon indirect taxes.
In the context of non-documentation of economy, FBR again preferred to rely upon withholding taxes in order to further burden those who still consider that remaining out of tax net will incentivize them rather than coming into tax net.
Now the FBR has taken conscious steps to increase tax burden on those who are non filers and buying cars and property plots in different parts of the country. The limit of plot has been envisaged at 3 million, although, the FBR has proposed this exempted limit at 2 million but the federal cabinet increased this limit up to Rs3 million for imposing advance tax on purchase of plots.
The rampant tax evasion is another area which needs to be focused more for increasing revenues. Without effective enforcement the achievement of highly ambitious tax collection target seems unfeasible.
The concept of right man for the right job needs to be implemented in tax collection machinery. If the government desires to make high-level changes in top management of the FBR it should be made at the start of the coming financial year because after passing few months it will be hard for new comers to grasp the tax issues in half way. This advice will be applicable only if the government continues to bring DMG officers into the FBR at the slot of Chairman FBR.
The effective enforcement for retailers, hotels and other withholding agents can prove wonders for the tax machinery so the FBR should focus on these issues at the start of the fiscal year.
In order to overcome under invoicing, the government has brought down the maximum slab of Customs Duty but also increased duty on certain items by excluding them from zero rated regimes. There is need to use technology by ensuring hassle free mechanism to achieve the desired results.
