Revenue body hopes to achieve tax-to-GDP ratio of 13-15pc in 5 years

The Federal Board of Revenue (FBR) hopes to achieve the tax-to-GDP ratio of 13-15 per cent during the next five years against the existing level of 8.0 per cent under the already initiated Tax Administration Reforms Programme (TARP), reveals the content of a letter written by the revenue body chairman to the finance secretary.

Despite Pakistanís exceedingly unfavorable macroeconomic situation, the revenue body is committed to meet the revenue collection target of Rs1,380 billion by achieving a growth of 19.3 per cent, as compared to the previous fiscal year.

The revenue collection target is likely to be achieved, keeping in view the current collection figure of Rs791 billion till February, which is 11.7 per cent higher than last year. The revenue collection has witnessed significant growth since December as in February it reached 24.9 per cent, according to the letter.

Citing a number of measures that the revenue body had initiated to bring about the much-needed reforms in the tax administration and practices, the document revealed that the revenue body has successfully created an Inland Revenue Service, comprising personnel from the income tax and customs and central excise groups, thereby, enhancing the viability of the tax collection.

However, the tax administration is committed to bring further reforms, such as inducting business process reengineering, effective technical support, measures to prevent non-compliance aimed at building tax compliant culture, improved specialisation, increasing internal control and efficiency, keeping up greater consistency, carrying out more effective auditing procedures, providing better taxpayers facilitation and education and enhancing capacity building of staff and officers, it added.

A total of 8,414 luxury vehicles were identified, which will be appropriately taxed once their information is matched with the NTN master index.

The revenue body has also calculated that out of 3.021 million commercial and industrial electricity consumers only 0.683 million have filed their tax returns, which means that 73.3 per cent of such users are not included in the tax net and will soon be taxed once their data is matched with the master index, the letter said.

Furthermore, the revenue body has successfully added 131,146 new taxpayers in the category of withholding tax. Efforts are afoot to bring another 250,000 businesses into the tax net by the end of the current fiscal year, it said.

The revenue body has also reached an understanding with the Karachi Stock Exchange that its members will pay tax at the rate of 17.5 per cent on short-term gains on stock holdings for less than six months and at the rate of 7.5 per cent on gains on stock holdings for more than six months, but less than a year. This tax rate will have an incremental increase of 20 per cent and 10 per cent, respectively within the next five years.

The Value-Added Tax (VAT) acts will be supported by an adequate risk-based audit mechanism and would be free from exemptions and domestic zero-ratings, except those that are indicated in the international best practices, the letter said.

Initially, to fully implement Value-Added Tax by July, the revenue body, in consultation with the International Monetary Fund, World Bank and German GTZ, will submit legislation to harmonise the existing tax laws with the VAT Act by the end of the current month, the letter said.

The revenue body is also making efforts to check smuggling, under-invoicing, evasion of excise duty on cigarettes, irregularities in Afghan Transit Trade and to overcome problems being faced in running automated system of customs clearance piloted by Agility International, according to the letter.

Source The News