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FBR official proposes tax survey to broaden tax base

ISLAMABAD: FBR’s Director General (Broadening Tax Base, BTB) Rehmat Ullah Wazir on Thursday proposed launching of countrywide tax survey in order to broaden the tax base. “Due to political reasons the survey has not yet been launched but it is up to Parliament to give green signal for starting the

By our correspondents
April 24, 2015
ISLAMABAD: FBR’s Director General (Broadening Tax Base, BTB) Rehmat Ullah Wazir on Thursday proposed launching of countrywide tax survey in order to broaden the tax base.
“Due to political reasons the survey has not yet been launched but it is up to Parliament to give green signal for starting the survey for broadening the tax base,” he said during the sub-committee meeting of the National Assembly’s standing committee on finance which met here on Thursday.
He said FBR has taken a number of initiatives to broaden the net. It is recognised that non-reporting and under-reporting of income is a matter of grave concern. Such persons do not contribute to state revenue despite the fact that they can afford to and are liable to pay due taxes. On the other hand they demand services from the state.
For this purpose, a National Data Warehouse has been created in FBR. The data warehouse primarily includes the data collected through third party sources such as motor vehicle registering authorities, educational institutions, CVT collected by FBR and provincial governments on purchase of immovable property, electricity distribution companies, automobile manufacturing companies, and the withholding tax statements. Based on the database notices are being issued.
Notices requiring filing of returns have been issued to 180,686 potential taxpayers so far. In response to these notices 54,791 persons have filed returns. Provisional assessments in cases where the persons did not respond to the notices have been framed in more than 44,613 cases.
Besides, FBR has assigned target to Regional Tax Offices of 207,000 notices to be issued under section 114 for filing of Income Tax Returns during FY 2014-15. So far 101,487 notices have been issued by the RTOs.
The new policy measures taken through Finance Act, 2014 to broaden the tax base include a new regime wherein different rates of adjustable withholding of Income Tax for income tax returns filers and non-filers on certain transactions have been introduced. This includes sale and purchase of immovable property, purchase, registration and transfer of ownership of motor vehicle, cash withdrawal from banks, and payment of profit on debt and dividend income. The higher rates of tax for non-filers will not only prod non-filers to file returns and declare their income for all sources, it will also provide a database to FBR for identification of potential taxpayers to be pursued for broadening of tax base.
The FBR official informed the committee that a vigorous policy has to be followed - the success in this drive is dependent on delivery of notices to the right potential taxpayers therefore logistics requirements have to be carefully assessed and implemented; provisions of required tools and manpower; broadening of tax base has to be prioritized.
A district level setup for broadening of tax base is proposed. Currently, the field formations are facing acute shortage of workforce and therefore officers and staff have been given additional charges which results in lesser priority given to broadening of tax base initiatives, he added.
President of the Karachi Chamber of Commerce and Industry (KCCI), Iftikhar Ahmed Vohra said that the KCCI fully supports the initiative of the FBR to broaden the tax base. At present, smuggling worth billions of dollars is taking place and if the government brings down the tax rates, the cost of smuggling would rise and documented imports would subsequently increase.
Referring to the Pak-China trade, he said that there is discrepancy in the Pak-China exports data. According to him, exports of China to Pakistan stood at $11billion whereas as per Pakistan’s data, imports from China amounted to $6.5billion, reflecting discrepancy due to under-invoicing and possible smuggling.
He said the discretionary power given to the Inland Revenue officers has created serious problems for the business and trade. At present people are very disappointed over the attitude of the IR officers, who are using discretionary powers to harass the taxpayers. Being President of KCCI I receive a large number of complaints against the IR officers in Karachi, which is alarming. He alleged that tax audits have been cleared by the auditors after taking Rs100000-300000 as bribe.
He suggested that there should be a focal person in the FBR who should promptly respond to the queries of the business and trade. Presently, the FBR’s orders are not implemented in the field formations.
When he suggested restoration of turnover tax, Shahid Hussain Asad asked who would determine the actual turnover of the businesses. FBR Member Inland Revenue Operations Muhammad Ashraf Khan said that the turnover tax was applicable in the past.
He said that the FBR’s revenue collection would be between Rs2,600 billion and Rs2,650 billion for the whole fiscal of 2014-15.
Senior Member Policy Inland Revenue Shahid Hussain Asad said FBR was surrendering its powers of issuing SROs for granting any exemption or tax concession, the Economic Coordination Committee of the Cabinet would be the ultimate authority to approve exemption of duties and taxes.
He said the difference of tax rates between the filers and non-filers has resulted in increase of 20 percent in direct taxes collection during July-March (2014-15). There is an impact of 20 percent on the overall direct taxes collection due to higher rates of withholding taxes for non-filers of income tax returns.
FBR Member IR Operations said that the number of return filers has increased by 50,000 during current fiscal year due to difference of tax rates between filers and non-filers announced in the budget (2014-15).