FBR plans hiring foreign firm to collect accurate production data

International tender soon

KARACHI: The tax authorities have planned to hire a foreign consulting firm for the electronic monitoring of production volumes and to overhaul the way local manufactures are taxed in an effort to tackle sale tax avoidance, officials said on Monday

They added that the Federal Board of Revenue (FBR) will issue an international tender to appoint the consulting firm.

 “At the manufacturing stage, under-reporting of production and suppression of sales constitutes a major threat to the sales tax revenue,” a senior official told The News. “As the system works on self-assessment basis, production processes cannot be supervised manually.”

The official said even otherwise, manual supervision is not an effective way of ensuring accurate production figures. In this regard, the board has planned to introduce the system of electronic monitoring of production and supplies.

An international tender would soon be issued in this regard.

“The planned mechanism has the potential to bring a quantum jump in the sales tax collection by reducing the tax gap,” the official said.

A pilot project was recently run at the Lucky Cement’s manufacturing unit with the assistance of the Pakistan Revenue Automation Limited (PRAL), a company owned by the FBR for ICT operations.

However, the official said, PRAL did not have the capacity to install and operate the system on mass levels; “therefore, some international firm would be hired.”

“The FBR has also sought assistance of the World Bank in this regard,” the official said. The FBR’s approved equipment at manufacturing places will be installed, while the board would issue licence for the companies for installation and operation of the equipment.

The official said that the economy is gaining growth momentum and the factors contributing include the political resolve, reform initiatives and improved situation of law and order in the country.

Moreover, the decline in oil prices, rise in the foreign exchange buffers, and growth in remittances and proceeds from privatisation provided further support to the economy.

On the tax revenue front, many positive developments have been noticed and overall performance is improving.

"The reforms have started paying the dividends in the shape of improved compliance, higher revenue growth and tax-to-GDP ratio. Keeping in view the current macroeconomic trends, it is hoped that the economy will move forward with a faster pace."

"Speedy work on China Pakistan Economic Corridor would provide a big jump to the economy of Pakistan and consequently boosting tax collection," the official added.