ISLAMABAD: Improvement in tax collection by provinces is critically important to ensure sustainable investments for human resource development in the country, experts agreed.
They were addressing a webinar titled ‘towards a more innovative, effective and enabling provincial sales tax regime’, jointly organised by the Sustainable Development Policy Institute (SDPI) and Sub National Governance (SNG).
Vaqar Ahmed, joint executive director of SDPI said revenues of provinces must grow by almost 20 percent per annum in the medium term to sustain investments in human development and enable infrastructure development.
“This target can be achieved through having and using better data and evidence on tax avoidance and evasion and a structured sector-specific dialogue with private sector,” Ahmed said.
“This dialogue is important to help reduce the trust deficit between taxpayers and tax authorities as well as improving overall capacities for evidence-use in tax bodies.”
Ahmed further said the provinces are facing uncertainties related to federal transfers and reduction in development program that in turn threatens the sustainability of the medium-term fiscal framework.
“If pandemic outlook prolongs greater efforts toward the provincial revenue mobilisation would be required to sustain relief and recovery.”
Claire Hutchings, senior portfolio leader of Oxford Policy Management said incentives and motivations of all actors in the system need to be understood by revenue authorities to devise strategies for tax compliance through behavioural nudge techniques.
Zain Sahi, chairman of the Punjab Revenue Authority said the primary reason for poor tax compliance in the Punjab was found to be high rates of taxes. “Therefore, in addition to nudge techniques, fiscal incentives were also introduced including reduction in rates,” Sahi said.
Data from external sources is needed to identify taxpayers outside the tax net, but data analysis capabilities in the public sector also need improvement. The Punjab Revenue Authority is willing to share its data with other government entities on reciprocal basis.
World Bank’s Public Sector Specialist Irum Touqeer said expansion of tax base and improving tax compliance will remain challenging until the authorities efficiently utilise taxpayers’ data, remove constraints related to information and communication technology sector and automate data.
SNG Program Innovation Lead Usman Khan informed the participants that the program works closely with the Punjab Revenue Authority to deploy an intelligent system. It aims to make integration of all government data on taxpayers easier and other data commercially available in the public domain.
The UK government-funded program for improving public financial management is also aimed at to make the audit process of existing taxpayers smarter and more efficient. The system will use smart data techniques to identify the audit scope rather than a random selection, he added.
Naveed Aziz, governance adviser of Foreign, Commonwealth and Development Office said the FCDO has been working with both the federal and provincial governments, but any work done by donors has to be institutionalised for any change to materialise.
Gulalai Khan, communications and social impact adviser of SNG Program shared various dynamics of the topic and highlighted the importance of discourse on tax revenue mobilisation by provinces.