Tough procedures beget poor tax compliance

KARACHI: A heap of procedures in the tax registration system is the main cause of poor tax compliance in Pakistan, experts said on Saturday.   

Tax analysts said taxpayers in Pakistan are required to give a plethora of information to declare statements and returns. Procedures related to tax compliance are complicated.

“There are several issues faced by taxpayers, including filing of monthly statement of sales tax and income tax and time-consuming online filing because of system errors,” tax consultant Ikramul Haq said.

The World Bank, in its recently issued doing business report 2017, showed that Pakistan’s ranking slipped to 156 from 154 with regards to a taxpaying indicator; although the country’s overall ranking improved to 144 from the last year’s 148. 

Had said banks and telecom companies are facing even more problems in the presence of multiple tax agencies and their requirement of filing monthly and annual statements.

“Forms should be simplified with removal of irrelevant requirements,” he said. At least monthly income tax statement should be substituted with quarterly statement, which would reduce burden on taxpayers.

The consultant said an independent agency should be set up for handling tax matters of both the federal and provincial governments.

Abdul Qadir Memon, ex-president of the Pakistan Tax Bar Association said there will be no ease in taxpaying until the Federal Board of Revenue (FBR) improves its automation system.

Memon said there are difficulties at the time of return filing and sales tax registration. 

“FBR’s automation system is based on obsolete hardware, which is frequently creating problems,” he said. “While the FBR repairs the system, taxpayers should not be suffered.”

Rehan Jafri, president of Karachi Tax Bar Association said taxpayers face problems at the time of auditing, creating trust deficit and discouraging taxpayers to discharge their liabilities.

Jafri said the FBR should facilitate the existing taxpayers and use available data for identifying new taxpayers. 

During the past few years, the FBR accumulated information but no such efforts have been seen from the FBR side to effectively utilize the data.