FBR working on new unit to boost tax base

KARACHI:  Authorities are set to launch a new unit that aim to increase tax base in the country, part of government’s efforts to boost revenue collection, officials said on Friday.

They added that the dedicated unit, which will identify new taxpayers and monitor withholding tax collection, is likely to establish by the month end.

 “The new broadening the tax base office will identify potential taxpayers on the basis of monitoring of withholding taxes and third party sources,” a senior official said.

At present, the activities of broadening the tax base has been done through existing field staff, who already had other responsibilities of enforcement and audit of the existing taxpayers. Considering the importance, the government announced the establishment of new directorate to broaden the tax base in the budget 2017/18.

In chief commissioners’ conference held last week, the finance minister has directed the FBR to focus on enhancing the number of taxpayers, besides increasing the ratio of direct taxes.

Presently, the lack of tax culture is a major hindrance in narrow tax base. The FBR identified reasons for narrow tax base, which included heavy reliance on indirect taxes; discontinuity of regular survey; the lack of proper and effective enforcement by the FBR offices; the lack of proper computerised stock register; the lack of balance between facilitation and enforcement; and the lack of capacity and motivation to utilise available information.

The FBR has issued National Tax Number (NTN) to around four million people of over 200 million in the country. As per the latest Active Taxpayers List (ATL) issued by the FBR, only 1.23 million taxpayers filed their income tax returns for the tax year 2016.

Sources in the FBR said the new directorate would have its separate enforcement and audit teams to conduct examination of available data of potential taxpayers and through field surveys.

The new directorate would have a strategy of zero-tolerance for non-filers and it would ensure enforcement of returns in the cases of all NTN holders, the sources added.

The new directorate, besides available data of potential taxpayers, will also obtain records from Nadra, telecom companies, banking companies, utility providers, property registration authorities, land developers, provincial excise and taxation authorities, schools, clubs, hotels, domestic and international airlines, dividend, interest, rental income, etc, they said.

One of the major priorities of the directorate will be to target 10 million mobile phone subscribers. The directorate will also focus on untaxed sector such as doctors, lawyers, architects / engineers, fashion designers, etc, the sources said.

The FBR has also started collecting information in the case of transactions of records of property transactions.

For the last three years, the government has enhanced the withholding tax rates for non-filers, which helped increased the number of return filers to 1.23 million to-date from 0.94 million in the tax year 2014.

The sources said the directorate will also prioritise the sales tax registration and would make it integral part of the BTB initiatives.

The FBR had already obtained information of six million transactions and initiated legal proceedings for enhancing the tax base, they added.