WB, FBR propose jacking up tax to 15pc of GDP

ISLAMABAD: The World Bank (WB) and Federal Board of Revenue (FBR) on Monday proposed jacking up tax to GDP ratio to 15 per cent from the existing level of 10 per cent under medium term revenue strategy from 2018-19 to 2020-21, The News has learnt.

The top guns of WB and FBR held a conference here to work out modalities for devising medium term revenue strategy under the PTI-led regime over the next three years.It was agreed upon between both the sides that the FBR’s Policy Board should be activated with the participation of provincial revenue authorities to harmonise tax policy among the Centre and the four federating units.

It was a worrying aspect for the tax collection machinery that the tax base was further shrinking as the number of return filers had drastically dropped so far in the current fiscal year in which the FBR received only 350,000 returns till September 30, 2018, against over 600,000 in the same period of last fiscal year.

“The newly-appointed FBR Chairman, Mohammad Jehanzeb, wants short term interventions to improve tax machinery for improving alternate dispute resolution, disposing of litigations, placing information technology and harmonising tax policies with the provinces to maximise revenue collection,” one top official told The News in background discussions here on Monday.

It might be an ambitious target to jack up the tax to GDP ratio to 15 per cent within the next three years from the existing level hovering around 10 per cent. The tax to GDP ratio remained stagnant for the last two decades as all efforts made by all governments in the last 10 to 20 years failed to yield any desired results.

It was pointed out by tax experts of the World Bank and tax practitioners belonging to the FBR that the taxpayers had to deal with five tax machineries in Pakistan, including the FBR and four Provincial Revenue Authorities of each province that wasted a lot of time for honest taxpayers.

“The harmonisation among Income Tax and Sales Tax is a dire need of the hour for using each other’s data to expand the tax base and revenue collection up to the real potential of the country,” said the official. Although, the Inland Revenue System (IRS) deals with both Income Tax and Sales Tax but using data for expanding the base and collection still needs to be done for making the FBR an effective revenue collection agency.

The FBR’s Policy Board already existed, but it was never allowed to play its important role for policy formulation on taxation front. There was a consensus among the stakeholders for activation of this policy Board whereby the provinces will be invited on special invitation to harmonise fiscal policies for the whole Pakistan.

“The usage of IT can provide us solution at cheaper rates,” said the official and added that the government intended to utilise technology for the purpose of expanding the narrowed tax base in months and years ahead.