Single agency to collect sales tax on goods, services

KARACHI: The federal and provincial governments have given nod for the establishment of a single sales tax collection agency on goods and services, sources said on Saturday.

An official at the Federal Board of Revenue (FBR) said the proposed agnecy will start operations in next three years.

Currently, the federal government and all the four provincial governments are collecting sales tax on goods and services separately.

Besides, taxpayers are also facing difficulties in filing monthly sales tax statements in case of services provided in more than one jurisdictions, resulting in increase in the cost of doing business, the sources said.

“In three years time, we [the federal and provincial governments] will move to a single tax collection agency with single return and single auditing authority to cut down on compliance costs,” according to an official document.

“A revision of business processes, administrative structures and efficient dispute resolution mechanism will also be evolved,” it added.

The FBR official said the taxpayers were facing the problem after introuction of the 18th Amendment to the Constitution in April 2010. Earlier, FBR was the sole agency to collect sales tax on goods and services, he added.

However, Sindh was the first province to establish revenue authority; followed by Punjab, Khyber-Pakhtunkwa and Balochsitan.

In the presence of the revenue authorities, including federal and provincial, the taxpayers started running pillar to post for resolving their issues. The taxpayers faced double taxation for service provided to more than one provinces, besides filing of sales tax returns in different jurisdictions.

The FBR official said setting up of a single agency would be coupled with taxpayer education and facilitation by developing android application for filing returns and payment of taxes.

The integration of federal and provincial sales tax services would help the FBR and provincial revenue authorities detect tax evasion and avoidance.

Tax Reform Commission (TRC), which was constituted by the previous government, in its report submitted to the Finance Ministry in May 2015, recommended harmonising sales tax law regarding both federal and provincial sales tax, dealing with the issues of services to avoid double taxation and bring about ease in doing business. Besides, the business community also raised voices on different sales tax and sales tax on services rates within the country, which led to a number issues for business organisations operating across the country.

The Overseas Chamber of Commerce and Industry (OICCI) has recommended to the government all sales tax rates of the different jurisdictions within the country, should be reduced to 13 percent and aligned with the Sindh sales tax on services.

This should be followed by a study of the rates in the regional countries, with comparable economic parameters, to ensure sales tax rates competitiveness. As per the OICCI analysis, an average sales tax rates are less than 12 percent in Asia, with a range of six percent to 17 percent.