TRC advises simple return filing procedures, plan for small traders

KARACHI: The Tax Reforms Commission (TRC), constituted by the finance minister to review and rationalise taxes, recommended simple tax return filing procedures for salaried persons and a separate tax plan for small traders to boost revenue collection and broaden tax base.
“When schedules for banking, insurance, capital gains and petroleum sectors are available in the statute then why not a separate chapter for small traders should be drafted to streamline income tax from retailers and wholesalers,” said a TRC member, on condition not to be named, on Wednesday.
The Finance Minister Ishaq Dar constituted the TRC last year to reform the tax system for increasing tax to GDP ratio through simplification of tax laws. The TRC members include tax officials and consultants, lawyers and businessmen. The commission submitted its interim report in May 2015 with a number of recommendations with a primary objective to simplify the laws in order to make a taxpayer/person aware of his/her obligations.
On October 10, 2015, the TRC members met the finance minister and apprised him about the recommendations.
The minister appreciated the commission’s advices and directed a committee’s formation to oversee and expedite the ongoing reforms in the Federal Board of Revenue (FBR) and to further improve taxpayers’ facilitation and broadening of the tax base.
The FBR has yet to nominate a representation for the committee, which shows the seriousness of the tax machinery in reforming the tax system.
FBR sources said some people in the tax body have vested interests and are not interested to bring changes.
The sources said one of the reasons for no nomination is that at least four top level officials are retiring by April 2016.
They added that the retiring persons are indifferent to the tax reform.
The sources said Prime Minister’s Special Advisor on Revenue Haroon Akhtar, who has keen interest in tripling the revenue in next five to six years, took the initiative to speed up the reform program.
A cursory glance at the TRC’s recommendations showed that if they are implemented the FBR will witness a revolutionary change, especially through simplification of laws.
The TRC member said a cumbersome procedure and complex tax return system shies away the existing as well as potential taxpayers.
The TRC’s recommendations said there has to be an urgent change within the FBR’s culture and in the attitude of tax collectors. It urged the need for promotion of an idea that tax payment is an honour and tax evasion is a disgrace.
The relationship between FBR and taxpayers has to be customer-oriented rather than adversarial. Emphasis has to be on taxpayers’ facilitation and incentivisation for honesty and integrity for both taxpayers and FBR.
The TRC asked for a separate committee with a mandate to simplify the Income Tax Ordinance and other tax laws to increase tax compliance.
“A period of six months should be given for this task considering the urgency,” it said. “All tax laws should be translated in Urdu language and moving forward all FBR circulars, instructions should be released both in Urdu and English.”
The commission further recommended that a separate committee should be formed to review and simplify tax return forms with a mandate to reduce the level for compliance effort by 50 percent within two years.
The TRC recommended that three months should be given to the committee to complete its task. It also advised a taxpayer’s grievances redressal system.
“Make all financial transactions transparent, eliminate money power and corrupt administrative structure,” the commission recommended.