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Initiative on simplification of tax laws launched


FBR takes a very strong exception to an Editorial captioned “Paying Taxes” published in a Daily

Raza Kazmi

ISLAMABAD: In a watershed development and to press his vision into practice, Shaukat Tarin, Advisor to PM on Finance & Revenue has launched the formulation of Inland Revenue Code in a bid to harmonize all inland taxation laws and maximize facilitation of taxpayers. It promises to ensure ease of doing business by removing multiplicity of taxing statutes and a plethora of rules & regulations devised to operationalize them.
It is pertinent to mention that FBR, on domestic side, implements and enforces four major tax laws i.e. the Income Tax Ordinance, 2001, the Sales Tax Act, 1990, the Federal Excise, 2005, & the Islamabad Capital Territory (Sales Tax on Services) Ordinance, 2001. These four tax statutes are then supported by equal number of rules compiled in voluminous books comprising the Income Tax Rules, 2002, the Sales Tax Rules, 2006, the Federal Excise Rules, 2005 and the Islamabad Capital Territory (Sales Tax on Services) Rules, 2001.
Resultantly, a taxpayer has to consult practically eight law books in order to engage with the tax system and pay off his/her tax liability.
It goes beyond saying that the tax laws needed harmonization and simplification. This has long been demanded by World Bank, IMF, ADB and other bilateral and multilateral donors. Similarly, there have been pressing demands by the civil society, lawyers’ community and also superior courts who have found the above laws to be very complexed and even un-implementable.
However, previous governments have not been braving enough to embrace this challenge. Keeping
this in view, the PTI government has decided to harmonize all these four tax laws by merging them into one law book supplemented by single rules book. It is in this context that in collaboration with ADB, a high-level committee has been constituted by FBR consisting of eminent tax professionals from public sector and legal experts from ICAP to continuously oversee and review the draft legislation to ensure quality and correctness.
The said committee would monitor the drafting of harmonized Inland Revenue Code, covering all tax laws by the end of March, 2022. After consultation with all key stakeholders including chambers of commerce, trade bodies, tax practitioners and field formations over April & May, 2022, it will be available for presentation before the Parliament in the Budget Session, 2022 for promulgation. It is positively hoped that the new Inland Revenue Code will be enforced with effect from July 1, 2022.
This high value policy intervention is organically embedded in the larger vision of FBR to promote a culture of automation and digitization in order to ensure taxpayers’ facilitation.
In order to ensure that the Inland Revenue Code is thoroughly discussed with all major stakeholders and finally developed within the given timelines, Advisor on Finance & Revenue has directed Chairman FBR to personally review the progress of this immensely important draft law and update him on regular basis.
Meanwhile, Federal Board of Revenue (FBR) has taken a very strong exception to an Editorial captioned “Paying Taxes” published on 10th November, 2021 in an English Daily (not The Financial Daily) which is, indeed, malicious in intent and suspicious in content. The said piece has termed used hackneyed jargon which include ‘sloppy tax regime’, ‘an army of tax collector working personal financial gains’ and those are ‘reluctant to use technology’ and the likely ‘resistance from tax collectors’ to the reform agenda at hand and the resultant failure of FBR in collecting sufficient revenues.
It also talked about ‘the nexus between the wealthy and tax collectors’. All these accusations are far from facts on the ground and seem to be part of a well-orchestrated campaign aimed to malign FBR. As a matter of fact, the commendable performance of FBR in the previous Financial Year 2020-21 and first four months of current Financial Year 2021-22 has been widely appreciated at all levels and by the Prime Minister himself on more occasions than one.
The Revenue Target for F.Y 2020-21 has not only been achieved but also surpassed by Rs.54 billion by collecting Rs. 4,745 billion against assigned target of Rs. 4,691 billion. Likewise, continuing the growth momentum, the revenue targets for the first four month of current financial year has been surpassed by Rs.233 billion with year-to-year growth of 37% by collecting Rs. 1,840 billion against assigned target of Rs. 1,607 billion. Income Tax Returns for tax year 2021 has crossed 2.8 million as on 1st November, 2021 with tax paid with returns stood at Rs.52 billion as against 1.8 million returns and 29.6 billion tax paid with returns on 8th December, 2020, the closing date, last year.
Contrary to the claims made in the caption editorial, FBR is vigorously introducing automation and digitization not only to increase the much-needed revenue but also to ensure transparency, efficiency and facilitation in the tax system. With its focus on ensuring ease of doing business, FBR is all set to digitize and automate the processes involved in tax collection in order to minimize human interaction with taxpayers and thereby ensuring transparency in the system. The recent launch of Track and Trace System to digitally monitor important sectors like Tobacco, Fertilizers, Sugar, Beverages, and Cement from manufacturers to the end users, is yet another milestone achieved by FBR.
Furthermore, Point of Sales System (POS) introduced by FBR is aimed at ensuring real time monitoring of actual sales of Tier-one retailers to plug revenue leakages and thus increase the revenue collection, significantly. Over 14,000 point-of-sale terminals have already been integrated with real time reporting system of FBR. In collaboration with NADRA, plans are also afoot to use Artificial Intelligence (AI) and Mathematical Modelling (MM) in order to ascertain real income and thus determine actual tax liability.
Furthermore, FBR is all set to launch Single Sales Tax Portal by the end of November, 2021. The Portal would not only be beneficial for the taxpayers in filing their single monthly Sales Tax Returns but would also be helpful for tax collectors in having a 360-degrees view of taxpayers’ business activities across the country in order to maximize revenue potential and tax compliance. By all standards, this is a giant leap forward in taxpayers’ facilitation and at the same time, a significant step in harmonization of taxes between federal and provincial governments. These are some of the key initiatives which would broaden the tax base, ensure transparency, and promote accountability within FBR.
Likewise, promoting FBR’s vision, there are wide array of out-of-box solutions being designed and executed by Pakistan Customs to ensure transparency, automation of processes and maximize ease of doing business. Recent formal launch of Pakistan Single Window (PSW) by FBR is being termed as game changer for promotion of international trade with Pakistan, thus having a massive potential to increase revenue for the country.
Authorized Economic Operator Program (AEO) has been introduced to facilitate the processing of import and export consignment of AEO companies on priority through We-BOC system. Similarly, Clearance in the sky has been introduced for the seamless processing/clearance of goods declarations of air cargo before the landing of air craft in Pakistan. There are number of other initiatives being taken by FBR to reform and restructure its tax system which cannot be described in detail due to limited space.
Team FBR is fully determined to not only achieve the maximum revenue during the second quarter but is also geared to exceed the staggering target of Rs. 5,829 billion, set for the current FY 2021-22. This goes without saying that FBR’s historic achievements would not have been possible without unflinching support of Prime Minister of Pakistan who believes in rule of law, and its enforcement on all without any distinction.