Broadening the tax base: FBR to effectively use citizens' data with NADRA

ISLAMABAD: The Federal Board of Revenue (FBR) will be able to effectively use citizens' data available with the National Database and Registration Authority (NADRA) for broadening the tax base, and accurate declaration of assets/income by the filers and non-filers of income tax returns based on their expenditure patterns.

The issue of the MoU signed between the NADRA and the FBR came in the light during the fourth meeting of the Federal Board of Revenue (FBR) Policy Board held here on Thursday under the chairmanship of Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh.

The meeting was attended by the Adviser to the Prime Minister on Commerce, Abdul Razak Dawood, Minister for Privatization Mian Mohammad Soomro, Special Assistant to Prime Minister (SAPM) on Revenue Dr Waqar Masood, Adviser to the Prime Minister on Institutional Reforms and Austerity Dr Ishrat Hussain, and Minister for Industries and Production Hammad Azhar.

A participant of the meeting told Business Recorder that the FBR officials updated the meeting on the importance of rich data available with the NADRA for the purpose of expanding the tax net. The FBR and the NADRA had inked a memorandum of understanding (MoU) for real-time verification of the computerised national identity card numbers (CNICs) and associated details for broadening the tax base.

Linking NADRA and the FBR systems will help improve the FBR's service delivery standards for taxpayers as it will help to automate tax refunds prefill data in withholding statements and tax returns. It will also promote ease of doing business by saving time spent in regulatory compliance.

In addition, this data linkage will facilitate onward linking of the FBR's system with other organisations. This has a huge potential for identification of persons who are either outside the tax net or conceal their income and assets.

According to sources, some people use wrong Computerised National Identity Card (CNIC) numbers, so that the system accepts the CNIC numbers. These CNICs belong to other individuals or are wrong CNIC numbers. To ensure this does not happen, the FBR will now verify the authenticity of the CNICs with the NADRA, on the pattern of verification done by various banks.

Sources said that after successful implementation of the Electronic Origin Data Exchange System between China Customs and Pakistan Customs to address under-declaration and duty evasion on imports from China, now the FBR would approach the UAE government for implementing the same system.

The FBR is regularly receiving Trade Prices Data electronically from China's customs authority for goods being exported from China to Pakistan. The system was operationalised between Pakistan and China to check under-invoicing.

The FBR has intensified its operations against the importers responsible for under-invoicing, over-invoicing, and mis-declaration. Pakistan Customs has put in place proactive/preventive mechanism to effectively control under-invoicing/over-invoicing and mis-declaration (at the import stage), keeping in view the fact that these phenomena not only cause revenue hemorrhage and loss to domestic industries, but the same are an instrumental source of trade-based money-laundering and terror financing.

Such malpractices are now treated as fiscal fraud under the Customs Act of 1969, they added. The FBR Member Customs Operations made a detailed presentation on Customs Valuation (Under-invoicing) and highlighted measures to be taken to plug in gaps and enhance custom revenues in future.

The FBR has issued valuation rulings and entered into Electronic Data Exchange (EDE) Agreements with China, Iran, Afghanistan etc to address the issue of under-invoicing of imports effectively. These agreements have yielded positive results. The adviser stressed the need to evaluate the clearance time with reference to the regional trading partners in order to make the FBR more competitive.

Copyright Business Recorder, 2020